What is the difference between front, back and middle office in an investment bank?

by Girl Banker

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As an eager banker-wannabe whenever I heard the term "back-office" I imagined a category of overworked and underpaid workers toiling away in a windowless room at the back of a building! Personally, I find the term a little derogatory.

In banking, the terms: back, middle and front office refer to how closely connected you are to the money train.

Front office
Front office workers make the money. Their actions lead directly to more or less money being added to the bottom line of the bank. Front office workers will earn the highest bonuses because they essentially make the money and as such expect a higher cut. 

In theory, the more money you earn for the bank, the higher your expected bonus is. In a recession, bonus expectations will be lower overall but front office workers will still expect more than those further down the chain.

Front office does not have to be client-facing e.g. traders usually do not see clients but if you are client-facing you will need to look smart and dress well for meetings. If you hate suits, this is not the best job for you!

Front office includes: 

• Salespeople in the capital markets
• Traders in the capital markets
• Corporate finance bankers 

Although analysts and associates in corporate finance don't have a budget to meet, they would also be categorised as front office because the modelling and presentation work they do leads to the loss or gain of a deal.

Middle office
Middle office workers are an integral part of making money. They directly support a deal but their actions have to be instigated by a front-office worker. A middle office worker cannot as a result of their own actions increase bank profits.

Middle office includes: 

• Legal (they make sure legal documents with external parties are optimally structured)
• Compliance (make sure you're on the right side of complaince law e.g. following chinese wall requirements)
• Research (if it's provided to clients free of charge is a middle office function)

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Back office
Back office includes any process-orientated roles. An efficient back office is vital because if clients don't get statements and confirmations on time they will hate your bank and could, on that basis, exclude your bank from deals. 

How can back office impact front office deals?
Imagine you work on a company's small corporate finance team; you have ten bank relationships to manage. One bank consistently sends statements late. The statements frequently have errors and you have to call many times to get issues sorted - if it can be helped you're going to avoid doing business with that bank, aren't you?

Back office includes: 

• Confirmation teams (they confirm transactions with clients, send out regular statements e.g. regarding the current value of a booked deal)
• Presentations teams (they make presentations look pretty or consistent with the bank's style)
• Print & Production teams (they print off client presentations)

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So there you have it. When you're applying for jobs it can be a little challenging to decipher whether a role is front-office or not. This is especially true if you're applying off-cycle to a bank that has both a retail bank and an investment bank. 

Use the above guidelines to help you decide how close you are to the money train. You want to get as close as possible.

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