Do you want to start an investment bank? If YES, here is a complete guide to starting an investment banking business with NO money and NO experience.
Okay, so we have provided you an in-depth sample investment bank business plan template. We also took it further by analyzing and drafting a sample investment bank marketing plan backed up by actionable guerrilla marketing ideas for investment banking businesses. In this article, we will be considering all the requirements for starting a investment banking business. So put on your entrepreneurial hat and let’s proceed.
Why Start an Investment Bank?
One of the businesses that a lot of folks are turning to now and are smiling to the bank with it is the investment banking business. Nonetheless, it would be very needful to really know what the investment bank business really is and how one may possibly go ahead with kick starting it.
It is very needful that you analyze the existing investment banks in and outside of your area, know how many there are. Also, you would be required to check the existing competition, as well as know their strength and weaknesses. Knowing the weaknesses of the existing banks mean that you would be able to learn from their mistakes and in turn come up with a better and more preferred investment bank devoid of the mistakes and weaknesses of others.
Investment banking simply put has to do with starting a financial institution that helps individuals, corporations and even governments in raising financial capital by acting as their agent in the issuance of securities. This kind of venture is such that needs the effort of more than one person and it is worthy to note that this business is a very lucrative kind of business.
So, if you have done the required feasibility studies and market research, then you might want to venture into this business. If you have been tinkering with starting your own investment bank, but do not know how to go about it, then you should consider going through this article; it will sure give you the needed direction.
Starting an Investment Bank – A Complete Guide
- Industry Overview
The financial services industry is indeed a broad industry and one of the active lines of businesses in the industry that any entrepreneur who has the financial requirements and also a solid understanding of how to invest right can successfully start an investment bank.
Businesses/banks that operate in the Investment Banking and Securities Dealing industry comprises of businesses and private investors (individuals) that provide a wide range of securities services which include investment banking and broker-dealer trading services.
They also offer banking and wealth management services and engage in proprietary trading (trading their own capital for a profit) to varying degrees. Basically, investment banking services include securities underwriting and corporate financial services while trading services include market making and broker-dealer services.
In the face of free growth from the Investment Banking and Securities Dealing industry’s traditional underwriting and advisory services, both cyclical and structural influences on trading activity have ultimately affected revenue generation for operators in the industry in recent years.
The revenue generated by players in this industry is expected to decline. Most of the troubles experienced in the industry in recent time emanates from fixed income, commodities and currencies (FICC) trading operations. Expensive capital requirements and the trend of transitioning derivative trading to central clearinghouses are anticipated to structurally diminish the industry’s fixed income, commodities and currencies (FICC) revenue.
- Interesting Statistics About the Investment Banking Industry
The Investment Banking and Securities Dealing industry will continue to experience growth in all parts of the world especially in developed countries such as United States of America, Canada, United Kingdom, Germany, Australia, South Korea, Japan, China et al.
Statistics has it that in the United States of America alone, there are about 8,691 licensed and registered Investment Banking and Securities Dealing Companies scattered all across the length and breadth of the country and they are responsible for employing about 100,472 employees.
The industry rakes in a whooping sum of $105 billion annually with an annual growth rate projected at -13.0 percent within 2011 and 2016. The organizations that are leaders in the industry are; Bank of America, Citigroup Inc., JP Morgan Chase & Co, Morgan Stanley and The Goldman Sachs Group Inc.
A report recently published by IBISWorld shows that, while the number of industry activities has not deviated dramatically over the five-year period, the share of revenue that each activity accounts for has undergone substantial volatility.
The report also stated that products and services in the Investment Banking and Securities Dealing industry vary considerably on a company-by-company basis, largely depending on operator size. The report further stated that, small and medium size investment banks target niche industries and small companies and rely more heavily on traditional investment banking activities such as underwriting and financial advisory. Alternatively, major industry players earn a substantial share of revenue from trading activities.
Some of the factors that encourage entrepreneurs to start their own investment banking business are that despite the fact the business is capital intensive and the risks involved are high, it is indeed a thriving and profitable business venture for high end entrepreneurs.
Over and above, starting an investment bank requires professionalism and a good grasp of how investment works on a global platform. Besides, you would need to get the required certifications and license and also meet the standard capitalization for such business before you can be allowed to start an investment bank in the United States. The industry is heavily regulated to guide against fraud and criminality.
Starting an Investment Bank – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographics composition of those who require the services of an investment bank is not restricted to people and corporate organizations in your immediate community or state, but it cuts across people and corporate organizations who are interested in investing their money as a means of earning more money from all over the world. This is so because investment banking is a worldwide platform hence they work for people and corporate organizations all across the globe.
So, if you are looking towards defining the demographics for your investment bank, then you should make it all encompassing. It should include business oriented people, investors and corporate organizations within and outside the United States.
List of Niche ideas Within the Investment Bank Industry That You Can Specialize in
Most investment banks tend to provide a wide range of securities services, which include investment banking and broker-dealer trading services, banking and wealth management services and engage in proprietary trading (trading their own capital for a profit) to varying degrees. That is why it seems that there are no niche areas in the industry.
But on the other hand, some investment banks may decide to major in some key areas or niche area such as;
- Underwriting services (debt)
- Trading and related services
- Underwriting services (equity)
- M&A advising fees
- Corporate finance services
- Other financial advisory fees
The Level of Competition in the Investment Banking and Securities Dealing Industry
The level of competitions in the Investment Banking and Securities Dealing industry does not in any way depend on the location of the business since most investment banks can operate from any part of the world and still effectively compete in the Investment Banking and Securities Dealing industry.
When it comes to investment banking and securities dealing services, distance is never a barrier when competing for clients especially international clients. What most clients (individual and corporate clients) want is result, hence they are ready to hire the services of an investment bank no matter the part of the world they operate from as long as they have good track record and can deliver excellent results when it comes to giving them good returns on their investments and managing their wealth portfolio amongst other services.
But over and above, there are several investment banks and investment cum financial consultants scattered all around the United States and in the cyber space. So, if you choose to start your own investment bank in the United States, you will definitely meet stiffer competitions not only amongst investment banks in the United States, but also all over the globe especially if you choose to specialize in working for international business men and women and corporate organization. Besides, there are larger investment banks and securities dealing services firms that determine the trends in the industry and you should be ready to compete with them for clients.
List of Well Known Brands in the Investment Banking Industry
In every industry, there are always brands who perform better or are better regarded by the customers and general public than the others. Some of these brands are those that have been in the industry for a long while and so are known for that, while others are best known for how they treat their customers.
These are some of the leading investment banking and securities dealing services firms/brands in the United States of America and also in the globe;
- JPMorgan Chase
- Goldman Sachs
- Bank of America Merrill Lynch
- Morgan Stanley
- Barclays Investment Bank
- Credit Suisse
- Deutsche Bank
- Wells Fargo Securities
- RBC Capital Markets
- Jefferies Group
- BNP Paribas
- Evercore Partners
- BMO Capital Markets
- Mitsubishi UFJ Financial Group
When it comes to starting a business like investment banking and securities dealing services firms, you just have to get your feasibility studies and market research right before venturing into the business. It is good to mention that investment banking and securities dealing services business is not for rookies; it is for professionals who have successfully cut their teeth in the financial consulting and related industry over the years.
Starting this kind of business definitely entails that you raise plenty of capital. If you are already a wealthy person, this might not be an issue. Conversely, if you cannot, you may want to consider pulling resources from family and friends. Depending on the scale at which you want to start from, you might require as much as multiple thousands of dollars to strike this off.
You will be expected to hire experts that will help you with comprehensive economic analysis and the profitability of the businesses within the location that you intend launching the business. If you get your economic and cost analysis right before launching the business, then you may not have to stay long before you break even.
Starting Your Investment Bank from the Scratch versus Buying a Franchise
When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful investment banking and securities dealing services firm/brand as against starting from the scratch. Even though it is expensive buying the franchise of an investment banking and securities dealing services firm, but it will definitely pay you in the long run.
But if you truly want to build your own brand, after you must have proved your worth in the investment banking and securities dealing services industry and other related financial consulting businesses, then you might just want to start your own investment bank from the scratch.
The truth is that it will pay you in the long run to start your investment banking and securities dealing services firm from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful investment banks around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own investment banking and securities dealing firm brand to become a successful brand with corporate and individual clients from all across the length and breadth of the United States of America and other countries of the world.
Possible Threats and Challenges You Will Face When Starting an Investment Banking and Securities Dealing Services Business
If you decide to start your own investment banking and securities dealing services firm today, one of the major challenges you are likely going to face is the presence of well established investment banking and securities dealing services firm and also other related financial consultants who are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Some other threats that you are likely going to face as an investment banking and securities dealing services firm operating in the United States are unfavorable government policies, the arrival of a competitor within your location of operations and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards this threats other than to be optimistic that things will continue to work for your good.
Starting an Investment Bank – Legal Matters
- Best legal entity to use for an investment banking business
When considering starting an investment banking and securities dealing services, the legal entity you choose will go a long way to determine how big the business can grow; some investment banking and securities dealing services firm design their business and services for regional/community market, some for national market, while others for international market.
Generally, you have the options of either choosing a general partnership, or limited liability company which is commonly called an LLC for a business such as investment banking. Ordinarily, general partnership should have been the ideal business structure for a small scale investment banking and securities dealing services firm especially if you are just starting out with a moderate start-up capital.
But people prefer limited liability Company for obvious reasons. As a matter of fact, if your intention is to grow the business and have clients (both corporate and individual) from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
For example, setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meeting and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your investment banking and securities dealing services firm; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to critically study the various legal entity to use for your investment banking and securities dealing services firm, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your investment banking and securities dealing services firm so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Catchy Business Name Ideas Suitable for an Investment Banking and Securities Dealing Services Firm
Generally, when it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own investment banking and securities dealing services firm, here are some catchy names that you can choose from;
- Alps Investment Bank, LLC
- Silver Lining Investment Banking and Securities Dealing Services, Inc.
- Bernard Campari Securities, LLC
- Investment Solution Securities, Inc.
- Lego Nick Investment Bank, LLC
- Fleming Hills Investment Banking and Securities Dealing Services Group
- James Capstone Investment Bank, LLC
- Phil Garry Securities Ltd.
- Platform Investment Bank, Inc.
- DMX Investment Bank, Inc.
- Shannon Stevens Investment Bank, Inc.
- LMDS Investment Bank and Securities Dealing Services, Inc.
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your investment banking and securities dealing services firm.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own investment banking and securities dealing services firm in the United States of America;
- General insurance
- Risk insurance
- Credit insurance
- Deposit insurance
- Financial reinsurance
- Lenders mortgage insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own investment banking and securities dealing services firm, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successful run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Run an Investment Bank?
Aside from the results you produce as it relates to return on investment (ROI), professional certification is one of the main reasons why most investment banking and securities dealing services firms and financial consultants stand out. If you want to make impact in the investment banking and securities dealing services industry, you should work towards acquiring all the needed certifications in your area of specialization.
You are strongly encouraged to pursue professional certifications as it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own investment banking and securities dealing services firm;
- Certified Investment Banking IT Professional (CIBIT)
- Certified Investment Banker -CIB
- The CISI Diploma in Investment Compliance
- CFA and MBA
Please note that the higher your qualifications and experience (expertise), the easier it is for you to secure high profile investment and wealth management deals from corporate clients.
List of Legal Documents You Need to Run an Investment Banking and Securities Dealing Services Firm
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized especially a business like investment banking and securities dealing services firm. It is a fact that you cannot successfully run any business in the United States without the proper documentation. If you do, it won’t be too long before the long arm of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own investment banking and securities dealing services firm in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- Company Bylaws
- Insurance Policy
- Memorandum of Understanding (MoU)
Financing Your Investment Banking and Securities Dealing Services Firm
Asides from the required capitalization and pool – funds to invest with, starting an investment banking and securities dealing services firm can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your start-up capital.
No doubt when it comes to financing a business, one of the first things and perhaps the major factor that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start-up capital for your investment banking and securities dealing services firm;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Suitable Location for your Investment Banking Firm
Investment banking and securities dealing services firms and most financial services based type of businesses require that you see physically with your clients hence it must be located in a good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business.
The fact that you can operate your investment banking and securities dealing services firm from any part of the world does not mean that location has little influence on the success of an investment banking and securities dealing services firm.
If you have taken your time to study the investment banking and securities dealing services firms cum financial consulting industry, you will realize that investment banking and securities dealing services firms and financial consultancy agencies are willing to pay expensive rents in order to stay in a busy business district; a place where business activities and financial activities are at its peak.
So, if you are looking for a location for your investment banking and securities dealing services firm, ensure that it is a place that is located in a business district in your city, a place that is visible and easily accessible. Of course, you would not want to locate this type of business in the outskirt of town.
Your clients should be able to drive down and locate your office with little or no difficulty. Vendors also should be able to easily locate your office when they have to come submit their bid/proposals or documents for background checks et al.
Starting an Investment Bank – Technical & Manpower Details
On the average, there are no special technology or equipment needed to run this type of business except for customized investment banking and securities dealing services software and social media management software applications and other financial related software apps. So also, you will definitely need computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing an office space, the size of the investment banking and securities dealing services firm you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard investment banking and securities dealing services firm, then you should consider the option of leasing a facility for your office; when you lease, you will be able to work with long – term planning, structuring and expansion.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fund Manager/Portfolio Manager, Risk Manager, Chief Financial Officer (CFO)/Chief Accounting Officer (CAO), Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
Over and above, you would need a minimum of 10 to 20 key staff to effectively run a medium scale but standard investment banking and securities dealing services firm. Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some high profile financial consultancy contracts/jobs especially from big corporations.
If you are just starting out you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with other financial consultants/experts that operates as freelancers.
The Service Delivery Process Involved in an Investment Banking and Securities Dealing Services Firm
On the average, the way investment banking and securities dealing services firms works varies from one agency to another agency, but ideally, an investment banking and securities dealing services firm is expected to first and foremost build a robust company profile before biding for investment banking and securities dealing services contracts from corporate organizations, it will give them edge amongst their competitors.
Basically, most investment banking and securities dealing services firm get funds from investors who are interested in investing, and they assist them in investing their funds over a period of time as agreed by both parties. Despite the fact that investment banking and securities dealing services is highly risky, it is still a profitable venture hence there is an agreement between the investment banking and securities dealing services firm and the client as it relates to the commission they are expected to make from the deal. Most investment banking and securities dealing services firms charge based on percentage and also a fix consultancy/business administrative fees.
It is important to state that an investment banking and securities dealing services firm may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI), efficiency and flexibility; the above stated business cum services process is not cast on stone.
Starting an Investment Bank – The Marketing Plan
- Marketing ideas and strategies
As an investment banking and securities dealing services firm, you would have to prove your worth over and over again before attracting business deals from corporate clients. So, if you have plans to start your own investment banking and securities dealing services firm, it will pay you to first build a successful career in the investment banking and securities dealing services industry.
People and organizations will hire your services to help them handle all their investments and wealth management needs if they know that they are going to get good returns on their investment.
So, when you are drafting your marketing plans and strategies for your investment banking and securities dealing services firm, make sure that you create a compelling personal and company’s profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to investment banking and securities dealing services and the organizations you have worked for. This will help boost your chances in the market place when sourcing for clients/investors.
Please note that in most cases, when you are marketing your services to corporate organizations, you will be called upon to defend your proposal, and so you must be pretty good with presentations. Here are some of the platforms you can utilize to market your investment banking and securities dealing services firm;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, households and international business community in the United States
- Advertise your business in relevant financial magazines, radio stations and TV stations (make yourself available for investment banking and securities dealing services related talk shows and interactive sessions on TV and Radios)
- List your business on local directories/yellow pages
- Attend international financial cum investment expos, seminars, business fairs et al
- Create different packages for different category of clients in order to work with their budgets
- Leverage on the internet to promote your business (when you blog regularly on key issues as it relates to your business, people consider you an expert in the field)
- Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks.
- Engage the services of marketing executives and business developers to carry out direct marketing
Strategies to Boost Your Investment Bank Brand Awareness and Create Your Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secret of larger corporations is that they are willing to spend fortunes year in and year out to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them to be.
If your intention of starting an investment banking and securities dealing services firm is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brands, besides it is pretty much effective and wide reaching.
Another strategy is to sponsor relevant community based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;
- Place adverts on financial magazines and related newspapers, radio stations and TV stations.
- Encourage the use of word of mouth publicity from your loyal customers.
- Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business.
- Ensure that you position your banners and billboards in strategic positions all around your city.
- Distribute your fliers and handbills in target areas in and around our neighborhood.
- Contact corporate organizations, households and international business community et al by calling them up and informing them of your organization and the investment banking and securities dealing services you offer.
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site.
- Brand all your official cars and ensure that all your staff members and management staff wears your branded shirt or cap at regular intervals.