Why you shouldn’t work back office finance jobs (My experience in Investment Ops - Pros and Cons)
Hey I'm Aaron
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Notes:
During my time at university I interned at an asset management company and my role was that of a portfolio administrator, which is a part of the infamous back office. I know back office ITS NOT INVESTMENT BANKING kody ko style
So first of all what is front office, what is middle office and what is back office?
The front-office of an investment bank is the division that makes the bank money, so think capital markets, sales and trading and equity research
The middle office employees are the people that support the front office in areas of technology, law, and risk management.
And lastly Back Office roles relate to processes and systems that must exist regardless of revenue generated; examples include compliance, accounting, technology (IT), and HR. My experiences within back office are specifically investment operations but im taking my experiences + other people I know plus what ive researched to list out all the pros and cons.
Many banks have stopped using these terms, and the line between Middle Office (MO) and Back Office (BO) has always been blurry to non-existent.
So ofc we are gonna start out with the cons
Lower Pay - Junior-level base salaries are a bit lower than those in revenue-generating roles, but bonuses are significantly lower. An IB Analyst might receive a bonus equal to 70-100% of his/her base salary in a good year, but it’s more like 5-10% of base salary in these roles. The bonus percentage climbs significantly only at the mid-to-senior levels (VP/Director/MD).
Demographic: Unlike the big four, where im currently working. The age of people in back office teams usually stems to the older side. Managers and booses have been around for 25+ years and are stuck at the VP and ED levels.
Difficulty in Transitioning to Front-Office Roles Elsewhere - Yes, you can do it, but it is still an uphill battle. And the transition is difficult whether you’re at a large bank, a hedge fund, a private equity firm, or anything else. Because i was at a boutique company, when one of the portfolio managers left I did see one of the other portfolio administrators (who were working full time) rise to the position as a portfolio analyst, but he had proven himself time and time again and put in the work to get there. Not to mention he also had a masters degree in applied finance.
Repetitive Work - Much of the process-related and day-to-day work can get repetitive, but this point may be a bit less true for certain roles now. Note that much of the IB Analyst/Associate workload also gets repetitive (e.g., writing pitch books or CIMs).
Automation - because of the extremely repetitive work, the typical investment OPS roles are very susceptible to automation. A large part of my job when i was working as a portfolio administrator was using alteryx to to essentially do my job for me at a much quicker pace.
Non transferable skills: The tasks you do day to day in investment ops are glorified data administration. The skills you develop don’t really translate to any other industry or area in finance, unless you are using data analytics to automate your own job like i was, then maybe with some further study i suppose you could end up in data analytics. But itd be a long tough approach to get there.
Lack of Respect - This one isn’t universally true, but many front-office employees show little respect for support staff - partially because they’re always being yelled at by their superiors. If an IT system breaks, they may take out some of their anger on you.
High turnover: This is self explanatory based on everything i have listed above.
Most people in back office don't know the difference between front and back office and, if they do, don't care. Outside of Ops, most people working in the back office are actually doing what they like to do. Working in IT, Marketing, or HR at a BB is as a good place as any to do any of those functions. I really think the people in Ops are the only people that realize they are in back office and care about it.
Its a great internship opportunity, It does give you the opportunity to experience the investment world and get a small insight on how asset management actually works.
Jobs in non front office functions are more careers than something you do for two years before trying to do something better. Because of this, people in non front office jobs are likely more stable in their careers than front office folks. Also the jobs tend to be more recession proof for several reasons: they don't make as much and their jobs are necessary in good times and bad.
1. Free time at the office - The back office is a pretty easy and mindless job. A few hours of efficient work a day should be enough to free up the rest of your time to work on something else.