Description and Progression of Roles in Investment Banking
Working your way up the hierarchy.
In order to succeed in the world of investment banking, whether it be at a boutique or bulge bracket bank, you must work your way up the industry’s professional hierarchy. The Investment Banking professional hierarchy is as follows: Analyst, Associate, Vice President (VP), Senior Vice President/Director/Principal, and Managing Director (MD). Rate of advancement, pay and several other factors are dependent upon the specific company.
As an analyst, you are responsible for all administrative work necessary in the deal process. Responsibilities entail researching companies involved with the deal, building financial models, valuing the companies you are looking at and assembling these findings into power point presentations. This role teaches bankers the inner-workings of the finance world. Analysts generally work 80–110 hour workweeks and have very little time outside the office, especially as a first year analyst.
It takes approximately 2–3 years to be promoted to the associate position. The analyst position presents the highest amount of exit opportunities, as many treat this role as a stepping stone and transition to roles in areas such as Private Equity or Hedge Funds. Analysts are typically 22–27 years old.
First year analysts are generally paid $100–150K, while second year analysts can be paid $150–200K.
Disclaimer: Pay figures are only estimated and subjective to good/bad economies, types of companies, etc.
After 2–3 years of being an analyst or getting recruited out of a top MBA program, one may become an investment banking associate. The role of an associate entails guiding and overseeing the work of an analyst and executing Vice President’s Orders. This role is much more client facing than that of an analyst, you spend a lot more time managing the requests of clients. Associates are also able to sit in on more meetings than analysts, however still with a non-speaking role, unless they are asked to perform a task delegated from a VP.
It takes approximately 3–4 years to become a vice president, as this transition is more challenging than the previous one. In order to become promoted, one must show strong leadership traits and improved client management skills. There are generally the same exit opportunities for an associate as an analyst, however the recruiting process is less structured. Associates are typically 25–35 years old. This range is larger than that of an analyst, as some associates are selected from the analyst pool, while others are directly recruited from graduate school.
Pay for associates has a great amount of variation as their bonus takes up a large amount of their salary and pay is heavily dependent upon the state of the economy. First year associates may make anywhere from $70–150K, while the pay range of higher level (more senior) associates can range anywhere up to about $400K.
After several years in banking, one may work their way up the investment banking ladder to become a Vice President. There is a major shift here as VP’s have a more outward facing role and are responsible for establishing strong relationships with clients. They have a lot more interactions with the client, for example they may call buyers and pitch them a company they are selling. Vice Presidents are responsible for interpreting orders from their MD’s and Directors. The role of a vice president is to guide analysts and associates; they must instruct them on which materials need to be created and review these materials after completion.
After 2–4 years of being a VP, one may become a Senior Vice President/Director/Principal. The exit opportunities here are far more limited. One will most likely either stay in banking or go into corporate finance. It would be challenging for a Vice President to move into private equity at this point. The age of VP’s is have a large range, as they can be anywhere from 28 to 40 years old.
Pay for Vice Presidents has even more variability than an associate and is even more dependent on one’s bonus. Pay for a VP is almost solely based on one’s performance and the economy; it can range from $300K-$1M.
Senior Vice President/Director/Principal
The role of a Senior Vice President/Director/Principal is a mix between the role of a Vice President and Managing Director. This role differs according to the bank and group. This role can be either client facing where one develops relationships involving winning clients or more executional where one works on project management tasks. A SVP/Director/Principal must master the art of winning clients if they want to advance to become a Managing Director.
After 2–3 years of acting as a Senior Vice President/Director/Principal, one may progress to become a Managing Director. The age of bankers in this role ranges from 30–45 years old. Pay for this position ranges from $400-$1.5MM and is also dependent on bonuses and the economy.
The Managing Director at an investment bank oversees everyone involved in chain of work and is responsible for ensuring the satisfaction of their clients. After working for most of their professional lifetime as a banker, or even across various banks, they have a lot of experience to bring to table in this position. Most of an MD’s time is spent developing relationships and winning over clients. MD’s are often traveling to conferences to meet with private equity and venture capital firms. Their main job is to bring in business, while everyone below them in their hierarchy executes the job.
After being a lifelong banker, there are possibilities to move into several high-level industry professions. The minimum age of an MD is typically 30 years old and there is no age limit as many MDs stay in this role until retirement. Pay for the role of an MD is reflective on the number of deals closed. The for an MD can range anywhere from $1–3 MM, with bonuses this number can increase significantly.
As we can see through the progression of investment banking roles, there are several new responsibilities that come with each new prong of hierarchy. With every promotion, we typically see an increased pay and client communication. It takes many years of experience to get to the top of this hierarchy, however many may choose to take the path of several exit opportunities along the course of their career.