Does it really matter that you're not joining an investment bank in the front office?
If you're thinking of leaving university and going to work in an investment bank, you may already be familiar with the terms 'front office, 'middle office,' and 'back office.' If you're not, then maybe you should be.
Loosely speaking, 'front office' bankers are those who directly generate revenues for the firm. They are the M&A bankers. They are the salespeople and the traders. They are the equity capital markets bankers and the debt capital markets bankers who help clients raise money in the markets. Behind them are the 'middle office' bank employees. They are the compliance and risk professionals and the technology professionals who work in direct contact with the front office bankers to moderate and facilitate the revenue-earning process. And behind them again are the operations professionals who act as the administrators, making sure that all the activities of the front office bankers are properly documented and follow the most efficient processes.
If you haven't heard of the terms 'middle office' and 'back office', that might be because banks are trying to move away from them. They're seen as a bit pejorative and out of date. Nowadays, Goldman Sachs refers to its middle and back office as, 'The Federation.' Citigroup refers to, its 'non-revenue generating roles.' Deutsche Bank talks about, 'global functions' and 'infrastructure.'
Historically, students haven't always wanted to join banks' 'non-revenue generating' divisions. Front office banking jobs have been seen as more glamorous, more lucrative and more prestigious. According to banks' own graduate recruiters, that's all changing.
"The Federation is fundamental to the firm's success," says Michael Desmarais, global head of talent acquisition, human capital management at Goldman Sachs. "In an industry where technology, innovation, cost, risk management and regulatory scrutiny are all factors driving change, the Federation provides career opportunities for people to be front and center of current industry dynamics, to be creative, and to play a critical role in client service."
"The career paths in infrastructure can be just as exciting as those in revenue producing businesses," says Faye Woodhead, HR director for global graduate governance, planning and strategy at Deutsche Bank. As more of the sales and trading functions in banks become automated and as the regulatory demands on banks increase, banks like Deutsche say infrastructure jobs are becoming more and more important. "The regulatory environment is changing and we see our infrastructure hires as absolutely central to the way the bank operates," says Woodhead.
There are more graduate jobs in banks' infrastructure teams than ever before
Banks are also increasing their hiring into infrastructure jobs. Desmarais says over 50% of Goldman's existing staff now work in the Federation. Citi says 50% of its graduate hires in Europe, the Middle East and Africa (EMEA) last year were into global functions. Woodhead says Deutsche has recently launched two new infrastructure training initiatives. These include a new compliance graduate training programme and a new internal consulting training programme. "We’re hiring compliance trainees in New York, London and Frankfurt this year, and will expand to hire into Asia in 2015," Woodhead tells us.
Similarly, technology recruitment has become more important. Jamie Dimon, chief executive of JPMorgan recently revealed that the bank employs 30,000 programmers globally. JPMorgan is investing $48m in its Bournemouth campus (where its technology and other support staff work) in order to 'Googlize' it, meaning to make it more hip, in the style of Google's famous 'Googleplex' headquarters near San Jose.
Banks argue that infrastructure roles are by no means dull and boring. "Graduate opportunities in our global functions businesses come with high levels of responsibility and are every bit as competitive and dynamic as revenue generating roles," says Alix Roe, head of graduate recruitment and development at Citi. "We invest heavily in career development and encourage and support our graduates progress into senior positions at Citi."
Don't assume that banks' infrastructure roles are easier to get into
Because infrastructure jobs are seen as less sexy than jobs in the front office, there's often a perception that they're easier to get. Recruiters are at pains to point out that this is seriously wrong too.
“It’s a myth that it’s easier to get a job in a support function than the front office. A role in technology or risk might require different technical skills from a role in M&A or sales, but we’re looking for the same commitment, motivation and tenacity from all our graduate hires," says Roe. "It’s by no means easier to get an infrastructure role than a role in the front office. All our graduates go through the same application and admissions process,“ agrees Woodhead.
And don't necessarily assume that you can start in infrastructure and switch into the front office - especially in a European bank
Similarly, some banks' recruiters are keen to dissuade students who think they can start out in risk, or compliance, or operations (typically trade support) and use that foot in the door to become a salesperson or trader. This used to happen, but it's become far less common - especially at European banks, where it's often banned by local regulators.
"We would discourage you from applying for an infrastructure role if your intention is to work in a revenue producing role in future," says Woodhead emphatically. "Graduates are expected to join the divisions they’ve applied for. It’s important that we have people who want to build careers in risk, HR, or technology – rather than people who see these roles simply as a first step into the industry."
American banks tend to be less prescriptive about starting in infrastructure and staying in infrastructure, however. "It is advisable to have clear career aspirations," says Desmarais at Goldman Sachs. "But there is no single career path to a role in sales, trading or corporate finance and many of our employees end up working in revenue and non-revenue roles during their career."
At Goldman, Desmarais adds that the infrastructure training program equips students to work anywhere in the firm ("The skills one develops in a Federation role are broad and transferable across many areas of the firm and the financial services industry as a whole.")
So, no - it doesn't matter if you join an investment bank in the middle or back office. You might even be able to move into a front office job in future - depending upon where you work.
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