What do investment banking job titles really signify? Do analysts really analyze? Are vice presidents in charge of whole divisions? And do managing directors run the entire bank? No, no, and no again.
Banking job titles aren't what they seem. If you haven't come across them before you need to know this: they often make people sound more grand than they actually are. If someone tells you they're a vice president in an investment bank, for example, you might think they're something very fancy. They're not: Goldman Sachs has over 10,000 vice presidents (VPs) and that Goldman VP you meet is just one of many. The same applies to managing directors (MDs): most banks have several thousands of them.
Why do banks give people such fancy job titles? Ex-Goldman banker turned academic Alexandra Michel suggests it's because banking careers were historically short. In the past, the average career in an investment banking division (IBD - including M&A and equity or debt capital markets) lasted less than a decade. Banks are trying to change this, but recent research from Quinlan Associates, a strategy consulting firm specializing in financial services, found that anything from 6% to 9% of banks' graduate hires leave of their own accords in the first three years after they've been hired and that another 20% and 17% of those who remain leave voluntarily at associate and vice president level (to say nothing of all those who lose their jobs). - Banks use big job titles to persuade people to stick around.
If you leave university after a first degree (or a Masters), you will enter an investment bank as an analyst. Analyst is simply a euphemism for being at the bottom of the banking hierarchy.
What do analysts do? If you work in an investment banking division (IBD), you usually will research companies that might be involved in a deal, you will build the financial models which value the companies you're looking at. And you will assemble your findings into a Powerpoint presentation.
"Junior bankers are experts on financial modeling," says Michel. They are experts in Excel and VBA. They are also experts in building the PowerPoint presentations that banks use to communicate their ideas to clients. "The more junior you are in M&A, the more time you will spend working on Excel models and PowerPoint Presentations," says Mark Hatz, a former Goldman Sachs analyst who now helps students prepare for banking interviews.
A current M&A analyst at European bank says analysts do what they're told: "The analyst is the person who does all the administration work necessary in the deal process. As the most junior person, you might work on research, you might create the materials for the pitch-book which presents banks' ideas to clients, and you might work on the financial models - but what you do will be quite basic." Some analysts complain that their work is very boring and repetitive: “As an analyst, you spend 75% of your time on PowerPoint, making presentations,” says one. “Excel modelling is the most valuable and interesting part of the job, but you don’t do very much of that.” He claims that most of his work was updating so-called "comparables: “Each analyst was assigned 20-25 companies to update each trimester and it basically involved going through all the accounts and making sure everything was accurate. You could easily spend 100 hours on it. It’s the kind of thing you stay in late for, but it could very easily be automated. All you’re really doing is pulling information from FactSet and Bloomberg.”
Banks are alert to analysts' disgruntlement. Most are trying to get computers to do the most boring parts of the job.
Michel says analysts don't like to be reminded of their status. During her detailed research in two Wall Street banks, Michel came across an analyst who burst into tears after being introduced to a client as such. “You introduced me as an analyst!”, the analyst complained (crying) to a vice president.
How long will you be an analyst for?
Traditionally, people have been analysts in investment banks for three years. However, this is changing. As the chart below from Quinlan shows, analyst programs at most banks have been cut by six to 12 months and now last between 2.0 and 2.5 years.
How much are you paid as an analyst?
Despite being at the bottom of the pile, analysts in investment banks are paid pretty well. In your first year as an analyst in M&A in London you can expect to earn anything from £65k ($85k) at UBS to £78k ($101k) at Bank of America Merrill Lynch.
How many hours do you work as analyst?
The downside to being an analyst in IBD is the working hours. When people talk about 80 hour weeks in banking, it's analysts their referring to. Most banks have got policies in place to cut analysts' working hours, especially at weekends, but it's still common to work from 9am to midnight - or later - on weekdays.
The chart below, from Quinlan Associates, shows each bank's policy for reducing working hours.
Associates are one notch up from analysts. After you've done your two or two and a half years as an analyst, you should get promoted to an associate. You can also enter a bank as an associate after studying an MBA - although this is harder than it used to be. Associates are like analysts, except more important. Associates immediate purpose to manage the analysts below them and to communicate the wishes of the vice presidents (VPs) above them.
"As an associate you're still working on the PowerPoint slides, still managing the presentation," says the M&A analyst, "- But you also work more on the [financial] models."
The associate's role is partly to, "guide the analyst in preparing the presentation and doing the research," he says. The analyst does the work and the associate checks it. "The associate's still an important part of the process. If you have a 50 page presentation, the analyst will usually do 30-40 pages and the associate will check them and do the rest."
Associates are still expected to do analyst-type work, says one former associates, although she says that, "analysts are technically the "producers" of all the work and the associates are the "checkers" of it."
How long will you be an associate for?
If you last the course, you'll be an associate for three years.
How much are you paid as an associate?
Associates on Wall Street can expect anything from $200k to $350k over the course of their three years according to the Options Group. In London, associate pay ranges from £138k to £216k over the three years.
How many hours do you work as an associate?
Associates usually - but not always - work a few hours less each week than analysts. "You'll often see the associates going home at 11pm instead of midnight," says one analyst. "But that kind of depends upon the person and how good the analyst is. If you're a lazy associate with a good analyst, you can leave early. If you're an ambitious associate with a bad analyst, you'll still be working at 2am."
It's when you get to vice president (VP) level, that things start to get interesting. Suddenly, you're more outward facing - you actually get to talk to clients. However, you also have to manage the team and oversee the process of putting the client presentations together and this can be stressful. "Being a VP requires more “ownership” in the team and well-established client relationships," says Anne Karina Asbjorn, an associate and strategist for European rates at Nomura.
Vice presidents help to manage clients on a daily basis, says Michel. They also manage the associates and (by default) the analysts and make sure the necessary financial models and Powerpoint presentations are being built. "VPs lead the layout of the presentations," agrees Hatz. "They're responsible for making sure the pitch documents are put together and they will also have an active daily role in executing any deals that go ahead."
"The VPs guide the analysts and associates," says the analyst in M&A. "They're running the deal process on a daily basis. - They're the ones saying which materials need to be created. However, they're also the ones who speak on the calls to the clients. They help keep the clients up to date with how things are progressing."
How long will you be a VP for?
Once you get to VP-level, the process of rising up through the investment banking ranks becomes more erratic. In theory, you're supposed to be a VP for three years but sometimes people get stuck at vice president forever (and ever). Most banks are trying to cut the number of expensive people they have at the top of their pyramids, and this is making it harder to get promoted. Goldman Sachs, for example, only promotes around 400 people to managing director every two years and has around 12,000 vice presidents. On the other hand, talented VPs are being more responsibility (for the same pay) under a process known as "juniorization."
How much will you be paid as a VP?
Because VPs can vary wildly in terms of experience, their pay often varies widely too. On Wall Street, pay for VPs in front office investment banking jobs can be anything from $375k to $925k according to the Options Group. In London, pay can go from £218k to £321k over the ideal three year VP life cycle.
How many hours do you work as a VP?
As a rule of thumb, you should work fewer hours as a VP than as an analyst or associate. "The associate is running the process for the VP, so the VP gets to leave earlier," says the analyst. This doesn't mean they leave early, however. "Our VP goes home around 10pm," he adds.
Some banks have an intermediate level of directors (Ds) between VPs and managing directors (MDs).
And what do Ds and MDs do exactly? Michel points out that their main responsibility is bringing in new business. There's a lot of travelling. It's not really as glamorous as people think. MDs also oversee everyone further down the hierarchy and make sure their treasured clients are happy.
"As a director, you'll speak a lot with the clients," says the analyst. "Your role is to act as the interface between the client and the rest of the team."
Managing directors are at the top of the investment banking pile. "They talk to the clients, meet the clients, bring in the revenues and build the business for the bank," says the analyst. "They're the connectors - the relationship builders - they're out there, finding out what's going on with their clients in their industry."
How long will you be a D or MD for?
Although some people are VPs forever, you're usually promoted to director after about three years in a VP position. Once you're a director, Michel says it should (ideally) take only another two years before you make managing director. This may be wishful thinking, however. - Research suggests most people only become MDs after 15 years in banking, and even then only 20% of those who are elgible for an MD promotion will make it.
Once you make MD, the pressure will be on to bring in revenues. If you don't deliver you'll be out. If you do deliver, you can expect to last a while. The average tenure of managing directors and partners at Goldman Sachs, for example, is thought to be around eight years.
How much are you paid as a D or MD?
Pay for directors and managing directors varies wildly from person to person. As an MD in IBD on Wall Street you will almost certainly earn in excess of $600k in total compensation. In London, MD salaries alone are £350k ($500k)+.
How many hours will you work as a D or MD?
As a director, you'll typically work fewer hours than a VP. - You might go home at 8 or 9pm. As an MD, your hours will assume a life of their own. "Sometimes we don't see the MDs in the office much," says the analyst. "- Their jobs are a bit more freestyle and flexible. They might be out of the office for a week, meeting clients. They might have a lunch with a client, and then a coffee, and then a meal with another client. They might go and meet a COO who's also a personal friend." If you're an MD in investment banking, you want to work for a bank that's happy to let you build relationships, and which accepts that this can take time. At Goldman Sachs, for example, COO Harvey Schwartz says it can take seven years for client relationships to generate fees. Even so, banks like to know what their MDs are up to while they're flying around schmoozing clients: HSBC recently introduced a system for tracking how its senior M&A bankers use their time and how many deals they bring in.
Although banks are hierarchical, Michel says they can also be fairly egalitarian. If you perform well, you can progress through the hierarchy (at least to VP level) fairly quickly. In IBD, she says most people actually do get promoted up to the next level. This makes banks less competitive places than people expect. Power differentials are minimized and everyone (according to Michel) works for common purpose. Unfortunately, she also concludes that this can lead to overwork and burnout.