Investment bankers are a little like lawyers. You pay them a retainer, and in return, they give your specialized information and argue your specific cause to others with power or money. Also like lawyers, the public perception of them is highly mixed. Some view them as a necessary evil to get a job done properly and quickly, while others view them as needless middlemen who serve their own interests while hiding behind the interest of their clients.
An investment banker is not really a “banker” in the normal use of the term. An investment banker is a specialist in a specific area of economic development. Some deal in mergers and acquisitions, and some deal in a specific field like the automotive market, financial services or exporting. The point of hiring an investment banker is that such a person is meant to be expert in your field of interest and can handle the legal and bureaucratic hurdles required for financing and expansion. In hiring an investment banker, you are ideally hiring a well known expert in the field to help you and your business expand.
In times when business investment is low and profits are falling, an investment banker might provide an edge in obtaining financing and clients from a base that only a longtime specialist could access. If you are involved in exporting, for example, which has a great deal of legal and bureaucratic paperwork to wade through, an investment banker might be indispensable to provide legal services to free your firm up for more interesting ventures. While expensive, an investment banker might well be the difference between success and failure. At their best, investment bankers serve to line up financing and other options with those firms that can best use them.
Investment bankers are expensive. This fact is often at the root of their negative reputation. Even more, their work is not contingent on the profitability or even the usability of their research. The fact that they are mostly specialists in a specific economic field often limits their vision to that field and nothing else. A good businessman considering an investment banker might ask himself if there are not others that are equally expert in their field that are not officially “bankers” in this sense and might offer advice and experience for a fraction of the banker's cost. At their worst, investment bankers charge high fees for information that serves their own and other clients' interest without any guarantee of profitability or usability.
British finance writers Don Young and Pat Scott worry about investment bankers and their connections in the field. While regulated, these bankers are often vulnerable to being manipulated by outsiders who would love to be “directed” to a profitable company. Even worse, these bankers could be getting their information from biased sources like banks, which might then promote debt financing over all other options.
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