What do investment banking job titles really signify? The storm of acronyms is bewildering to anyone outside banking who thinks a company has only one managing director (MD), or only a handful of vice presidents (VP), that associates are freelancers, or that analysts are people who plan to make a career out of analyzing companies or processes.
Helpfully, Alexandra Michel, the ex-Goldman banker turned academic, clarifies the strange state of banks’ hierarchies in her new report on bankers working themselves to death. Banks aren’t like other organizations, says Michel. Their hierarchies are not normal. Banks’ expansive job titles seem designed to disguise the reality: the average career in an investment banking division (IBD – including M&A and equity or debt capital markets) lasts less than a decade. Yes, you get a big job title unusually quickly in banking, but it probably won’t last.
What analysts do in IBD:
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 ladder.
And what do you do as analyst? “Junior bankers are experts on financial modeling,” points out Michel. They are experts in Excel and VBA. They are also experts in Powerpoint, which is used to present banks’ ideas to clients.
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.
What associates do in IBD:
After two or three years as analysts, people are usually promoted to associates, says Michel. Associates are like analysts, except more important. They manage analysts’ workloads.
What vice presidents (VPs) do in IBD:
Vice presidents help to manage clients on a daily basis, says Michel. They also manage associates and (by default) analysts and make sure the necessary financial models and Powerpoint presentations are being built. Most associates will get promoted to vice president after three or four years. Sometimes people get stuck at vice president forever and ever. Goldman Sachs is only promoting 300 (or so) people to managing director every two years and has 12,000 vice presidents in total…
What directors and managing directors do in IBD:
Some banks have an intermediate level of directors (Ds) between VPs and managing directors (MDs). 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 is assuming you stay on the ladder.
And what do VPs 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.
The upshot of all this, according to Michel, is that investment banks are far more egalitarian places than people assume. 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 leads to overwork and burnout.
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