Investment banks have a rigid and strict hierarchy that is comparable to a military organization, where each rank means a great deal and carries specific, significant perks as you advance. The typical hierarchy of investment banks is common to almost all investment banks, although non-US banks may have different job titles. However, regardless of the titles, job descriptions tend to be consistent from one investment bank to another.
The following guide outlines the typical hierarchy of investment banks.
1. Investment Banking Analyst
Almost all investment banking analysts enter the industry as fresh graduates from the best business schools. Most investment banks have a two-year program, after which the analyst rises to the associate rank. The majority of an analyst’s work involves researching companies, building financial models in Excel, and creating PowerPoint presentations that the bank uses to communicate ideas to potential clients. An analyst earns between $100,000 and $150,000 annually.
After working for two or three years as an analyst, you are promoted to the associate rank. Alternatively, you can sometimes enter the associate rank directly, skipping over being an analyst, if you arrive with a graduate degree from a top MBA program. Apart from watching over the analysts, an associate spends most of their time talking to clients and seeing what they need. They may also work alongside analysts in preparing pitch book materials and in financial modeling. The salary of an associate varies between $110,000 and $300,000.
An associate typically rises to the rank of a vice president after working at the bank for a period of three to four years. A vice president speaks to clients and updates them on how deals or transactions are progressing. By default, the analysts and associates fall under the vice president, whose responsibilities include ensuring that PowerPoint presentations and financial models are built in the right way. VPs have an active role in executing deals with clients and, therefore, earn a substantially higher salary than associates or analysts. The pay usually ranges between $150,000 and $450,000.
A Senior VP may also be called a director or principal, depending on the company. To become a Senior VP, you must have worked in an investment bank and risen up the hierarchy. It is unheard of for someone to be hired for the position from outside the bank. A Senior VP deals directly with a lot of clients and acts as a bridge between the clients and the team in the lower ranks. Senior VP pay ranges between $250,000 and $1.5 million, inclusive of bonuses.
The Managing Director sits at the highest level of the investment bank hierarchy, and he/she is responsible for the profitability of the bank. It takes a long time, considerable skill, and even some good fortune to get to this level. The work of the Managing Director is to know how all the deals are progressing and to be aware of what is happening in the political or economic environment that is likely to affect the bank’s operations or their clients. Most of a Managing Director’s time is spent on soliciting new clients, meeting potential investors, and building relationships. They make between $500,000 and $4 million – in a good year, their gross income may hit $10 million. If the bank is not making money, then the Managing Director takes the blame. If the bank is doing well, then they take the credit, in the form of higher and higher levels of compensation.
We hope this has been a helpful guide on the typical hierarchy of investment banks and investment banking jobs. Below are more free CFI resources to help you advance your financial services industry career: