In many roles in investment banking, thinking about the business needs and aims of clients is a crucial part of the job. Asset management firms are some of the most important clients of investment banks. These organisations manage the long-term investment of multimillion pound pools of money, predominantly made up of pension, insurance or savings funds, so are significant users of the advisory and trading services that investment banks provide.
Here a director at leading asset management firm M&G explains how he works with investment banks, what he looks for from them, and how junior bankers can start building relationships with clients.
Why is focusing on the clients important in investment banking?
Investment banking is a client-driven business, so the clients are the most important people - ultimately, they get you paid. So investment banks need to have good relationships with clients as these generate business.
As a junior team member you might not be leading the bank's relationship with a client, but it's important that when you're working on something for them you understand exactly what they want, otherwise you won't be able to effectively deliver the advice or service the bank is selling.
How do you work with investment banks?
My team at M&G invests in leveraged loans and we work with those at investment banks involved in setting up loan deals for corporates and selling them on to various other banks and institutions like us. We normally get involved at the syndication stage, that is, when banks are selling on their initial participation in a loan they've made. But as banks are currently cautious about taking on risk, banks increasingly want the certainty as early as possible of knowing that big long-term investors like us will buy the debt from them. Getting involved earlier is good for us too, because it means we may get some influence over how the deal is structured and the terms of the loan documents, and preferential rights when portions of debt are being allocated.
We also work with investment banks on restructuring the debt of businesses we've lent to that are now in financial distress. Due to the size of M&G's business, we're generally one of the most significant lenders, so will often sit on the steering committees running the restructuring. As part of this process, there'll be lots of interaction with investment banks as both the lender group and the corporate borrower will often have investment banks advising them.
We tend to interact most with junior people at investment banks when we're deciding whether or not to invest in a deal. Analysts at investment banks will do a lot of the evaluation work required before a financing package is set up. When we speak to them, they're generally very helpful - they find answers to our questions and get us comfortable with the deal.
How do you choose which investment banks to work with?
We have ongoing relationships with people at all the major investment banks who work on the kind of loans we invest in and regularly speak to them about what's going on in the market. They might call us, or we might call them as we'll see in the press that a deal is happening and will have an idea of which banks are working on it.
Once a deal that we want to invest in comes to market, the process of deciding which bank we go to in order to invest is simple - we go to one of the banks who have that deal. We will usually be called by banks selling these deals because we're a big investor in the market and even more importantly as a result of the strong relationships we have with investment banks.
What skills and qualities do you value in the investment bankers you work with?
You need to be good with numbers and thorough in your technical analysis of what you're working on. You also need to have read up on its commercial background. It's very important to get these basic building blocks right.
Integrity and honesty are very important qualities to have. For example, I need investment bankers to provide me with accurate information on the business we're lending to and status of the syndication process. Our trust in bankers we work with is built up over a number of transactions over a number of years.
Finally, you've got to have good communication skills.
How can I build good client relationships as a junior banker?
Here is James' advice..
- Make the most of every opportunity to get to know clients: See if you can go along to the client meetings where the project you've been working on will be discussed. If you've been asked to respond to a client's questions, answer them well, be helpful, and follow up your conversation or email. Even phoning a client just to organise the practicalities of a meeting is an opportunity - you'll get to interact with them and, if you do a good job, they'll remember you when they come across your name again.
- Always put your best foot forward: Whenever you have contact with clients make sure you come across as well-prepared, knowledgeable, and helpful.
- Get to know people at your level: Try to build relationships with people at client organisations of a similar level of seniority to you - you're likely to have more in common with a recent graduate working on the buy-side than a senior director and will therefore find it easier to build up a rapport with them. You should also build good relationships with the other graduates who start with you at your bank - many of these people will move to different organisations in the finance sector at some point, and you'll then have an amazing network in the industry.
- Learn from senior people: Watch how they interact with clients. Think about how they find a professional balance between the extremes of being too reserved and being too over-familiar. But remember that everyone has their own style - and you'll succeed best with clients if you work in a way that's close to how you naturally interact with people.