Investment Banking Roles and Responsibilities

Roles of an Investment Banker

Investment Banks performs various different type of roles by offering various financial services to their clients that include roles such as helping the corporations in finding the investor for obtaining the debt finance, underwriting of the stock issues, working as the financial advisor, handling of the mergers and acquisitions, etc.

This is the final article (9/9) on the Investment Banking overview Investment Banking OverviewInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more series.

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 a different kind of function investment banking is in to so please note that this was more of a bird’s eye view of individual departments. If you deep into it, you will find that you know it is whole science altogether within each function. As an investment bank, you know potential carriers if you want to kind of look at you will note that the higher is key involves different levels one it starts with an analyst then move to associate then become a vice president than a finally managing director so let’s now look at how this investment banking roles and responsibilities are within investment banks through this video.

Investment Banking Roles and Responsibilities Video

Investment Banking Roles and Responsibilities

Investment Banking Roles and Responsibilities

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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 Associate; there would be a team of Analysts, then we’ll find that someone with the name of Vice President will also be there, and there will be a couple of managing directors. So what is the role of individually each and everyone within the investment bank?

Analyst

So let’s talk about the bottom of the food chain. Who is the analyst, and what is the typical profile? So analyst; the analyst is someone basically whose main role is to create financial models, do company valuations, comparable comps, relative valuations like Price to earnings ratioPrice To Earnings RatioThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. read more, PBV ratioPBV RatioPrice to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share read more, etc., do some hardcore data punching. So something, as you know, creates a model from scratch, populate the historical, do some industry research, do some due diligence, create IB pitch books. So essentially, the analyst’s role is all about, you know, getting your hands dirty and someone who is is just a graduate, let’s say in history, or it may be financed is kind of eligible for this kind of a job.

Associates

So let’s look at who are the Associates? So the Associate’s primary role is basically they check the work of the analyst. So they are one level up over and above the analyst. So that’s why they called as Associate. They write a text for the presentations, they oversee 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 a 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 bank as an associate before you become someone called a Vice President.

Vice President

Now, who is a Vice President? So obviously, we are moving up the higher arc key moving up the food 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 a 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 to the meeting. I.e., how should it look like? Do 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.

Managing Director

So what is the role of a managing director? The managing Director is basically someone like a father. Now his responsibility is to develop 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 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 of the business come from the investment bank.

Investment Banking Front Office, Middle Office or Back Office


Investment Banking Front office middle office back office

Investment Banking Front Office

So I hope you understood the role and responsibility when we talk about investment banks another Jargon which is very famous which office do you work for Front Office, Back office, Middle Office so say, for example, risk management is a middle office job likewise investment banking sales, and trading is a 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 jargon. I will call this as Front Office, then there is something called Middle Office, and then we have another thing called Back Office. What is this Front Office, Middle Office, Back office 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 desksTrading DesksA trading desk is a section within a bank or company that buys and sells securities such as bonds, shares, currencies, and commodities to facilitate their own or clients' trades in the financial markets, ensuring market liquidity.read more, 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 researchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. read more 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 analyses about buy-sell on a particular stock. So we have earlier seen 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 the risk management team they come in Middle Office. What is the role of the Middle Office? The middle office’s key role is actually to interact with the Front Office guys and to ensure that they do not engage in any set of activities that 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 works on the Back Office.

Investment Banking Back office

So Back Office are those guys who do not interact with the clients. So 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. The reason being that they are not interacting with the clients it’s just 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 the smooth functioning of the business or the investment bank, can be classified as Back Office employees. With this, I hope that you have probably understood what the Investment banking roles and responsibilities of individual functions within an investment bank are.

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