Roles of an Investment Banker

It 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.

  • Part 1 – Investment Banking vs. Commercial BankingPart 2 – Equity ResearchPart 3 – AMCPart 4 – Sales and TradingPart 5 – Private Placements of SharesPart 6 – UnderwritersPart 7 – Mergers and AcquisitionsPart 8 – Restructuring and ReorganizationPart 9 – Investment Banking Roles and Responsibilities

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, so please note that this was more of a bird’s eye view of individual departments. If you are deep into it, you will know the whole science 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

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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, populates the historical data, does some industry research, does some due diligence, and create IB pitch booksCreate IB Pitch BooksPitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm’s main attributes and valuation analysis, which helps them decide whether or not to invest in the client’s business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm’s sales department to help them sell products and services to a client.read more. So essentially, the analyst’s role is all about, you know, getting your hands dirty and someone who 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 the Associates are? So the Associate’s primary role is to check the analyst’s work. So they are one level up over and above the analyst. So that’s why they are called associates. They write a text for the presentations, oversee the job of an analyst, and sometimes interact with clients, as you know, the investment banks presenting the other side of the party or the client. So they may interact. So a lot of dirty work needs to be done here in terms ofFinancial analysis is an analysis of finance-related projects/activities, company’s financial statements (balance sheet, income statement, and notes to accounts) or financial ratios to evaluate the company’s results, performance, and trends, which is useful for making significant decisions such as investment, project planning and financing activities.read more financial analysisFinancial AnalysisFinancial analysis is an analysis of finance-related projects/activities, company’s financial statements (balance sheet, income statement, and notes to accounts) or financial ratios to evaluate the company’s results, performance, and trends, which is useful for making significant decisions such as investment, project planning and financing activities.read more 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 up the food chain. So obviously the Vice President would be overlooking the associates and the analyst, but what is the key role? Think of the Vice President as a project manager. When we talk about Investment Banks, investment banks have to make a lot of presentations and handle different kinds of verticals. The Vice President is someone who is handling a certain set of projects. He handles the structure of the presentation before going to the meeting. I.e., what should it look like? Do you know what a pitch book is, a pitch book’s design? So all these things need to be managed, and he also talks to senior investment bankers, analysts, and 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 a managing director.

Managing Director

So what is the role of a managing director? The managing director is 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 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

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 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 does Front Office, Middle Office, Back office mean in this context? So when we talk about investment banking, the coreThe entry-level investment banking jobs for graduates mainly belong to categories such as markets, specialist markets, investment management, corporate banking, risk management, structured finance, technology, operations, private wealth management.read more jobs of investment bankingJobs Of Investment BankingThe entry-level investment banking jobs for graduates mainly belong to categories such as markets, specialist markets, investment management, corporate banking, risk management, structured finance, technology, operations, private wealth management.read more 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 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 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 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 work in tandem to convince a client. So this is the 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 comes in the Middle Office. What is the role of the Middle Office? The middle office’s key role is to interact with the Front Office guys and ensure that they do not engage in any set of activities that you know are out of compliance or probably the risks are too much for the investment bank to take. So to check the work associated with the Front Office, Middle Office, the people employed here actually do the risk assessment related to it. So all the controls and procedures, finance control guys, even the compliance, the strategy guys, all of them 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 consider working in a Back Office in an investment bank. The reason is that they are not interacting with the clients. It’s just terminology, so I don’t worry about why IT guys are classified as Back Office. Think of whether they are facing the real clients, if not, they could be classified as Middle Office or Back Office. Also, the operations guys, operation employees who are 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 you have probably understood the role of investment banking and the responsibilities of individual functions within an investment bank.

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