Banks’ weird hierarchies: what analysts, associates, VPs, MDs do really

5 Jul

by Sarah Butcher
29 October 2014

Strangely named rungs on the banking ladder.

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, bankers are on hand to help out. 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? You build the financial models which value the companies you’re looking at. And then you assemble your findings into a Powerpoint presentation.

“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. “The more junior you are in M&A, the more time you will spend working on Excel models and PowerPoint Presentations,” says Mark Hatz, a former Goldman Sachs analyst who now helps students prepare for banking interviews. “The analyst is the number cruncher,” agrees ex-M&A banker Guillaume Tardy-Joubert of Coaching Assembly. “They are delivering the information.”

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.

“Associates give modelling guidelines to the analysts and check their work,” says Tardy-Joubert. “They report to vice presidents.”

What vice presidents (VPs) do in IBD:
Vice presidents help to manage clients on a daily basis, says Michel. They also manage the associates and (by default) the 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…

“The VP has a lot more contact with clients,” says Tardy-Joubert. “But he also interfaces with the analyst and associate – he might design the pitchbook [The Powerpoint presentation in which banks present their ideas to clients.]”

“VPs lead the layout of the presentations,” agrees Hatz. “They’re responsible for making sure the pitch documents are put together and they will also have an active daily role in executing any deals that go ahead.”

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.

Tardy Joubert agrees that MD’s jobs aren’t as glamorous as they seem. “MDs are like entrepreneurs – they’re salesmen. They need to go out and meet the clients and bring the business in. There’s a different kind of stress to that. The best MDs work just as hard as any analysts.”

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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