If you’re thinking about applying for a job at one, you might have come across the front, middle, and back offices in job descriptions (although not so much in official descriptions, for a reason you’ll soon find out) and in casual conversation.
What do they all mean, though? And why is everyone so funny about the back office? Read on and find out.
Front office jobs are generally the easiest ones to define – they’re client-facing and revenue-generating. A senior banker in London says that, historically, “front office jobs in investment banks were those trading on behalf of the bank, or directly working with clients or creating products, research or analysis for them.”
Another senior banker agrees. He says front office jobs were always any that involved “direct interaction with the client and customer – be that an individual or a corporate client.”
What jobs does that cover? In an investment bank, that means mergers and acquisitions (M&A), debt and equity capital markets (DCM and ECM, respectively), as well as sales & trading roles… Even if you do spend that “client-facing” role as a junior carrying your boss’ briefcase and building financial models alone at night.
As the name suggests, the middle office is somewhere between the front and back offices.
We’re not just being annoying in saying that. The front office might be easy to identify, but the middle- and back-office distinction is less clear-cut. Strictly speaking, the middle office’s role is to directly support the front office. The word directly is italicized for good reason – there’s a lot riding on it.
Which kinds of people in banks directly support the front office? Risk management professionals maybe? Or someone in compliance? Or even in technology…? Kind of. The problem with these definitions is that not all risk, compliance, or tech people support the front office directly – although some definitely do. That blurs the lines a lot.
“It’s perfectly possible for a risk person to be either in the middle office or the back office,” says one senior banker. “You might get a risk professional sitting on the trading floor, in which case he or she would be a middle office person. And then you might get a risk person miles away in the corporate center, in which case they’d be in the back office.”
The “back office” generally refers to what’s going on behind the scenes at an investment bank. Nowadays, a lot of the work done is far from glitzy London or New York but in offshoring paradises such as Bengaluru (home to 9,000 Goldman Sachs employees) and Mumbai (home to a similar number of Morgan Stanley people).
What sort of jobs are those tens of thousands of back office people doing? Well, a variety. Settlements, for example – making sure that payments for trades are processed. Human resources, too. A huge number work in technology (for which India is an unparalleled offshoring destination).
Back-office jobs aren’t seen as sexy, really. They’re not seen as desirable, but banks do their best to make them seem interesting. There might be something to their historic stigma, however. “I worked in trade support covering settlements for a French bank in London,” says one operations analyst. “It was all very static, and process driven – I spent all day analyzing exception queues from various systems and analyzing trades to make sure they were settled properly. It was a repetitive job with very slow career progression.” Yeesh.
What we’ve outlined above is, really, what the office split used to be. Things have changed, and are continuing to change, and the reason for that is that pesky thing called technological progression.
Banks are very, very keen to automate as much as they can. You can save money, for one, and make fewer mistakes. It also can lead to better productive results than brainpower. Goldman Sachs replaced 600 equities traders with electronic trading systems back in 2000, and it hasn’t looked back since.
Engineers are taking over more and more of the front office’s territory, too. In 2014, Goldman introduced Marquee, a “digital storefront” for Goldman clients to access the bank’s pricing and risk information directly. Goldman has since added AI capabilities to Marquee’s abilities – including overlaying geopolitical events that automatically impact a change in the price of a security or derivative. Chris Churchman, Goldman’s head of Marquee, told Business Insider that he saw Marquee’s role in an investor’s day as “just like Amazon.com’s.” There’s not much need for humans to intervene in a purchase at Amazon.
So, the front, middle, and back office distinctions are becoming increasingly irrelevant. Or rather, outdated – as technology advances, the tighter the bonds between everyone at the bank.
“The front, middle and back office are a dated concept, and if you’re thinking in those terms you work for a bank with cultural issues,” says one senior banker. “Nowadays, you’re all in it together to drive performance.”
The monster on the hill is Artificial Intelligence (AI). The New York Times claimed says some banks are cutting their analyst classes by 66%, as AI is used to do much of the grunt work like generating PowerPoint presentations.
The increase in demand for AI is also boosting demand for data professionals who sit in the middle office but work with the front. JPMorgan’s head of digital banking, Samik Chandarana, said that AI’s specific role will be to save time on data crunching. AI “frees up bankers’, particularly analysts’, time to focus on relationships, and allows them to give companies better data faster,” Chandarana told Financial News.
Increased US of AI stands to change the skills needed in front office bankers, who will become masters at writing prompts instead of masters at creating AI models. “You have an infinitely smart companion who can automatically perform tasks like modelling and deck creation, so the skill set that will be most prized is critical thinking, creativity, taking the data and advancing it to come up with new ideas,” one senior banker told Financial News. “It will be the revenge of the liberal arts graduates.”
As banks automate processes, back and middle office jobs stand to disappear. Roles in off-shored centers like India may prove particularly at risk. And this isn’t a distance threat – Goldman Sachs is already working on “a dozen” projects that utilise generative AI, per Reuters.
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