Investment Banking Roles and Responsibilities – This is the final article (9/9) on the Investment Banking overview series.
- Part 1 – Investment Banking vs Commercial Banking
- Part 2 – Equity Research in an Investment Bank
- Part 3 – What is Asset Management Company
- Part 4 – Sales and Trading
- Part 5 – Private Placements, IPOs and FPOs
- Part 6 – Underwriters and Market Makers
- Part 7 – Mergers and Acquisitions
- Part 8 – Restructuring and Reorganization
- Part 9 – Investment Banking Roles and Responsibilities
1) Investment Banking Program 99 Course Bundle, 500+ hours
2) Business and Financial Modeling (University of Pennysylvania)
3) Wharton Business and Financial Modeling Capstone (University of Pennysylvania)
4) Introduction to Finance: Valuation and Investing (University of Michigan)
5) Valuing Projects and Companies (University of Michigan)
In this article, we discuss the following –
- Key Roles in Investment Banking – Analyst, Associate, Vice President, Managing Director,
- Investment Banking – Front Office, Middle Office and Back Office.
So I hope you know this provided a good glimpse of different kind of function investment banking is in to so please note that this was more of bird’s eye view of individual departments and if you deep in to it you will find that you know it is whole science all together within each function and as an investment bank you know potential carriers if you want to kind if look at you will note that the higher are key involves different levels one it’s starts with an analyst then move to associated then become a vice precedent then a finally managing director so let’s now look at how this roles and responsibilities are within an investment banks through this video.
Investment Banking Roles and Responsibilities Video
Key Roles in Investment Banking
Let us now look at some of the key players within the investment banking domain. Let’s take an example there is a WNK Investment Bank and if you look at an investment bank you’ll have these different positions. One of them would be called as Associate; there would be a team of Analyst then we’ll find that someone with the name of Vice President will also be there and there will be couple of managing directors. So what is a role of individually each and every one within the investment bank?
So let’s talk about bottom of the food chain you know who is the analyst and what is the typical profile like? So analyst; analyst is someone basically whose main role is to kind of create financial models, do company valuations, comparable comps, relative valuations like Price to earnings ratio, PBV ratio etc, do some hardcore data punching. So something like you know create a model from scratch, populate the historical, do some industry research, do some due diligence, create pitch books. So essentially analyst’s role is all about you know getting your hands dirty and someone who is basically is just a graduate let’s say in history or it may be finance is kind of eligible for this kind of a job.
So let’s look at who are the Associates? So Associate’s primary role is basically they check the work of analyst. So they are one level up over and above the analyst. So that’s why they called as Associate. They write text for the presentations, they basically over see the job of an analyst and they also sometimes interact with clients as well as you know the investment banks who are presenting the other side of the party or the client. So they may interact. So lot of dirty work needs to be also done here in terms of financial analysis when a person is an associate. So think of you know spending at least 4-5 years after you join an investment banks as an associate before you become someone called a Vice President.
Now who is a Vice President? So obviously we are moving up the higher arc key moving up the foot chain. So obviously Vice President would be overlooking the associates and the analyst but what is the key role? Think of Vice President as a project manager. When we talk about Investment Banks, investment banks have to make lot of presentations and handling different kinds of verticals. Vice President is someone who is handling a certain set of a project. He handles the structure of the presentation before going for the meeting. How it should be looked like? You know what is a pitch book, a design of a pitch book? So all these things need to be managed and he also talks to the senior investment bankers and the analysts and basically the associates. So all and all he is one of the most important guys within an investment bank. Just a level below the final one who is called as a managing director.
So what is the role of a managing director? Managing Director is a basically someone like a father. Now his responsibility is to kind of develop an ultimate relationships assume that a managing director is highly networked would be attending conferences, would be meeting clients, you know debating and discussing things about valuations and going to high level meetings and managing directors may focus on one of the industries and kind of develop relationships with the management and obviously his primary role is to bring business to the company. So he is the one who is at the top and he is handling the part where the sales or the business comes from the investment bank.
Investment Banking Front Office, Middle Office or Back Office
Investment Banking Front Office
So I hope you understood the role and responsibility when we talk about investment banks another Jargon which are kind of very famous which office do you work for Front Office, Back office, Middle Office so say for example risk management is middle office job likewise investment banking sales and trading is front office job. So let us now look at the structure of an investment bank. The structure of the investment bank is actually divided into some jargons. I will call this as Front Office then there is a something called Middle Office and then we have another thing called Back Office. What is this Front Office, Middle Office, Back office actually mean in this context? So when we talk about investment banking core jobs of investment banking where you know investment bankers are directly dealing with clients. So Front office means you know being the face of the organizations so you’re dealing directly with the clients and hence you are within working in a front office likewise think of sales and trading desk. Sales and trading desks as we have discussed you know these are the guys who actually directly talk to the clients and advise them on buy and sell recommendations of the stocks. So since they are directly interacting with the clients they are considered to be the Front Office kind of roles. Likewise equity research is also considered to be a Front Office role because they are also directly interacting with the client you know recommending their own set of analysis about buy-sell on a particular stock. So we have earlier seen that how research, sales and trading actually work in tandem in order to convince a client. So this is Front Office for you.
Investment Banking Middle Office
Now what is Middle Office and who comes in between? So when we talk about investment banking structure something like you know risk management team they come in Middle Office. What is the role of the Middle Office? Middle office’s key role is to actually interact with the Front Office guys and to ensure that they do not engage in any set of activities which you know out of compliance or probably the risks are too much for the investment bank to take. So in order to check the work associated with the Front Office, Middle Office actually the people employed here actually does the risk assessment related to it. So all the controls and procedures, finance control guys, even the compliance, the strategy guys all of them actually come here and they work as a part of the Middle Office then this brings us to the last thing that who works on the Back Office.
Investment Banking Back office
So Back Office are those guys who actually not interacting with the clients. So you know you can say that the IT guys or the technology guys. They are the ones who would be considered to be working in a Back Office in an investment bank. Reason being that they are not interacting with the clients it’s just a nomenclature so I don’t worry about you know why IT guys are you know classified as Back Office think of whether are they facing the real clients, if no then they could be either classified as Middle Office or Back Office. Also the operations guys, operation employees who are you know helping out in terms of smooth functioning of the business or the investment bank can be classified as a Back Office employees. With this I hope that you have probably understood what are the roles and responsibilities of individual functions within an investment bank.