Financial advisors and investment bankers are both part of the financial services universe, but each type of professional serves in a unique capacity. Financial advisors are responsible for investing clients' capital in such a way that it helps individuals or institutions to reach financial goals. Investment bankers are the bridge between corporations and the capital markets. They provide the debt or equity financing that companies often need to grow, and facilitate major transactions that companies could not perform alone.
Financial advisors invest on behalf of individual and institutional clients using a variety of investment products, including those designed internally as well as investment vehicles overseen by outside asset managers. They use their knowledge about the financial markets and attempt to provide returns that match an investor's expectations and risk tolerance. Investment bankers may be employed by large financial institutions or smaller, independent firms, known as boutiques. Bankers provide a myriad of services to corporations, ranging from restructuring support to merger and acquisition processes. They are perhaps best known for underwriting initial public offerings (IPOs) for companies just entering the stock market, a process that involves buying shares and reselling them to public investors.
Financial advisors often adhere to a fee-based structure, which is to charge clients a percentage of assets managed. Financial advisors may also earn commissions based on the number of transactions performed for clients or from using their own designated investment products, according to CNN Money. Investment bankers charge fees based on the size of deals performed for clients. Fee income is in part based on the conditions of the financial markets as when deal flow weakens, so too does the size of fees earned by bankers. In 2010, the fees earned by investment bankers improved alongside the recovery in the financial markets following the economic recession. Industry fees advanced nearly 10 percent in the period, according to "The New York Times."
Financial advisors generally begin their career earning some base salary while they are establishing their business. In time, however, financial advisors' earnings can become entirely dependent on commissions, according to "USA Today." The most experienced financial advisors earn salaries based on the size of assets managed. Investment bankers often earn some of the highest salaries in financial services, and earnings are generally split between a base salary and a bonus. Following the financial crisis of 2008, investment banks faced greater regulatory scrutiny and declining profits. As a result, severe cost-cutting measures were introduced that included lower pay for bankers, according to an article on the Bloomberg website.
When a financial advisor retains a client, whether that client is an institution, such as a pension fund or a corporation, or a wealthy individual, it is not uncommon for them to maintain that relationship for life. Even when financial advisors change firms, they often carry their book of business, which is a list of clients serviced and their assets, with them. Investment bankers rely heavily on relationships, too. Nonetheless, investment bankers often work in specialized areas of finance, which limits the capacity in which they can serve for clients.