Front vs. Middle vs. Back Office: Which Investment Banking Path Should You Cross?

Front Middle Back Office Investment Banking

You probably had read or heard gazillions of stories of how the front office is always better than the middle or the back office.

These stories probably had played thousands of times in your mind; to the point that you just accept that they are true.

But, is this really the case?

Before we jump to conclusions, let’s have first a closer examination of the differences of each department.

What is the difference between a front office analyst and a back office analyst?

A front office analyst is someone who is a revenue – generator for the firm. For example, those analysts that are in trading and sales, investment banking, private equity and even wealth management are all front room analysts.

They are the ones who create models and pitch books. Also, they are the professionals talking with banking clients.

Usually, front office analysts are into sales, marketing, investment banking and research. All pre-trade and execution activities are done by front office associates.

The front office is where the banks assist clients to raise money from equity or debt markets. Their advisory services cover M&As and LBOs to name a few. They also do the trading of equities, debt securities, derivatives, etc.

All else are back room or middle office associates.

Back office analysts provide support services to the front room associates. They are not directly engaged with trading nor talking with clients.

Some of the examples would be accountants, operations group, regulatory compliance, human resources personnel as well as IT professionals.

What is the middle office?

Middle office is composed of professionals working in the departments of compliance, presentation centers, and risk management. These professionals can somehow be categorized under the back office.

Employees that manage risks are oftentimes regarded as part of the middle office. They also calculate profit or loss of each deal transacted by the front office.

The middle office also includes corporate treasury, financial control, and strategic management.

Middle office and front office usually work together on some deals in order to ensure that the bank is not taking on risks that are above what the company strategies allow.

Middle office associates at least have bachelor degrees, but some of them have MBAs as well.

Does Back Office earn less than front office?

Yes, even at the analyst level.

The reason is that most of the work in the back office (e.g. support systems) are less technical or are less related to banking than the tasks done in the front office.

For example, in NY, banks would pay around $60,000 per year for back office associates. Their front room counterparts, on the other hand, would earn around 20% more basic compensation.

You can find banks whose starting salaries for both offices are not that far from each other. However, as the years of experience accumulate, the pay gap widens.

Based on data crowdsourcing Emolument, some of the worst-paying jobs in UK investment banking back offices earn around 40,000 Euros (around USD41,000) per year. Some examples are job positions for cash management and operational risk management.

Why should I work in the back office?

If you want a work-life balance, working in a back office role could be a good fit for you because it allows you to work a regular day shift that ends at 5 or 6 pm.

If you want not so head-breaking tasks, back offices tasks are perfect for you. Tasks would be repetitive and you don’t need to use much complex analysis to complete your job.

If it’s just internship, accepting back office roles might be a good move. Why? It is because accepting such roles will give you access to front office roles. This is not recommended for full office positions, though.

What should I NOT work in the back office?

By applying in back office positions, especially as an intern, you might lessen your chances of being hired for full-time front room associates.

The reason is that most of the students, especially from the top business schools, usually have experienced front office jobs.

Since this is the case, banks will, by logic, choose students with relevant experience for full-time front room position. If your experience is solely in the back office, you will definitely be at a very big disadvantage.

It’s always better to work at small firms in a front office role than in a big bank in a back office role.

Back office support positions won’t also help you much in hedge funds or private equity funds.

You won't also get especial attention from investment banks or financial firms just because you have back office experience. They will view you as someone with no enough experience in investment banking.

Moreover, if you work on non-finance related positions such as IT, don’t expect to be considered at all.

Back office jobs are not part of the investment process. You won’t be working on valuation models in back office positions.

Much of the jobs are about after-trade paper works and documentations. If you don’t like it, then, you don’t fit in the back office.

Many back office positions are not located in the main building of banks. Thus, you'll find it hard to connect with the right people in case you want to transition to the front room later on.

There are lots of back office positions that are outsourced by banks especially in IT and HR.

By nature, lots of tasks in these departments are process-driven and repetitive. Most repetitive tasks might already be automated, though. If you would like to work on a dynamic job, stay away from back office positions.

A lot of analysts also observed that career advancement in the back office is generally slower than in the front office.

Which is the best: front, middle, or back office?

There is no definite answer.

It all depends on what YOUR goal is.

If you aim for the highest pay possible, even if it means working long hours, you must target working for the front office. The front office would generally be the one which could give you the most experience in terms of investment banking.

If you prefer having more free time than money, go for a back office position.

Back office is also the way to go if you want to be exposed to the finance industry but do not necessarily want to do trading or client meet-ups.

If you want a balance (though not guaranteed) between money and free time, a middle office position might be the best for you.

How much is the difference between the compensation of front office and back office associates?

For junior analysts, the difference is somehow small, about $10,000-$20,000. But, as both analysts gain more experience, the salary gap would also widen.

Aside from that, bonuses would also be very different.

In front office positions, one could get up to twice the annual salary as a bonus, but, for back room associates, bonuses could only be around 5-15% of annual salary.

You might find it hard living on a back office associate’s salary especially if you’re working in a bank in a big city like London or New York.

How to transition from back office to front office?

It’s not easy to transition from back office to front office, especially in Investment banking.

Especially if you come from a field not closely related to finance such as engineering or IT. It’s almost impossible.

Out of the few who successfully transitioned, almost all came from middle office departments like risk management and presentation centers.

Do not go for positions that are totally not IB related such as IT and HR.

There are lots of articles that tell you cannot move from back to the front office.

However, if you really want it, go for it! You need a lot of patience, though.

There’s a lot of creativity involved. You must get the right education and be employed by good investment banks. Going for smaller banks could help you move from back to front office roles.

Your years of experience in the back office and your skills (such as communication skills) will be vital to your transition from back to the front office. Don’t take your job for granted. Learn how to highlight your relevant back office skills in your resumé.

If you’re working closely with traders, network with them. Observe and listen how they work. Over time, you will gain knowledge that is useful in cases you get invited for interviews.

It would also help a lot if you can network with people who had been able to jump from back to the front office. One of the best ways to find them is to ask your friends and colleagues. You can also use LinkedIn to find these people. Have a chat with them and get tips how you can do the shift also.

You can also get analysts certifications that are relevant to your target job.

No one can really say how, you can only get some good tips, just like here. You have to figure out the way yourself.

Even if you come from a totally unrelated field like engineering or arts, you’ll never know if you can unless you try hard.

On a final note, if you really want to jump office, start planning now. It takes a lot of preparation before you reach your goals.

What is a presentation center?

A presentation center is a department where PowerPoint presentations or similar presentations are being crafted by well-trained professionals called graphics operators.

Aside from presentations, they also create pitch books.

If you have a PPT requirement, you can send the draft to people and they will create the presentation. It is more efficient to use presentation centers than let front office professionals do the work.

There are usually two shifts for banks, one morning shift and one midnight shift.

How does the work look like in presentation centers?

Work for presentation centres come from investment banking analysts.

After creating their text reports, analysts will hand over their reports to the presentation center.

They will discuss to a supervisor what they want to be done. The supervisor will list down the instructions.

After that, the reports will be distributed to teams who will create the presentation. Shift leaders manage the flow of work within the department.

Each presentation will be made consisting of professionally made charts, graphs and other visual objects.

Each creator, after doing the presentation will submit it to an “assurance” team. That team will ensure that the presentation follows company guidelines related to branding.

If the presentation did not pass, the presentation will be reverted to the one who created it for proper revision.

Professionals in the presentation centers usually are the first ones who are laid off during times when business is down. This is the reason why they should avoid having too many errors; else, they’ll have no job in any time.

After passing the assurance team, the presentation will already be given to the requesting analyst.

Sometimes the presentation wouldn’t match with the analyst’s instructions, in which case, the analyst might reprimand the creator.

Usually, the reports are made until late nights or late morning that’s why meeting very anxious analysts is common.

Professionals in the presentation centers could have two shifts, one midnight shift and one morning shift. Because of tight deadlines and stressed bankers, midnight shifters are usually the ones exposed to the most stressful situations.

Some professionals in the presentation centers are paid by the hour. That’s why they would like more job, unlike other professionals who can avoid job but still get a fix daily rate.

Graphics operators also work during holidays like Christmas and New Year.

If you’re the banker, how should you deal with the graphic operators?

Most of the time, presentation centers work with lots of presentations with very tight deadlines. There are lots of furious bankers queuing up hoping they would get the best attention for their reports.

Because of the stress and anxiety in the air, there's no escaping from negative behaviors from both the bankers and the presentation centre.

However, you as the banker, should always act professionally and reasonably.

Most likely, you will deal with graphic operators many times; thus, you would like to get the best impression from them so that your requests will be properly addressed all the time.

Be reasonable when setting the deadlines. Most of the works passed on to the presentation centers have very tight deadlines. You should always consider how much work must be done on your report when setting your deadline.

Also, be always clear with your instructions. Be as concise as possible.

Create your text reports as clearly as possible. Preparing bad outputs would only lengthen the time needed by operators to create your presentation. Be diligent in every aspect of your reports.

Note that the presentation centers follow company rules related to styles, so you cannot impose your own style.

Be sure your behavior represents your title position.

Help! How do I decide where to work?

After all these information, you might be getting an information overload.

There’s a lot to consider, thus, you cannot decide with finality which path to take on.

Start with this question: “What do I want my career to be in 10 years?”. Envision the perfect scenario for you.

Do I want to be a respected trader of securities? Or maybe an M&A authority? Do I want a job that is somehow laid-back and would allow me to have work-life balance? Do I want to be a manager of the tax department? Compliance?

After you determine what professional you would like to be in 10 years, reread this article. By doing so, you’ll get a good idea of the plan you should make.

Careful planning and patience will always bring you far.

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Front vs. Middle vs. Back Office: Which Investment Banking Path Should You Cross? 1

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