You decided to work in an investment bank.
But, you’re in a new world. You don’t know what analysts, associate, Vice President, and managing director in investment banks do?
You know the names of the positions, but you don’t really know what they are. You’re confused.
Well, you’re not the only one. There are a lot of students or professionals that don't really know the different functions inside the investment banking hierarchy.
So here you go, here are the investment banking titles and what they really mean, and what kind of roles they do inside an investment bank.
Note: The compensations stated here are based on if you are working in a developed city like New York or London. The work hours would, of course, vary day by day. The hours of works stated here are just estimations and just for illustration purposes.
An analyst is the one who does the financial analysis (or credit evaluation) of a company. His/her goal is to assess the financial health of the company. His output will be the basis of a recommendation to be made by his supervisors, especially Vice President and Managing Director.
Analysts do all the administrative portion of the deal process. They are the ones who work with financial models, pitch books and PowerPoint presentations.
His analysis could include ratio analysis, industry highlights, financial modeling, and valuation.
Analysts are the ones at the bottom of the organizational structure of banks.
As an analyst, you’ll be the one working the most hours.
You’ll have the most workload.
You’ll be the one pulling all-nighters more often than other members of the organization.
However, you need that kind of experience. You’re still at the start of your career. So don’t complain too much about the work. You need that experience in order to grow yourself as an investment banker.
Don’t worry. Your effort would most likely be always compensated. There are junior analysts that rack-up $100,000 year. However, your compensation is largely influenced by the sector you are working on. According to recruiter.com, analysts in the financial and insurance industry tend to earn the most.
First, take up a course in finance- Classroom or Online. As much as possible, choose a school that will give you the best exposure to investment banks. A Master’s program will improve your career.
Second, you need to have good on-the-job training.
Third, apply, be interviewed and be hired by investment banks.
You still have a lot of other opportunities based on the skills you had acquired from your bank. One, you can go to private non-bank companies and be hired as part of the corporate finance division.
If you want to stay within the finance industry, there are jobs waiting at hedge funds, private equity, and venture capital.
But, if you decided you want to move up the bank’s ladder, read on!
Typically, it will take you about three years in that position before getting promoted to being an ‘associate'. However, there are banks like Goldman Sachs which has accelerated programs of two years.
There are investment banks whose promotions are almost automatic with the passage of time. About 60-70% of analysts are being promoted to associates in these banks. Some reported Goldman Sachs as being one of those investment banks.
There are investment banks that, however, have tighter guidelines on promotion. You must meet above-average internal ratings consistently for three years in order to get promoted.
Those that were not promoted have three things in common: weak modeling skills, cannot work independently and do not demonstrate leadership potential.
Associates are quite like analysts but are more important.
Associates are the ones who guide the analysts in the preparation of research and visual presentations. For example, presentations are done about 75% by the analysts. The associates will do the remaining 25% together with the finishing touches.
The associate is the bridge between analysts and executives like vice presidents and directors.
You will still do financial models and presentations, but mostly you will be the ones checking the accuracy and correctness of the jobs of the analysts.
Once you’re on the associate level, you’ll be attending more pitch meetings and meet-ups with clients.
In general, they work quite fewer hours than analysts. But still, they work a lot.
If their analysts work until midnight, associates will probably work until 10 pm or 11 pm only. But, if you're an associate that is very much driven to rise up the corporate ladder, you will push yourself to work the same (or even more hours) than the analysts.
Usually, the associates are 26-35 years old.
For those promoted to vice president (or any officer role), it took them about five years at the associate level. But, beware; it’s a lot difficult to move from associate to Vice President, then from analyst to associate.
You will need not just expertise in modeling; you also have to show the bank that you are a capable leader. How you handle your analysts will greatly impact when you will be promoted.
You will also have to show excellent communication skills. After all, as a Vice President, you’ll be talking with clients a lot. You will also be the one to initialize some deals. Do you have what it takes? Show your bosses.
If you want to get promoted faster, an MBA degree or certification (like CFA) would help.
You actually have two options.
Aside from being a Vice President, you can also move into non-banking institutions in a finance executive role. There are also exit opportunities at buy-side entities such as hedge funds.
But, if you’re the type who wants to be an executive at a big bank, then, the next section is for you.
Once you become a Vice President, you’ll feel that your hard work as an investment banking analyst and an investment banking associate had already paid off.
Tasks will become more interesting.
You'll be working fewer hours.
You’ll talk a lot more with clients, and will be the ones bringing in the deals (and income!).
You’ll get more bonuses of course.
Vice President is almost always promoted from inside the bank. It’s rare to find an outsider take on the Vice President role. So, if you want to really get promoted, you have to stay on the same bank for years.
Vice President's age is usually 35-50 years.
Vice Presidents guide associates and analysts. Since they are the ones handling the deals, they are also the ones what kinds of presentations will be made by associates and analysts.
They are the ones who have a final call on presentations. They will be the primary persons who will be presenting to clients or possible clients.
Once you’re a Vice President, it will be a lot harder for you to climb the corporate ladder. In fact, less than half of the VPs are promoted to directors each year. Also, your promotion will also depend on how bullish the economy is.
There is not much promotion mainly because of costs. Maintaining too many VPs is costly for investment banks, especially that VPs require a lot of bonuses. Thus, there are VPs who are stuck in their position in the entirety of their careers.
However, it's not that bad to be stuck in Vice President, right? After all, you'll get to be paid hefty bonuses. Plus, you'll get exciting responsibilities since you are the one who brings in clients to your bank.
Also, VPs work a lot less than associates and analysts. If your team works until midnight, you probably can go around 7 or 8 pm. After all, all the dirty and time-consuming tasks are already being worked out by your team. Your responsibility is mostly on the analysis and communication side of the deals.
Well, directors and managing directors are the ones directing the activities of the bank.
As for the question, if you can become one, of course, you can!
Directors, especially managing directors, are the foremost in terms of bringing in deals, especially the biggest ones. They are the ones responsible for the billion-dollar deals you see on newspapers. They talk with a lot of external people. Also, they travel a lot.
There are investment banks that have some Executive directors on the hierarchy before having the Managing director.
Managing Director oversees all directors (that are below them), all VPs, all analysts and all associates. There’s a lot of stress for sure.
Their time schedule is flexible and unpredictable. There are times that Directors cannot be seen in a week or so. They are always out meeting business partners or clients. They sometimes go abroad in order to create deals.
The directors are the ones who meet the topmost executive of every organization.
Your bonuses will be largely affected by the state of the economy.
Currently, bank titles are causing confusion among applicants and head hunters.
Why? It is because corporate titles are sometimes becoming hideous.
For example, there are investment banks like Goldman Sachs that promote investment banking analyst to investment banking associate in two years instead of three years. But, in reality, those associates are still doing an analyst's role, just with a few added responsibilities.
On the other hand, fancy titles like assistant vice presidents are introduced by some firms. But, in reality, these people are still doing the duties of associates.
There are even some investment banks that use‘junior’ and ‘senior’ in their ‘associates’ position.
If you’re promoted from junior to senior, isn't it an awesome feeling? But still, your job is to be an associate.
Creating two different levels of an associate is somewhat similar also to ‘promoting'. Technically, however, you're still on the same level.
In Goldman Sachs, headhunters say, the responsibilities of Executive Director and Vice President are almost the same.
If you come across UBS, you’ll discover that there are no associates. They call them associate director. Confusing, right? Which is which, is he an associate or director? They also don’t have VPs, rather, they call them directors.
Here’s more. BNP Paribas in London doesn't have corporate titles at all! Their company identifies its employees based on an internal grading system based on pay and authority. It’s not surprising if it creates confusion both inside and outside the organization.
This scenario has caused a lot of problems, that’s why BNP Paribas has started introducing traditional corporate titles.
As a solution, headhunters judge their applicants based on the number of years of experience rather than a job title. So, the next time you apply for a job, clearly indicate the number of years you worked and the kind of tasks that you had worked on.
Well, you must first know how to become a financial analyst.
You need to have the right education, the right school, and the right internship in order to get the best job that will suit you.
If, on the other hand, you’re confused as to what career in finance to choose, you better check this guide.
Which position do you think is most exciting? Let us know by leaving your comment!