Investment Banks help companies and governments issue securities, help investors purchase securities, manage financial assets, trade securities and provide financial advice. The leading investment banks including Merrill Lynch, Salomon Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs are said to be in the bulge bracket.
Other investment banks are regionally oriented or situated in the middle market (e.g. Piper Jaffray). Others are small, specialized firms called boutiques which might be oriented toward bond-trading, M&A advisory, technical analysis or program trading. Firms have lots of different areas and groups within them. In most firms, there is sales and trading which works with owners of securities, investment banking which works with issuers of securities (firms and governments) and capital markets which goes in between the other two. To get an idea of how a firm is organized, check out the products and services groups at Goldman Sachs.
Investment Management and Advisory
Investment banks are among the growing number of firms offering investment management services for which investors pay a fee based on the size of their portfolios (for example, 1% of their net asset value). As the securities markets become more volatile and complicated, it has become increasingly difficult and time-consuming for investors to monitor all financial news. These investors may not believe that the brokers are impartial; therefore, they look for management services.
For large institutional and individual accounts, asset management groups and bank trust and cash management departments handle separate portfolios or aggregate portfolios, depending on the client preference or portfolio size. Firms also manage mutual funds with small minimum investment levels.
The number of mutual funds in the past few years has ballooned. Some, such as Fidelity, have as many as 100 individual funds. Many of these management groups are division of larger financial institutions, including banks and insurance companies. A rapidly growing trend today is that some institutions also offer financial planning services to help individuals cope with the growing complexity and diversity of financial products. Financial planners include IDS Financial Services, Integrated Resources, MONY and New England Insurance. The financial planner works with clients to establish financial objectives and helps them accomplish the goals through investments, insurance, tax, retirement and estate planning.
