Investment bankers direct multi-million dollar transactions on behalf of their corporate clients. They can make big bucks for their clients, and they are paid according. But investment banking is not all prestige and glamor.

Aside from the 100-hour weeks on the job, it takes a lot of hard work just to break into the field of investment banking. One way that you can increase your chances of landing a position is by going where the jobs are. Here are the top three best states for investment banking, along with the major cities where you should target your job search.

  • New York – New York City
    When it comes to investment banking jobs, nowhere comes close to New York City. Of the 50 top banking employers ranked by, 33 have their world headquarters located in New York City. If you know you want a job in investment banking, New York City is the place to be. There are stories of ambitious young graduates who move to New York City and knock on doors for months until they get into the industry.
    The downsides of working in New York City are the high cost of living and the high taxes. New York City was ranked the eighth-most expensive city in the world by a 2009 Mercer survey so your money won't go as far as you might think.
    Regarding taxes, New York City is unusual in that the city levies a personal income tax with a top rate of approximately 3.648%. In addition, New York State levies an income tax with a top rate of 7.85%. Adding in federal income tax, the highest marginal tax rate for workers in New York City is over 45%. So for very high earners, nearly half of what they make is taxed away.
    Despite the downsides, the prevalence of investment banking jobs in New York means that you still have to consider New York as a top choice for investment banking jobs. (Think about the costs of becoming an investment banker vs. the benefits, is it right for you? Compensation Myths: Burger Flipper Vs. Investment Banker.)
  • California – Los Angeles, San Francisco
    California is considered the financial center of the west coast. Within California most investment banking jobs are located in either Los Angeles or San Francisco. While only three of the top 50 banking employers ranked by have their world headquarters in California, most major investment banking employers have regional offices in the state in order to serve their west coast clients.
    Los Angeles and San Francisco are expensive cities to live in, but they are generally less expensive than New York City. Los Angeles was ranked the 23rd most expensive city in the world by a 2009 Mercer survey, and San Francisco was ranked 36th. California's state income tax rates range from 1.25% up to a top tax rate of 9.55% (and 10.55% for income over $1 million). For high earning investment bankers, California's state income taxes can thus be comparable to the New York City's combined city and state income taxes. (Learn more about the investment banking field in Wanna Be A Bigwig? Try Investment Banking.)
  • Illinois – Chicago
    Chicago is sometimes considered America's third financial center. In the finance world, Chicago is best known for the Chicago Board of Trade and the Chicago Mercantile Exchange. These exchanges specialize primarily in commodities and derivative contract trading. However, Chicago is also the third-largest city in America, and many investment banking employers have offices there. A quick survey of some of the major investment banks indicated that Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Lazard (NYSE:LAZ), Deutsche Bank AG (NYSE:DB) and Greenhill and Co. (NYSE:GHL) all have offices in Chicago.
    Chicago is less expensive than other major financial centers and was ranked the 50th-most expensive city in the world. The taxes are a bargain compared to New York or California as well. Illinois imposes a state income tax rate which is set at a flat 3% of net income.

The Bottom Line
In order to get a job in investment banking, it's best to be willing to relocate to one of the major financial centers in the United States. Due to their prominence, these cities tend to have a relatively high cost of living and impose relatively high taxes. Fortunately, these factors are offset by the extremely high compensation that can be gained by successful investment bankers.

Catch up on the latest financial news; read Water Cooler Finance: More Spilled Oil, Fewer Jobs.