If you’re looking towards investment banking as a career after university, you’ll need to suss out where you’ll fit in! There are a number of divisions that make up an investment bank, usually divided into ‘front office, ‘middle office’ and ‘back office’.
Front office: bringing in the bacon
Front office roles exist to generate revenue for the bank and make as much profit as possible for their clients. Traders, brokers, asset managers, researchers, and sales and structuring professionals are the key players of the front office line up.
Modern front office roles are a far cry from the incessant shouting down phones in years gone by. Nowadays, the trading floor utilises various software packages and applications to track, analyse and predict the markets and facilitate the trades themselves. You’ll even find developers on the trading floor!
Researchers will investigate potential markets and investment opportunities for clients to inform pitches and asset management, whilst the traders and brokers make the trades themselves. These bankers will also support clients as they buy, merge or sell or provide advice and services when it comes to financing and restructuring.
Characteristics of the front office
- High pressure! There are big decisions to be made in short time frames that could either make or lose huge amounts of money.
- Long working hours. 80-hour weeks are not uncommon!
- These roles generally have the highest salaries in investment banking – indeed, they’re some of the most highly paid career paths out there!
Middle office: the voice of reason
In investment banking, the middle office usually consists of risk management, research and compliance departments, as well as some elements of technology.
Risk analysts and managers work closely with front office teams to feed them their results relating to various asset classes and financial markets. This information helps the decision makers to mitigate investment risks as much as possible. They also manage risk in terms of compliance, ensuring the bank’s practice is on the right side of legislation and industry standards. A legal team will also feature here.
Developers and some types of quantitative analysts work on the creation and maintenance of software and applications used by the traders and brokers. Financial control is also part of the middle office – it’s essentially the accounting department for the bank, preparing financial statements for reporting to industry regulators etc.
Characteristics of the middle office
- Huge responsibility! These guys are responsible for making sure the bank doesn’t breach regulations and put its financial position and reputation at stake.
- Challenging negotiations. Middle office needs to convince front office not to get carried away with risky investment, whilst giving them the room to make the most lucrative moves they can.
Back office: the engine room
The back office is namely referred to as ‘operations’. This includes all of the services and duties that must be carried out when trades are made by the front office: clearing and settlement. These are many administrative roles, which play a vital part in the overall functioning of the bank – and the world of trading overall, for that matter! There are also opportunities to work on projects, creating new processes and refining or automating older ones. They offer a chance to work with various different asset classes, and a global dynamic to work – global investment banks will coordinate their operations teams worldwide.
It’s not just about clearing and settlement services either. A bank is, after all, a business like any other, with staff to take care of, an image and brand to mould and promote, and a need to source the very best talent for their roles, from graduate intake up to the most senior roles. This is where HR and marketing comes in, running recruitment, ensuring standards are upheld across the business, handling disciplinary issues when necessary, organising benefits and rewards for existing employees and generally acting as the glue to keep everything in the bank together.
Technology forms part of the back office too. A modern bank is nothing without fully functioning systems and hardware, so experts are always on hand for maintenance and to fix problems whenever they arise.
Characteristics of the back office
- More standard office hours compared to the front office.
- An international dynamic. Multinational investment banks often unite their operations teams across the globe to get tasks done and problems solved as quickly as possible.
- There are still essential deadlines to meet, though the heat of the working environment may not be as intense as in the front office.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.