Front Office vs. Back Office: Investment Bank Roles
The roles in an investment bank can be separated into three distinct parts: the front office, the middle office, and the back office. Each sector is very different yet plays an important role in making sure that the investment bank generates money, manages risk, and operations run smoothly.
Investment Bank Roles: Front Office vs. Middle Office vs. Back Office
From a broad perspective, the finance roles within an investment banking firm can be divided into three sections:
- Front Office (FO): The front office is responsible for producing revenue for the investment bank, which can come from fees paid by clients for advisory services or profits obtained from trading.
- Middle Office (MO): The middle office is responsible for risk management and ensuring that, at all times, the firm is in full compliance with all regulatory requirements.
- Back Office (BO): The back office is responsible for the firm’s administrative tasks and making sure the day-to-day operations at the firm at running smoothly without any issues that could be a hindrance.
Front Office Role: Client-Facing Finance Careers
Think you want to be an investment banker? Chances are the role you are imagining is a front office role.
The front office generates the bank’s revenue and consists of three primary divisions:
- Investment Banking: Front office investment banking is where the bank helps clients raise money in capital markets, and also where the bank advises companies on mergers & acquisitions.
- Sales and Trading: At a high level, sales and trading is where the bank, on behalf of the bank and its clients, buys and sells products. The traded products include anything from commodities to specialized derivatives.
- Equity Research: Equity research is where equity analysts closely follow companies (and industries) to write reports about their future earnings prospects. Other financial professionals buy these research reports from these banks and use the reports for their own investment analysis.
Other potential front office divisions that an investment bank may include are the following:
- Commercial Banking
- Merchant Banking
- Investment Management
- Global Transaction Banking
Middle Office Role: Risk Management and Legal Compliance
Ultimately, the goal of the middle office is to ensure that the investment bank doesn’t engage in certain activities that could be detrimental to the bank’s overall health as a firm.
For example, the risk management team must ensure that the front office, amid a capital raising process, is not placing the entire firm beyond a reasonable degree of risk by underwriting certain, highly-speculative securities.
Common examples of jobs often considered to be middle office roles include the following:
- Risk Management
- Financial Control
- Corporate Treasury
- Corporate Strategy
- Legal Counsel
Back Office Role: Operations Support Team
The back office refers to the operations team and technology staff (IT) that support the firm’s internal processes and systems.
The responsibility of the back office at an investment bank is to make sure the front office can perform their jobs and bring in money for the bank without interruptions, such as maintenance issues or an understaffed team.
In conclusion, the following list consists of careers considered to be back office roles:
- Technology Staff (IT)
- Human Resources (HR)