Holla Back, Office: 7 Reasons You Shouldn’t Work In The Back Office
“Andy used to want to be in the heat of things, sealing deals and wooing clients, but now he’s destined to be support staff.
Holla back, office?”
-BigLaw, BigSchmaw, The Leveraged Sellout
Ah, the back office. Should you go there? Is it worthwhile? Are there any exit opportunities?
I try to give detailed tips on everything from private equity interviews to investment banking resumes, but my advice on this one is simple:
No.
Front Office vs. Back Office
There seems to be some confusion over what constitutes “Front Office” vs. “Back Office” (and then there’s that netherworld of “Middle Office” in between the two), so let’s be clear on terminology.
“Front Office” refers to any group that generates revenue for the firm – investment banking, wealth management, private equity, and sales & trading are all examples.
One exception: equity research is still “front office” even though it doesn’t directly bring in revenue.
“Back Office” is anything that does not generate revenue – IT, accounting, HR, risk management and compliance are examples.
You might consider some of these “back office” roles – such as risk management and compliance – to be “middle office.” But let’s make things simple and just go with “back office” for now.
As you might surmise, groups that don’t bring in revenue are not viewed favorably in a culture where greed is good.
But why specifically should you not work in the back office?
1) The Front Office Doesn’t Care
This might be the biggest misconception that prospective financiers have: that it’s “easy” to transition from back office to front office.
In practice, it’s very difficult and I’ve rarely, if ever, seen it done. In cases where it does happen, usually it’s moving from “middle office” areas such as risk management rather than jumping from IT to M&A.
Often, engineers who want to move into finance are “sold the dream” on joining IT at a large bank, thinking that they’ll be able to break in at some point in the future.
But you know what? Out of every single engineer friend who graduated with me several years ago and went to work in IT at a bank, not a single one has successfully transitioned over – even though they all want to.
2) Top Business Schools Don’t Care
Business schools classify candidates into 3 categories – the “prestigious job” (finance / consulting) crowd, the “average job” (IT consulting / accounting / product management) crowd and the “did something completely different” (became a monk in Tibet / started a company / became a wandering bard) crowd.
Or as Alex Chu over at MBA Apply so eloquently puts it, the “Blue Chips,” “Average Joes” and “Vagabonds.”
Banks and other financial services firms recruit primarily at the top 10 business schools; these schools have very few students who took the “average job” path, and by doing back office work, you put yourself in this category and therefore reduce your chances of getting into one of these top schools.
Don’t believe me? Take a look at what Alex has to say on the topic:
“The difference with HBS, Stanford and Wharton is that you’ll see far more Blue Chips and Vagabonds (and by extension, less Average Joes) than you’ll see at other schools, and particularly at HBS and Stanford.”
Needless to say, HBS, Stanford and Wharton are some of the top business schools for finance recruiting.
3) The Buy-Side Doesn’t Care Either
This one mostly applies to hedge funds, but doing back office work at a large bank is not a good way to break into the buy-side.
Some people get the idea that working in trade execution support might be a good way to network with hedge funds and eventually break in.
While this logic almost makes sense on paper, in practice it’s much better to get actual experience doing trading or investing if you want to work at a hedge fund – even a small “prop shop” or smaller hedge fund would be a much better strategy for getting into SAC or Citadel one day.
And Steve Schwarzman really doesn’t care that you did IT work at a bank – so don’t expect a great reception in private equity, either.
4) Goodbye, Models And Bottles, We Hardly Knew Ye
Don’t expect too much pay in back office jobs, let alone the models and bottles you lust after (if you’re female just think of male models here).
You’ll likely be earning slightly less than what investment banking analysts make as base salary ($60K), so probably $40-50K in your first year with a very small bonus (5-15% of base salary).
It’s hard enough living in New York or London on this kind of base salary, but to barely get a bonus either… that’s like pouring salt in the wound.
5) Respect, I Never Get Any Respect Around Here
There are myths about how bankers don’t respect lawyers when working on deals, but in my experience this is rarely true; no matter what you say behind their backs, no one directly insults or disrespects lawyers.
But back office folks are directly insulted. I’ve seen MDs yell at risk management and compliance staff because of draconian restrictions, and I’ve seen even lowly Analysts get into arguments with IT staff who are told “FIX IT NOW!!!” repeatedly.
Once again, those who don’t generate money in a culture of money are not very well off.
6) It’s A 9 To 5 Job
Yes, this is a bad thing. The problem with standard (or almost standard) hours is that learning and advancement opportunities are also very limited. If you value peace of mind and a stress-free environment more than the potential to advance, then back office work might be for you.
But I’m guessing most of you don’t fall into that category.
This type of work is more appropriate if you want to have a secure, stable job with little in the way of either downside or upside.
7) The Work Itself
Finally, the work you do in the back office is almost uniformly boring and even more repetitive than spreading comps, creating pitch books and pulling all-nighters to fix broken printers.
While you could argue that investment bankers are overpaid paper pushers as well, they actually bring in revenue via deals. And at the senior levels they focus on relationship-building, which is far more interesting than monitoring employee trades.
Ok, But Is It Really That Bad?
There are a few exceptions. As mentioned above, if you are simply seeking a low-stress environment while still being able to claim that you “work in finance,” then the back office might be for you.
Another exception: internships. It’s not necessarily the end of the world if you end up in a back or middle-office role in a summer internship, but you should try to transition out as soon as possible – it’s much easier to move over as an intern than as a full-timer.
The Solution
“Ok,” you might say, “But if I can only get back or middle office roles at bulge bracket banks what should I do?”
Simple: Go smaller. It’s far superior to do banking or trading at a boutique than to do back office work at a large company.
Sure, you might not have the same exit opportunities as your friends at Morgan Stanley IBD, but you’ll still be much better off than your friends at Morgan Stanley IT.
Boutiques are still hiring, even in this market, and are often the best strategy for those who are transitioning into finance from other careers.
Holla Back…
…if you can find me a single example of someone who successfully moved from back office to front office.
In the meantime, focus on doing client-facing work anywhere you can – that’s always better than being the IT guy (or girl).
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This summer I held a back-office position as an Auditing Intern (rising junior) for a Fortune 200 company. For next summer and beyond I am looking to transition into Finance and more specifically banking. Can this internship be leveraged well for a finance position next summer? Or will employers look at it as more of a detriment. Will it also help being that it was only my sophomore summer?
Your internship can demonstrate your basic knowledge of accounting and no it won’t be perceived as a “detriment”. Yes it will help you though not exactly relevant to IB roles
Hi, I am currently performing an internship in the back-office of a major pension funds administrator (one of the world’s 10 biggest ones). The role is centered in one team but also allows for rotation around different ones to better understand how they are all connected.
I was looking into moving to strategic consulting, how could I leverage such experience to enter that industry?
Thank you in advance.
Re management consulting pls go to http://managementconsulted.com
You are absolutely right! BO is not worth it on many levels. My 5 year experience is testiment to that. Having said that I would like to clarify a few points:
1. I know of a handfull of ppl who transitioned into FO. Mostly trading. Examples: research, trading assistants, risk nd price testing. BUT a number of these ppl failed and were forced to resign. Why? I suspect lack of training you get as an FO grad.
2. Your base and bonuses do not get much better after first year. Base grows at snail pase of 5-10pc a year. Most frequently closer to 5pc than 10! Bonuses remain at 10-15pc of your base for a loooong time .. Director level time in fact. Best way to get a raise is to change jobs. Hence the bank hopping common for BO/MO. Promotions give you a silly money raise.
3. Stress levels and working hours. Ha! You’d think you have it easy there!! Fact is, you work 12-14 hour days, weekends are common in top banks and on top of that there is a substantial stress level. My FO significant other has considerably less “politics” stress than I and in fact shorter hours. Believe me a lot will be expected of you for the money.
4. FO are not particularely abusive or harsh … I’ve worked for 2 top banks (so far) and was very lucky with my FO guys.
5. Monotony? Well .. Its quite dull. Repetetive. Not too exciting at all.
All in I’d say I’m not at all impressed.
TRY your butt off to get into FO!! Is my advice
K.
Thanks for adding that. Agreed that back office is not really worth it – for the amount of work, might as well go to the front office (if you can).
A colleague of mine recently moved from the database development team to portfolio strategy. He’s young and I can’t imagine why he wouldn’t be able to continue that push. I think many back office staff stay there because that’s what they’re suited to and where they belong. If you are driven to move to the front office, that might mean that you are naturally more inclined and suited to that kind of work, making it much more likely for you to end up there.
Yes!
i am so passionate about working in a back office position considering I am not really the customer inclined type but with all that has been said, i am really discouraged about the whole thing. are the front office roles that difficult? or is the middle office any better?
http://www.goldmansachs.com/careers/choose-your-path/index.html will help you
Hello there,
I’m working as a research sales assistant at a growing firm but not in their nYC office. Instead I’m in a new outside new York office and not getting a ton of exposure.
Should I go MO at a BB or stay here? Maybe get to their main office after I graduate?
Hello there,
I’m working as a research sales assistant at a growing firm but not in their nYC office. Instead I’m in a new outside new York office and not getting a ton of exposure.
Should I go MO at a BB or stay here?
Can you work your way to the NY office? If your role offers advancement I’d stay there. Otherwise I’d leave.
Working compliance at a BB with the goal of hopping over to SEC down the road. May even come back to BB farther down said road, but FO. Doable? Feasible?
Yes. You craft your career!
Kweku Adoboli started in Back Office I believe… and successfully transferred to Front Office. The subsequent success I suppose is up to some debate.
Hey Brian,
So this past summer I completed a B.O internship “Cash Management” at a top medium investment bank in the city.
However, I am in the process of trying to land a middle office job out of college. What positions are pretty good for exit opportunities? I don’t know which positions are M.O. Is being a financial analyst a M.O position? I don’t think I am ready for a front office job but maybe if I change my mind after the 2 yrs of being an analyst (if i get hired) then I would def be ready to commit to it.
I don’t want to be stuck in B.O because I’ve read on the site that exit opportunities are very limited. Maybe it isn’t the end of the world if I start as an analyst but that’s taking a risk to get stuck there.
Please advise & thank you!
Hi Brian,
I’m a masters student in Investment Management at a B-school that’s at the top of the food chain in Latin America.
How helpful do you think this will be in me landing a front office role in the US? What are my best chances?
I did work in back office right out of college (energy trading) for 2 years and left to get my masters.
Any thoughts?
If you have US residency/green card and can legally work in US with a sponsorship your chances are a lot higher. Your chances are somewhat decent, though you’ll be competing with local US students/professionals who have already had front office internships/experience in IB. Your best chances maybe to look for roles within Latam in a global bank and transfer.
Hi there. Junior accounting major from non-target, high GPA, previous internship at major asset management firm here.
Was gunning for BB IB SA position until recently. Met some M&A attorneys while meeting with some firms in NYC, and interest in corporate law was sparked. As I am not sure 100% what I want to pursue right now, what are your thoughts about trying to intern in compliance/risk management? Also, what about an internship at a top Corporate law firm? I.E. coming from a non-target, would a name like Wachtell Lipton/Skadden/Latham Watkins/Kirkland Ellis, etc be impressive in FT recruiting for IB at BB or would I be better off pursuing something else.
I am not 100% sure, and I don’t think compliance is directly related to corporate law, though I may be wrong. You may have more opportunities to deal with lawyers at your IB role. Yes, I think an internship at the law firm would be more relevant, though I think firms may be more interested in pre-law candidates/candidates in law school. Yes I know a contact from Skadden who moved to IB then PE so yes such names can be impressive.
My friend moved from being in a back-office doing settlements directly to a front-office as a funds manager (well, for the first 2 years, he was ‘just’ an assistant funds manager) :-)
Thank you for sharing. Kudos to your friend!
The analyst I worked with last summer at a BB in strategy ops/back office started out at an elite boutique in investment banking and within a year was able to jump over to morgan stanley in a very prestigious group…then she messed up. she got sick of the job after a year and moved to back office at a different bank, thinking it would make things “easier”…needless to say, she ended up having to shell out 200K to go to b-school in order to get back on track. back office is definitely the worse thing you can do if you have any sort of talent.
You guys are right about a back office internship not being the end of the world, though. The bank I was with got slammed by the feds so they cut down on the new analyst class I ended up having to apply for other jobs. I lucked out and ended up as a front office analyst at a hedge fund…but I’ll never make the mistake again.
Thanks for this great post!
Thanks a lot for your insights and for sharing. I’m sure readers appreciate your input.
Yes BO is not really enticing. However, is it ok to start off a career after graduation as an Operations analyst and keep networking to eventually make a move to the FO? Add to this an MBA or CFA qualification.
Great articles guys. Keep it up!
Yes BO is not really enticing. However, is it ok to start off a career after graduation as an Operations analyst and keep networking to eventually make a move to the FO? Add to this an MBA or CFA qualification.
Great articles guys. Keep it up!
Yes, you can do so, though there will be challenges because you’ll be competing against people who have had FO experience so you’ll have to distinguish yourself and background!
I’ve got offered an internship with Credit risk at a BB and I’m just curious of what some of the exit opps could be for working within credit risk? I’ve also heard that credit risk is basically starting to count as FO at some IB’s like JP, do you agree?
Perhaps risk management and maybe trading roles (this is stretching it a bit). I’m not quite sure if it is regarded as FO to be honest, but many would view it as MO type of role. I wouldn’t worry too much about it though – enjoy your offer, and congratulations!
Hi M&I and Brian, I am an attorney (not corporate or finance related) but have an opportunity to work for a major bank in Credit Risk Management (I have some finance/econ training), which is BO/MO. I don’t have any dreams of being an IBanker, quite frankly, my ideal job would be working as an attorney at the federal reserve or CFTC or in-house within a bank. I also actually like credit risk management as a topic (though have never worked in it — I know school and job are totally different beasts).
Do you think switching careers to finance in a CRM function is a good idea? To me, it poses greater risks but also perhaps greater rewards. Then again, to throw away a legal career (which, unlike many other attorneys, I do not hate) and the stability of government employment, gives me great pause.
From your post you would seem to discourage BO work, but I don’t care about FO, so would this not apply to me? Do you think I have a good chance switching to a regulatory agency or even getting transferred to the legal department of the bank after working a few years in CRM?
Yes I think this experience coupled with your legal experience will increase your chances of switching into a regulatory agency/legal department of a bank. Since you have an offer already, and aren’t looking for IB roles, I don’t think this article applies to your case. I’d suggest you to ask a lot of questions re your role at the bank before you take the offer so you have a better understanding of what you’re getting yourself into.