How does the investment banking hierarchy work?
Specifically, how do bankers climb from entry-level position to the corner office?
Investment Banking Hierarchy in a Nutshell
Everyone getting into the industry should expect a totem-pole style of hierarchy. That’s right — straight up, first one stepping on the second one, second on the third and so on.
- Analyst: The very bottom of the totem pole
- Associate: One step above but everyone else is breathing on your shoulder
- Vice President (VP): Squeezed right in the middle
- Senior Vice President (SVP): Almost there
- Managing Director (MD): Top of the world
In terms of how to climb up the totem pole, there is no choice – it’s either up or out.
Bottom of the Totem Pole: The Analysts
You do all the grunt work, boring administrative chores, and everything that no body wants to do. You have 3 core duties:
1. Routine Work (when you have no active deals or have down time)
- Update company share prices and company profiles.
- Prepare public information books.
- Work on league tables (and have to figure out a way to show your firm in top 3 in every chart).
- Search through the 100+ pages of 10K (a technical version of annual reports) to find that particular number for the comparable company analysis. Repeat for 20 companies.
- Research on certain industry and screen the thousands of companies to find 5 potential M&A candidates.
2. Administrative Work (when you have active deals)
- Lots of emailing or faxing to client / MD on the road. And the fax machine doesn’t work.
- Print presentation books and then manually insert a last-minute additional page to the 30 books within 3 minutes.
- Man the data room and cater impossible requests from potential bidders.
3. Financial Modeling
- This is the fun part (well, for nerds like me). The analyst takes the ownership of building the model. Associates may work on it but in most cases they are responsible for checking your work.
Bonus!
- Design the lucite and closing dinner gifts when a deal is completed
- Pick up dry clean for the VP
- Take your overseas clients’ wives to shop at Victoria Secret
(Yes, I have done all these.)
As you can see, financial modeling is a tiny part of your analyst’s life. Expect your life full of deadlines and last-minute calls doing administrative and all sorts of grunt work. But you are rewarded by the unrivaled exposure and networking opportunities that can be priceless to your future career, whatever it may be.
Next to the Bottom: The Associates
a.k.a Glorified Analyst, you are one step above the analyst but everyone else is breathing over your shoulder.”
The Associate’s primary job is to make sure the analyst finishes the task properly and on time. This would mean:
- “Monitor” the analyst. Make sure the analysts take care of all the routine work, or do the work if you get stuck with an analyst of “special recruit” (client’s son, Miss World, MD’s pet…)
- Check the financial models. Not much work if you get assigned with a capable analyst.
- Draft the presentation. In many cases Associates work on the outline and let the analyst write the actual bullet points of the presentation.
- Train the analysts. This is tricky because many analysts are technically stronger given they are the ones who do the actual work. In reality the training is done by Associates who are promoted directly from the analyst pool, vs fresh-grad MBAs.
- Contribute in meetings. While Associates are not expected to bring in deals, they should be able to answer clients’ questions in meetings (especially on the technical side) and lead meetings in working group during the execution phase of a deal.
Difficult Transition: Vice President
What a grand title, but in the World of Investment Banking it refers to a middle management role.”
After 3-4 years an Associate will be promoted to the VP position. As an “officer”, VPs are expected to gradually bring in new deals and clients, which means that the banker has to transform himself from a technical person to a sales person.
This is a vastly different skill set and many “star” junior bankers struggle to in their new role because their strength (usually technical skills) no longer applies to the new job.
Another major role of Vice President is to lead the execution, under the guidance of senior bankers. You thought the MD runs all the deals? He/she prefers to spend the time brewing up other deals and getting more businesses.
Almost There: Senior Vice President
SVP is, literally, a more “senior” VP and spends half the time executing deals and the rest bringing in businesses.
In Goldman Sachs, SVPs are known as Principals. For most investment banks in Europe and Asia, SVPs are called Executive Directors.
Finally… Managing Director
Top of the world… in the office.”
MDs run the house: they are the revenue generator and have all the say in the bank. Of course, there are still distinction between junior MDs and those sitting in the corner office — the true rain makers.
MDs do have tough revenue targets and hopefully by the time you are in this position you have a large network of clients who can give you business in different stage of the investment cycles.
Are All MDs Nasty People?
Not really, but many are either pretty anal or have some kind of split personality — Who wouldn’t be if one instance you are the king in the office, and in another instance you are begging for business from the client (who earns much less than you by the way).
Well, Still Want to Get into Investment Banking?
Did I hear a Yes?
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