What Is a FIG at an Investment Bank? (original) (raw)

Financial institutions such as banks and insurance companies provide their clients with expert advice to help them achieve financial success and protect their assets.

But where does a financial institution go when it needs advice itself?

In certain cases, they may turn to a financial institutions group (FIG). But what exactly is a FIG and what does it do?

Key Takeaways

• A FIG provides expertise and advisory services to banks, insurance companies, and other financial institutions.
• Wells Fargo, Goldman Sachs, and Morgan Stanley are firms with FIG business activities.
• Investment banking, debt restructuring, and raising capital are among the services offered to FIG clients.
• FIGs can also make money by borrowing funds at lower rates and lending at higher rates.

What Is a FIG?

A FIG is a financial institutions group, which is a division within an investment banking firm that focuses exclusively on meeting the capital needs of financial institutions.

FIG clients include banks, insurance companies, tech companies, specialty finance firms, and asset management firms.

FIG professionals provide expert advice and support for raising capital, restructuring, regulatory financing, and mergers and acquisitions.

These specialists have in-depth experience with, and knowledge of, the ways in which financial institutions handle debt, short-term liquidity, and long-term solvency.

FIGs typically hire analysts with strong academic backgrounds in finance. In general, many investment banks have training programs for employees that can prepare them for various opportunities, including FIG.

How Do FIGs Work?

Structure

As mentioned, FIGs are often a part of investment banking firms. However, some FIGs may be smaller entities unto themselves.

To organize their expertise effectively and support greater focus, some investment banks may break their FIG services into separate silos that match different client segments.

They also can use these silos as a marketing technique to help attract financial institution clients seeking specific types of services under the FIG umbrella.

FIG offerings may be integrated with broad services for major sectors such as healthcare, industrial, media, telecommunications, mining, energy, retail, technology, and real estate.

Services

The advisory services that FIGs provide for their clients can encompass:

• Initial public offerings (IPOs)
• Investment banking
• Mergers and acquisitions (M&A)
• Raising capital with equity
• Capital structure optimization
• Debt financing

FIGs can represent both public and private companies. They can help a private company go public. They might also offer targeted expertise for specific markets or have specialists who work in different segments such as mortgage lending, debt markets, and equity capital.

Client Types

FIG clients include:

• Insurance companies specializing in personal or commercial products
• Commercial finance companies that provide financial services to businesses, banks, brokerages, investment dealers, asset managers, and wealth management companies
• Emerging companies seeking to go public
• Private companies seeking financing through a private placement.

Fast Fact

Generally, large FIGs service a variety of capital-related needs for financial institutions.

Pros and Cons of FIGs

FIGs have advantages and disadvantages for those seeking employment with them.

Pros

• Steady and committed client base
• Experience working with sophisticated financial systems
• Opportunity to hone analytical skills
• Training in the management of capital
• A normally full deal-making pipeline
• Attractive salary and bonus, starting at 120,000foranalysts,120,000 for analysts, 120,000foranalysts,200,000 for associates, 300,000forvice−presidents,and300,000 for vice-presidents, and 300,000forvice−presidents,and500,000 for directors

Cons

• Long hours and challenging work
• Required analytical skills and regulatory knowledge may prove challenging
• Deal activity, while steady, can proceed slowly and prove unexciting
• Discipline and stamina can be required to stay engaged
• Specialist rather than generalist focus may make job changes difficult

What Types of Clients Work With a FIG?

Commercial banks, insurance companies, brokerages, investment banks, and specialty finance firms are among the clients that hire a financial institutions group.

What Top Investment Banks Have FIGs?

Goldman Sachs and Morgan Stanley are among major IBs with dedicated FIGs. Wells Fargo has a FIG as well.

Did FIG Advisers Help Broker UBS's Acquisition of Credit Suisse?

In 2023, FIG advisers at JP Morgan and Morgan Stanley worked with UBS to acquire Credit Suisse in a $3.2 billion dollar deal over a mere 48-hour period. Credit Suisse, a 167-year old bank, was on the brink of collapse, and the deal was among the most notable acquisitions in the banking sector since the 2008 global financial crisis.

How Do FIGs Make Money?

In addition to providing the comprehensive guidance already described, FIGs make profits from borrowing money at cheap rates and then lending it at higher rates. So they make interest income by moving money around in money markets, through loans, and other deposits.

The Bottom Line

Financial institutions groups provide a wide range of corporate finance services, from mergers and acquisitions advisory to capital raising.

Given their sophistication and scale of expertise, they have been instrumental in brokering some of the most significant banking deals in recent history, such as the UBS takeover of the 167-year old Swiss bank, Credit Suisse.