You’re being offered an operations job in an investment bank. In banking vernacular, you’re being given the chance to work in the “back office” on the infrastructure that helps the “front office” (where all the revenues are earned) to function. Back office jobs are important – banks couldn’t operate without them. They’re also an increasing source of competitive advantage – banks that have efficient back offices are more efficient overall. And they’re easier to get – fewer people want to work in the back office and there are plenty more jobs there. Most banks have at least two back office people to every member of front office staff.
So, if the back office of an investment bank dangles an offer, should you accept? Not if you want to maximize your earning potential.
Contemporary figures from Emolument.com, the real time pay benchmarking provider, suggest that over a 16 year career in a front office banking job (eg. sales and trading or M&A), you’re likely to earn 88% more than in the front office. Median front office compensation over a 16-year period is likely to total £3.1m ($4m) according to our analysis of Emolument’s figures. Median operations compensation is likely to total £1.6m ($2m) over the same period.
We’ve plotted the implied earnings by age in each sector in the chart below. The figures are derived from Emolument’s pay data for interns, analysts, associates, VPs and MDs, which is smoothed after assuming a three year period in each role (interns excepted).
The pay divergence widens from the age of 30 – from director-level up. Predictably, the discrepancy is partly down to bonuses: whereas managing directors (MDs) in the front office receive bonuses averaging 93% of salaries, bonuses in operations top out at 44% of salaries. However, salaries for MDs are higher in the front office too, at £230k vs. £160k in operations roles.
Does anything mitigate this low pay? Well…the hours are usually shorter in the back office jobs, but you can probably still expect a 10+ hour day. Worst of all though, operations jobs now have some of the highest levels of insecurity: as banks look to automate processes and cut costs, operations staff are on the front line. – Just ask Deutsche Bank or Barclays. By comparison, junior bankers in M&A are confident they’ll still be employed (and paid) even as computers take over the more boring parts of their jobs.