Investment Banking Divisions Explained - For Students, Graduates and Professionals by Afzal Hussein | Afzal Hussein | Skillshare

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Investment Banking Divisions Explained - For Students, Graduates and Professionals by Afzal Hussein

teacher avatar Afzal Hussein, Founder, Consultant & YouTuber

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Taught by industry leaders & working professionals
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Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

22 Lessons (54m)
    • 1. Introduction

    • 2. What is an investment bank?

    • 3. Boutique and bulge bracket investment banks

    • 4. The front office of an investment bank

    • 5. The middle and back office of an investment bank

    • 6. Investment banking division (front office)

    • 7. Sales & trading (front office)

    • 8. Asset management (front office)

    • 9. Private wealth management (front office)

    • 10. Research (front office)

    • 11. Merchant banking division (front office)

    • 12. Risk (middle office)

    • 13. Treasury (middle office)

    • 14. Operations (middle / back office)

    • 15. Technology (back office)

    • 16. Finance (back office)

    • 17. Human resources (back office)

    • 18. Legal (back office)

    • 19. Internal audit (back office)

    • 20. Compliance (back office)

    • 21. 10 common questions

    • 22. The class project

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About This Class

This class provides an overview and insight into the various divisions that make up a typical bulge bracket or global investment bank. The course covers everything you need to know in order to understand the inner workings of an investment bank and approach your applications and interviews to investment banks with more confidence.

We cover a range of topics including:

  • What an investment bank actually is and does
  • How an investment bank differs from a high street bank
  • Differences between boutique and bulge bracket investment banks
  • The front office divisions (investment banking division, sales & trading, asset management, etc.)
  • The middle and back office (risk, operations, technology, human resources, finance, legal, etc.)
  • 10 common questions
  • And so much more!

This course aims to be easy to understand and focuses on providing an entry level understanding to each division without overwhelming the viewer with too much information. As such, this course is for all levels regardless of academic or work experience.

Upon completion of this course, your understanding will allow you to discuss and explain the differences between divisions at length, each divisions’ function within the investment bank, and how the different divisions work together in order to help the investment bank succeed as a unit.

You’ll also be comfortable talking about, and explaining, why you’re interested in any given division whilst also being able to apply to such divisions and roles with confidence regardless of your current situation, background, experience or knowledge level. This will be vital for increasing your chances of success when applying for internships or full-time roles as well as in interviews.

For more information on me check out the 'About me' section on my profile and be sure to follow me for updates on new and upcoming courses.

Thanks, and enjoy!

Afzal Hussein

Meet Your Teacher

Teacher Profile Image

Afzal Hussein

Founder, Consultant & YouTuber



I'm Afzal, a Career Consultant, Public Speaker, Educator, Entrepreneur and YouTuber.

I started my career working for an investment bank called Goldman Sachs after securing lots of internships and work experience across the world of finance. Since leaving, I've helped thousands of students and graduates secure offers at some of the worlds best investment banks, consulting firms and startups.

I'm working on a range of super in-depth Skillshare classes to provide everything you need to know in order to secure spring weeks, internships and graduate schemes at companies like Goldman Sachs, BlackRock, PwC, etc.

Follow my Skillshare profile to stay updated when I release new courses and do let me know if you have any courses ... See full profile

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1. Introduction: My name's after I was saying, I'm a career consultant, public speaker, entrepreneur, educator on YouTube. But before I became all of those things, I started my career working for an investment bank called Goldman Sex. I've helped thousands of students and graduates secure jobs at Goldman Sachs, JP Morgan, Morgan Stanley, Bank of America, Merrill Lynch, PWC, KPMG, Boston Consulting Group, Google, Facebook. So on and so forth on this course, we're gonna take a deep dive into how the inner workings often investment bank, actually work. Areas that will cover include the front office divisions. So the investment banking division, the merchant banking division, the cells and trading floor, the research division, private Wealth Management asset management as well as overviews off the middle and back office divisions including operations, risk finance, Hate your legal so on and so forth. Upon completion of this course, your understanding will allow you to discuss and explain at length the differences between the different divisions within an investment bank and how the different divisions function in order to make the investment bank function as one big unit. By the end of this course, you'll be comfortable talking about on explaining which division you're interested in and why you're interested in that division. You'll also be able to apply to your desired division with more confidence, regardless off your background, your work experience, academic experience or your knowledge. So let's get to it. 2. What is an investment bank?: on investment banks, simply put, is similar to a high speed, but with one major difference. The High Street Bank serves individuals like you and me. I eat the everyday person on they take deposits and offer loans. And investment Bank basically does this on a much largest game, and investment banks clients on everyday people like you and me. Their clients are large corporations, governments, sovereign wealth funds, pension schemes, insurance companies, high net worth and ultra high net worth individuals. So the rich and wealthy and other institutional investors and other investment bags clients often invested back might need assistance with raising money, whether that be from debt and equity, which will talk about later on. Accessing the financial markets in order to buy stocks and shares or various financial securities. Specialist knowledge or advice on a particular sector or industry help in acquiring or merging with another company, Andi or many other intricate demands that are relevant to that individual clients needs. Whether it's a big institution or a high net worth. Individuals 3. Boutique and bulge bracket investment banks: eyes important to note that there are two key tax of investment banks. You've got boutique investment banks and you've got balls. Record investment banks. Boutique investment banks are small investor banks that specialize in certain areas off corporate finance. Two examples off to boutiques are ever core on de Rothschild. They purely focused on what an investment banking division would do in a global or aboard bracket. Invested Examples of both back investment banks include JP Morgan, Goldman Sachs, Bank of America, Merrill Lynch, Morgan Stanley, etcetera. The reason why these are Food Global Board broke investment banks is because they don't just offer corporate finance or the investment banking division. They do things like cells are trading asset management, private banking. They have large technology divisions. They've got big operations, divisions, etcetera. And so compared to the boutique banks, which just focus strictly on corporate finance. On the investment banking division, the board back investment bank does all of that, but it does a lot more board. Rocky investment banks are also considered global investment banks. It's important to know the differences between the boutiques and the board bracket investment banks because it will allow you to be more targeted in your applications 4. The front office of an investment bank: the front office of a global investment bank is where most aspiring students and graduates want to work. Why is that? The reason why is because the front office of an investment bank includes the revenue generating business divisions. Divisions in the front office include the investment banking division, the sales and trading floor, the research division, the merchant bank in some investment banks, asset management on private banking or private wealth management. These divisions act as the face off the investment bank. Simply put, they are responsible for building client relationships and bringing in business. They basically generate one of the revenue that the investment that creates in order to profit from. These divisions are called the front office because they are interacting with clients on a daily basis, and they're responsible for generating profits and revenues for the investment bank as a whole. These are the divisions that bring in the money. Andi subsequently invested into the financial markets. Front office is seen as a more attractive part of the investment bank for the following reasons. Firstly, the roles tend to be more client focused on or investment focused. This means you get exposure to build relationships, potentially go to client meetings, work on life deals. Andi invest capital across the financial markets, all of which are very exciting things to be involved in. Secondly, Given you're working in the front office, which is responsible for generating revenues and profits, your salaries and bonuses tend to be higher compared to your peers in the middle or the back office. So two reasons why people like the front office you get more plan interaction or investment focus. Work on your pay tends to be higher. Also, there's one more reason, and that is the luxury or prestige off. Working in the front office creates better exit opportunities for you when you want to leave to a different industry or a different role on. So a lot of people want to work in the front office because when they want to move to a hedge fund or a private equity firm will do something completely different, it tends to be easier. Doing toe from the front office as opposed to the middle or the back office, however, is no all good and well in the front office. The hours are a lot longer compared to the back office when you're working in the front office. Your hours will easily be in your first few years, 12 plus hours every day in the investment banking division, which we'll talk about later on. It is easily 16 hour shifts, five or six days a week, you can do 80 to 100 hour weeks on. That would be completely normal. But all of that will talk about later on. If you compare that with the middle in the back office, where typical hours are around 10 to 11 12 hours a day, there's a big difference. And that's partly because of the pay, partly because of the nature of the work. But it's important to understand that there are differences on you are compensated accordingly, Yeah. 5. The middle and back office of an investment bank: middle and back office divisions include risk operations, Treasury services, technology, finance would compliance, Legal and human resource is thes. Divisions aren't revenue generating. As such, they get very little to no exposure or interaction with clients. However, they play an integral part off the organization on the operation on the success off all investors banks, and they are essential for the front office divisions to carry out their work successfully . For those of you wondering if they're involved in investing capital into the financial markets, they aren't although the closest division in the back and middle office to that would be risk and then operations and talking about those in depth in the next few videos. Once again, compensation in the middle and back office is less than the compensation in the front office, relatively speaking. And that's because of the nature of the work, the middle in the back office on revenue generating areas on as such, they tend to be paid lower in bonuses on base salaries. If you're working in the middle of the back office, you can expect a working day off between eight Andi 11 hours every day. That will fluctuate, given your work Lord, but that's that tends to be the norm on you can also expect a lower bonus, then you come to parts in the front office. 6. Investment banking division (front office): with investment banking division is the part of the investment bank that most people hear about and learn off. It's known for its extremely long hours. And yes, this division tends to do the longest hours out off every other division on As an analyst or recent graduate, you can expect to be getting into the office at 9 a.m. On leaving anywhere past midnight one AM for the first few years, and you can also expect to be working five or six days a week. Yes, you heard me right. That's 15 to 18 hour shifts, five or six days a week for your 1st 2 years. They weren't joking when they said 80 to 100 hour work weeks. The nature of the work in the investment banking division is purely corporate finance Now what does that mean? Corporate finance is basically raising money for companies in order for them to spend that money on developing the business or restructuring how a company is organized. So restructuring the capital structure off a company, Andi, increasing a company's value to shareholders. More specifically, the IBD or the investment banking division carries out Emini, which is short for mergers and acquisitions, and this is where companies might merge with or acquire or take over other companies. Examples include Facebook taking over or acquiring what's up on instagram that required investment bankers to facilitate that process or a merger example would be when Merrill Lynch had emerged with Bank of America to form Bank of America. Merrill Lynch to banks had to merge in order to survive the global financial crisis off 2000 and eight. Then you've got IPO's initial public offering. This is where private companies, I e. Companies whose stocks you couldn't have previously poor, want to go public. I e. Offer their shares to the general public in order to raise money. As such, the investment banking division on the respective bankers facilitate the process on Take the company, public fruit and AIPO an initial public offering. But what exactly does that mean? The result being institutions and the general public can now buy shares off that company in exchange for cash. An example would be Facebook, who were taken public by Goldman Sachs as well as many other investment banks. But the need investment bank, if I'm correct, was Goldman Sachs. As a result, we can all now by Facebook stock, which means we own equity in Facebook on they take some of our money on. They can invest that money in order to develop higher or improve the company that is Facebook. Then there's equity financing. So similarly raising money from an I p o or raising money through equity on there's also debt financing. So there's equity financing and debt financing. Our debt financing is raising money from debt issuing loans in order to raise money. Just like we would take our massive loan or a mortgage to purchase a House investment. Banks can issue similar lawns on a larger scale in order to raise money for their clients. Then you've got leveraged finance. Leveraged finance is basically raising finance with debt by the debt that you use to raise that finance is bad quality debt. And so it's a riskier option for a client. One of the major benefits is that leverage finance sends to be a bit cheaper. Cos that you lend to, for example, might have a higher risk of defaulting on loans, which means they might not be able to pay back in full. Therefore, these types of deals can be a lot cheaper, given the heightened level of risk. But when they do work out, they tend to be worthwhile and lost. But not least, you've got restructuring I e. Reorganizing the company structure in order to make it more efficient, both from a shareholder's perspective on from an operational perspective. So reorganizing the whole business, the senior leadership all the way down to the bottom in order to make that business mawr successful, more operationally efficient on MAWR revenue generating and profit worthy all of this in order to improve the value that the shareholders get from the company. So if you investment bankers might dig deep into the functioning off the company on Dale, identify areas that can be scrapped areas where senior leadership management could be fired , areas where people not doing their jobs and sold and hire people that can do a better role or better job in those areas. Restructure the equity with debt off the organization pool with the goal of improving the whole company on improving shareholder value. 7. Sales & trading (front office): sales and trading is similar to what you see in the movies like Wall Street, you've all seen the manic trading floors, the male dominated working environment and the fast paced nature off the markets on the trading floor. However, although it is a male dominated working environment, there are still quite a few females that work in sales and trading industry. Andi, the environment isn't what you might expect it to be. Every you see in the movies would have applied a good few years ago. But nowadays things are quite different. Anyone who wants to work on a trading floor needs to be comfortable working at a fast paced , high pressurized working environment. This is very, very important, you'll told Neto. Have fixed skin on. You'll also need to be passionate about the financial markets. The main role off the sales and trading division is to simply act as a connector between buyers and sellers. Some clients will want to purchase a few financial, securities and commodities, whilst others would want to off load or sell their existing holdings in such commodities or financial securities. Investment backed role is to connect the two and ensure that they take a small commission, the cells and trading division is usually split into two separate areas. You've got equities, and you've got thick F. I. C. C. Fix stands for fixed income currencies on commodities, and then within these groups you've got sub sectors. So within equities you'll have technology, media and telecoms. You'll have pharmaceuticals, you have healthcare. So these old stocks Andi equities within those industries. And then within Fick, you have emerging market that you have interest rates. You have G 10 currencies, etcetera. Okay, so back to our example. Plan wants to buy or sell something. So it's the cells person's job to manage that relationship and make sure they are meeting the client's demands and expectations. And it's the traders job to execute the trade in the most efficient manner possible. That will ensure the plant gets the best price is available and also ensuring that the investment bank makes the best profit on that train. Well as the salespeople and traders, there are structures on quants structures create financial products in order to make lives off the clients a lot easier. Let's say, for example, Applied wants to buy a financial product that doesn't currently exist or is hard to gain access to the structures Role would be to kind of create that product for them because it's very customized and it takes a lot of work, and it's not easy to do. The investment bank can charge the client quite a bit of money for that structure. Has worked closely with sales on the clients in order to ensure that the client's needs are met to the best of their ability. Then you've got wants wants are typically highly statistical PhDs, physicists and mathematicians. Once the structured products are created, the Quanta responsible for pricing these products. How do you price the product that conforms to the ones? Also try to create new methods and processes off trading in order to make sure trading is as efficient as possible and in order to save time when executing trades on getting the clients the best prices possible. They also try to create new methods and processes off trading in order to be more efficient and cost effective. Typical hours on the trading floor can be anywhere between 11 and 14 hours a day. However, the trading floor is one division where you can expect to get in earlier than most people. You'll be in the office anywhere between 6:37:30 a.m. And you leave anywhere between seven PM and eight PM nine PM, depending on how busy your day is and what time off your it is. So you'll be in the office before the markets open and you leave at least 12 or so hours after depending on your workload and the time of the year. 8. Asset management (front office): management is all about managing money for large institutions and large clients and investing it into the financial markets over the long run in order to preserve or grow that capital. Typical plants off asset managers include pension schemes or pension funds, insurance companies, local authorities, sovereign wealth funds, charities and other large institutional plans. Typical hours for new graduates can range from 10 to 14 hours, with you getting in anywhere between seven and 8 a.m. and leaving anywhere between eight on 10 PM in your first year or so. But this obviously depends on the timing off the year on new workload. So, just like for students, when it's exam season, you are studying longer and you're in the library longer. Some periods of the year are busier for every division, in fact, so your hours your working hours will fluctuate accordingly. So in asset management, quarter rent each end of the course Elf of the Year might be busier, given a lot of plants like to do quarter and performance reviews to see how their investments are playing up as such for that time period. A lot of work me to go into the reviews and so your hours, especially as an unless my increase. There are two key roles that interns on dredges can go into in asset management. These tend to focus around sales on investing or product sells. People, as the name suggests, are typically required to focus on building long term relationships, prospecting, bringing in new clients and making sure all the clouds or served accordingly. They have to just keep the clouds focused on cater to the demands, and the investor needs off those clients. In essence, the cells people are selling the products that the asset management division or the organization has on offer Andi. So they need to nurture and manage that relationship. Sales teams are typically splits up by region. So you've got the UK Tell team you've got the German sales team Asia Sales Team North America, etcetera. So they split up by regions, and also we split up by clients. So you'll have sales teams that strictly for this one pension funds you have cells. Teams that strictly focus on insurance companies or sovereign wealth funds so once again sells teams are typically split by region on client type. On the investment side, you would typically start your career as a product specialists. Now what does that mean? What this means is you will be a technical and list within a specific asset class. For example, you might start your career as a product person within the equities as a close. Other asset classes include fixed income alternatives. Quant on multi asset. I'm conscious that this course is strictly on the different divisions within an investment bank. But if you want me to do a skill show course on anything else that you don't understand, where it's the asset classes or anything else, do let me know in the reviews or the feedback section. After a few years as a product specialist in the equities business, you get to decide if you want to be a trader executing trades or April for your manager, who is basically managing the risk off the portfolios that clients are investing in. What's a portfolio? A portfolio is basically a strategy or an amalgamation off stress cities where client money gets put into, and that for yoga's invested into the financial markets. So there can be an equities portfolio that focuses on technology stocks or health care stocks. Clients who are interested in tech or health care stocks can give the asset manager their money and that money will get put into that technology or healthcare equity portfolio. And then as a portfolio manager, you manage that you manage how it's invested, you manage the risk profile of it, so on and so forth. So you can't even execute trades a trader or you could be a portfolio manager. Both traders and portfolio managers worked very closely together, and they both idea generate, and they contribute to the overall performance and success off different investments that clients might take on with the S and management Asset Management simply takes capital from plants and investor into different asset classes. Given the risk appetite off, each individual plan in hope off preserving the capital war, making a return on that capital, each fund or each portfolio focuses on or specializes in a certain part off the financial markets. So once again it goes back to the asset classes. You have equity portfolios, fixed income portfolios, alternative investments, one investments on multi asset for four years as well. How does the asset manager make money? The asset manager charges a small fee on every investment. So let's say the asset Manager is given £500 million to invest into the financial markets from a client. The asset manager will charge a small percentage so half a percent, which is basically 50 basis points on that £500 million it will charge that half a percent for managing the money every year. 50 basis point fee, or half a percent for managing £500 million is a fee off £2.5 million per year. So that's a lot of money just for managing the £500 million. Some products invest in the alternative asset class, so hedge funds and private equity, for example, as such, they come with a performance fee. So there's the management fee, but then there's a performance fee as well. The purpose of the performance fee is to incentivize the asset manager to reach certain levels off returns or targets, and it does so by giving them a cut off the profits. So rather than just managing money and investing it, they are encouraged to take on some risk in order to get the performance fee, because if they do it for the client, they get profit as well. So, for example, there might be a performance fee off 10%. What this means is any profits above a certain level that the client makes. The asset manager gets to take 10% off those profits. So if the client makes £20 million profit, the asset manager gets 10% off that, which is £2 million on top of its £2.5 million management. So he gets £4 million. In other cases, that performance fee will be a lot higher, and that's why it's quite lucrative. And a lot of asset managers who invest in alternatives can expect lots of profits from great performance fees. If you're in sales, you can expect to get in for 8 a.m. on leave around 7 p.m. Obviously, depending on the workload and time of year. And if you're in products, you can expect to get in about 7 30 and leave at eight PM nine PM so the hours are longer for product people on their a bit shorter for sales. The reason for this is product. People are continuously working on loss of excel, spreadsheets, lots of pitch books sells. People are doing that as well. But the product people are working a lot longer because there will be 20 different sales teams, and they might want all of their parents might be interested in investing in equities. So then that one equity, Besson or that small team of equities people has to cater to all of the cells people, and so naturally, product people tend to work a lot longer. 9. Private wealth management (front office): Revell Wolf Management, otherwise known as private banking, is very similar to asset management. They both invest capital over the long run for their plants. The main difference is the type of planes, so asset management. The clients are very large institutional investors, whereas in private banking will private wolf management. The clients are individuals or family offices, so high net worth and ultra high net worth. Individuals and families basically so it could be oil tycoons, celebrities, sports personalities, wealthy directors, entrepreneurs, etcetera. Typical hours are similar to those in asset management. People are getting in about 7 30 leaving 12 hours 1st 14 hours later. Hours do tend to reduce the more senior you become, but this is a very high touch, client focused division on. So if you are managing a relationship with a high net worth individual when they need you, regardless of what time of the day is, you're gonna be expected to kind of respond will be there for them as much as you can. Similar to the asset manager of business, the private banking division makes its money from charging fees on the capital invested on behalf of its clients on this capital is invested across asset classes in the portfolios on the funds that the asset management clients are investing in as well. So private wealth, money and as a management money can be in the same pool for your being invested in the same products across the financial markets, it's important to know that private banking is heavily, if not the most heavily relationship focused division in any investment bank. It's driven primarily by your relationship with your plans, so that's very important. If you wanna get into it, you need to be an interpersonal people. Person being a people person on having strong interpersonal skills are vital to succeed as a private banker. So for those of you interested in this division, you are typically an extra verbal. You're good with people, you're good with holding a conversation, and you tend to naturally have a way with Game one. Contrast that with the investor whose primary focus is to be on the desk, investing in the capital markets on Let's So building relationships with their clients. So make sure you know which roles required which skills and what you are more suited for 10. Research (front office): the research division is an interesting part, often investment back expecting in recent years. As the name suggests, this division is responsible for creating and curating research data on articles on various divisions, asset classes, companies and sub sectors across the global financial markets. Research analysts are split into groups. These can be split across asset classes and then sub groups or sectors. For example, you can have a technology specialist research analyst in equities and then across them you can have someone who's covering pharmaceuticals, who's also on equities research on list. Similarly, you can have a research analyst who is covering emerging markets in fixed income, and then you might have someone else in fixed income who's covering global credit or high. You bet these are both still in fixed income way, say research. What exactly do you mean? A research analyst might be responsible for monitoring and tracking a given number of companies in their given field or sector or certain parts off the financial markets. In doing so, it means they need to become the expert in this field, and they need to carry out as much research as possible. They need to carry out extensive research on their asset close on their sub sects are in order to be kept in the loop and be aware of what's going on within that area off the financial markets. This is important because they need to construct important in depth reviews and reports on their subsector in order to present it to their traders or the cells, people or their team, or even different parts of the investment bank. Giving their opinion on whether they think you should buy, you should sell. You should hold a given stock or equity or portfolio that is related to the given asset class or sector that they are covering in the financial markets. They basically need to give their opinion on a certain area, and it needs to be validated with research and data because this information is gonna get passed around it Michael to clients. And they need to give their view on whether they think you should buy, own or sell a given stock or subsector, often asset class. At this particular point in time, they need to be well read in terms of news and data and everything going on in the global markets in order to frequently be able to have a valid opinion on their specific topic off expertise. Oftentimes their reports will be used to construct investment views on aid potential trades . So the information that they create and the reports that right do you have significance on ? They can be the deciding factor on whether an individual decides to invest in a part of market or not ours and research or anywhere between 10 and 12 hours each day. It's important to know once upon a time research was a thriving division because you could take that research and sell it to your clients. However, in recent years there's been a regulation or law that has prevented investment banks from selling their research to their clients. As such, this division isn't as revenue generating as it once waas because there's a lot off red tape or red flags or regulation surrounding the research that is created by the division. So it's important to be aware of that as such, this has impacted the revenue generating potential off the research division within the investment banks, where it's important to be aware of that before you decide to apply to this division and start your career 11. Merchant banking division (front office): the merchant bank Will. The merchant banking division is an interesting one because most investment banks don't have this division. Goldman Sachs have a merchant banking division, and that's why I have included it in this course, in case some of you might want to apply to getting into it. Want to learn a bit more about what it is and what it does? The good news is, it's one of the most attractive divisions to work in. Not many people have heard of it. It can actually potentially be a better option than going into the investment banking division if you're interested in exit opportunities into hedge funds. And private bad news is, it's extremely tough to get probably the hardest division again. Why? Well, part of the reason is that the MBD, or the merchant banking division, is extremely small, and they hardly ever recruit any interns or graduates. Typical routes into the merchant bank off doing a few years in the investment banking division. So what exactly does the motion do? The merchant bank primarily manages private capital, invests in and creates funds primarily focused on private equity, private debt, real estate, equity, real estate, debt on infrastructure, but what does all of that mean exactly? The merchant banking division raises money from the private wealth management clients, the asset management clients on sales and trading clients, and it pulls all of that money together on investor into the funds Day creates. It invests that money into special projects, and it does so over a long period of time. So once you invest that money, its stock is locked up for a good 10 or so years 10 to 15 years. What are these projects? These products can include funding infrastructure projects like creating toll roads or bridges all over the globe, or funding real estate projects like building lots of hotels or residential housing or hundreds of new homes, or even investing in startups and new innovative companies from private equity funds. The idea is investment in the merchant banking divisions funds over a very long period of time. Your money gets locked up by the return potential is very, very high, so you can expect returns between 15 and 20%. Compare that to a fixed income portfolio or fund off like two or 3%. There's a big difference, and you get that premium because you are locking your money up for a very long time, and so you need to be compensated accordingly. Merchant banking division invests off a long run, and so capital or investor money is locked up for at least 10 to 15 years. So if you're investing in a private equity fund or a private debt fund or a real estate equity or real estate, that or infrastructure fund your money is locked up for a long time. Reason being is you can't build houses or bridges overnight. It takes a long period of time. And so that's why you, when he gets locked up for so long, when your money is locked up for so long, it means your capital is a liquid. Liquid means it's not easily accessible. So if you ever hear that term liquid means your casual money is easily accessible, illiquid, it means it's not even the access. Similar to investing in private equity, the merchant banking division makes its money from a management fee on a performance. Feet on the hours are like working in the investment banking division, so you'll be doing 14 15 16 17 18 hour shifts easily. Five days a week for your 1st 2 years. But the beauty is the exit opportunities are great. So a lot of people leave the merger backing division and join hedge fund or private equity firm because they've got a lot of transferrable skills that are relevant from their previous role. 12. Risk (middle office): risk e assessing the creditworthiness or financial strength off clients to determine acceptable levels off credit exposure. Enterprise risk management coordinates the planning, organizing, leading and controlling off activities to minimize the effects of risks on Capitol on earnings. Liquidity risk i e. Overseeing and managing or controlling the firm's liquidity risk management framework, including stress testing on limit governance. Market risk. This is where one would assess, monitor and manage the firm's risk due to changes in the market environment Model Risk management This is where you're ensuring the independent controls around the development, implementation and usage of models with the intent of minimizing risk operational risk. This focuses on the development and implementation or risk assessment frameworks designed to identify, measure, monitor and manage risk exposures. Associate it with systems people processes on external offense. Typical hours can range from nine AM to six PM or a 9 to 11 hour day. This again depends on workload. On timing off, the individuals who work in risk oftentimes move into the front office, whether it's an asset management or trading, and that's because they build their expertise in a wrong that is closely tied to the front office, and then they go for the move. After a few years 13. Treasury (middle office): Treasury services, otherwise known as corporate Treasury or Treasury Solutions, is responsible for managing the firm's liquidity funding. Capital on allocation. Off Resource is, it basically manages the finances in the cash flow off the whole investment back. It needs to do so whilst also ensuring that no value is lost in idle cash. So the investment bank will have lots of collapsing around the Treasury Solutions or Services. Team needs to make sure that cash is invested, so it's gaining some interest in gun on it, for example, rather than sitting there and losing value, The Treasury division also assesses and manages the firm's asset liability risk. So the ratio of assets to liabilities that the investor back owns. That is down to the responsibility off the Treasury Services division. And they need to make sure it is being managed accordingly in order to ensure that the firm has enough cash flow and enough assets in relation to liabilities to make sure that they're on any risks off cash drying up for a certain division or a certain division. Not having enough resource is to function efficiently. Therefore, Treasury Services plays a key role in the success and operation off the investment back. Typical hours and Treasury services would be getting the office at 8:30 a.m. and leave about 6 30 or seven first PM 14. Operations (middle / back office): rations is considered to be the heart or the engine room off every investment bank for every trade executed. Transaction completed, Newmarket entered into product launched operations, make sure that everything goes to plan operations, enables business to float operations, works closely with the investment banking division, sales and trading and asset management in order to ensure the highest level of service to the firm's clients. Operations focuses on accuracy on deficiency in order to protect both the firm on the client. For example, if a client wants to buy a certain stock operations needs to check both the plan on that stock in its subject that everything is safe operations first and tools that stock and payment already to be traded. They then make sure that the trade is settled on time. And then they confirmed that each trade is reported accurately to the buyer, the seller firm on the regulators. Along the way, operations keeps an eye out for anything that can expose the firm or the client. Two. Financial fraud or any potential risk of loss operations does this for every transaction around the world. I was in operations are typically 9 to 11 hours a day But if you're interested in moving into the front office, operations is a good place to start. A lot of individuals build their expertise in operations, and because they work closely with the front office sales and trading division or investment banking division asset management, there's a natural transition and progression from operations after two or three or four years into the front office. So for those of you who couldn't can't get into the front office operations and as previously mentioned risk are good ways to break in after a few years. 15. Technology (back office): the technology division is an interesting case. Tech talent is in high demand that president. As a result, some bands have renamed their technology divisions to engineering in order to sound more attractive. So big tech companies like Facebook and Google don't steal the technology and lists that would typically head over to the investment banks. So if you see that, if you see engineering is the same fingers technology and so investment banks are struggling to retain tech talent because even if check talent does enter the workforce off for a year or two, they end up leaving to go and work for a start up or a tech a proper tech company rather than an investment bank. In order to stay attractive. Some investment banks are increasing the pay for technology and nest, and they're also relaxing the dress code for their tech employees. The typical technology division has four key areas. It's got cybersecurity, software, engineering, infrastructure engineering and financial modelling software engineering. Here, you can expect to design and implement high quality technology solutions for challenges across the bank. You do this by leveraging internal and open source services in order to design and develop applications to serve the many back middle and front office divisions. Financial modelling Here you can expect to work with large data sets to engineer advice and solutions for clients and the firm you build. Andan haunts advance quantitative and analytical methods, utilizing software to design risk modeling systems and develop machine learning algorithms . Infrastructure engineering in infrastructure engineering. This is the role that allows you to explore data center design networks, storage cloud computing, big data application messaging, databases, communications market data on software, languages lost but not need cybersecurity. Cyber security is all about protecting the client and the integrity off firm around the world in both an advisory and engineering capacity as you develop and propagate the necessary security control strategy. So I was Security involves performing security operations to detect, analyze and respond to fret intelligence on incidents quickly. You do this by leveraging data mining and machine learning techniques toe, identify malicious activity and cyber attacks 16. Finance (back office): the finance division works close me with all of the other divisions on their senior leadership in order to understand how well each of those divisions are doing and how well that the overrule investment bank is performing respective to its forecasts on projections . The Finance Division is responsible for managing the firm's food looking business plans on strategic initiatives, in addition to preparing the investment bank's quarterly reports on annual reporting. So this includes monitoring on working on the profit and loss statement, financial statements, all of the ins and outs in terms of the finances for the organization as a whole, and then reporting that to the public and to, you know, the global markets. So individuals who are interested in knowing about how the firm is performing can find out exactly how the investment bank is performing so all of that. Financial reporting, quarterly updates, annual reports. All of that comes from the Finance Division, therefore, employees in the finance division who worked closely with employees from the front off his divisions by the senior leadership level in order to ensure the right numbers are coming through from the front office revenue generating divisions to the finance division in order to make sure that reporting is as accurate as possible. Hours and finance are typically 95 or 96 p m. And obviously, once again it can fluctuate, depending on the time of your and your workload. 17. Human resources (back office): human resource is HR are responsible for attracting the best employees to any organization they did with graduate recruitment. Experienced higher recruitment in lots of areas that focus on the people off the investment bank. They focus on managing and developing the talent and ensuring that the employees of the firm get the best training on learning and development available. Human Resource is also plays a key role in ensuring that every employee turns up to work as happy as they can on a satisfied with their role as possible. Some of the areas specifically within human re sources include graduate recruitment experience, professional recruitment, diversity and inclusion, learning and development, employee relations, compensation benefits and wellness talent, advisers branding and so on. I was artifically 95 or 96. 18. Legal (back office): the legal divisions. Responsibility is to make sure they provide legal advice that protects the firms on the divisions. Financial well being. Andi reputation. They assist the various divisions with evaluating the risks from completing transactions on other activities for and on behalf of clients. There's legal team or group tied to practically every front office division, given the sheer number of deals and transactions that the front office divisions are doing . And so for each transaction or Dean, it's important to have that legal advice. And so that's where the Legal Division steps in. Legal team that works closely with the front of his divisions lets them know what can and can't be done or what can and can't be said in contracts. And so they worked very closely with the respective division or team hours in legal division can spend from 9 to 11. Our ships, on average, 19. Internal audit (back office): internal audit is, as the name suggests, the firm's own internal accounting division that is responsible for monitoring the financial reports off the firm. They work very closely with finance in order to ensure any info or accounting that goes out into the public domain is as accurate as possible. They check all the quarterly reports or the annual reports, all of the financial documents and accounting statements, in order to ensure as high a level as accuracy as possible. Accounting division within the investment bank is responsible for ensuring that any financial data or accounting statements that gets sent out to the public domain is in compliance with laws and regulations for that specific region. They also assess the firm's internal control structure and advise management on developing the best control solutions. Hours in the internal audit team or division are typically 95 or 96 p. M. 20. Compliance (back office): compliance, otherwise known as the Police Department, off an investment back. They're responsible for catching any illegal war, fraudulent activity that goes on throughout the whole investment bank, regardless off which division it's happening in. There's typically a compliance division attached to each division off the firm, and that's very important. In order to make sure safety of the firm is not compromised, they make sure nothing goes out to a client that isn't meant to, and they intrude that all the correct disclosures or included on E mains and presentations when they're being sent out to cleanse, in essence, compliance are responsible for protecting the reputation off the investment bank. They want to say your instant messenger, your inbox, your e mails, make sure you aren't doing anything you're not meant to be doing such a sending yourself confidential information or sending a client something that you're not meant to be sending compliance. Also host meetings on education and training to keep employees up to date with the latest regulations and laws. As an analyst or new graduate, Any time you need to send a presentation to a client, you need to get it signed off by compliance, so they review it and they tell you which disclosures to put on at the back, and it's quite a long process. It can be quite quick over time, but you need to make sure you put all the correct disclosures before it goes out to the client. Let's make sure the firm is protected and that you don't send out anything. You're not meant hours and compliance can be 9 to 5 96 97 when it's really busy. But this fluctuates with time. 21. 10 common questions: 10 questions quick fire questions that I get asked a lot. Is it possible to move from the back office to the front office, 100% possible by the best option to do so is to start your career in operations or in risk these other divisions that worked closely with the front office on So naturally, most people tend to go into the front office from evil risk or operations. Next question. What's the best division to work for in middle or back office to move into into the front office? That's risk or operations? Thea. Other divisions like finance, legal age or they don't work as much with the front office and where they do work together . It's in a completely different type of road. You want doing similar work to the front office, and you don't develop that type of expertise, whereas in risk and operations you develop the relevant expertise to help you move into the front office. What are the pay differences across divisions or front office, first middle and back office base salaries? So if you graduate, you saw on between Faith and four K, or 30 and 42 K in the back office or middle office and in the front office. It will be between 40 and 50 k base salary, and then your bonuses differ. It's usually a percentage of your salary, but naturally it will be a lot more for the front office compared to the back office. What's the hardest division to break into its the merchant banking division or the investment banking division? These are the most competitive. They receive the most applications, and they tend to be very hard to break into by. It's not impossible. Also, sales and trading is hard. All of the front office divisions tend to be hard to get into. But honestly, if you have a natural these I o interest in a specific division and you're well read, you do your research network. You're genuinely interested. It will be easy. Don't just go forever, announces chasing. Make sure you pursue the role of the division that interests you and that your skill set is more suited for best work life balance in the front office. I would say asset management and private banking and in the back office or the divisions have a good work life balance. The worst work life balance is the investment banking division or the merchant banking division. Easiest to break into. This depends once again on your skill set and your interest, but the back office divisions tend to be easy to get into, the better to work in tech for an investment back or for a tech company. I always tell people it's better to start in tech at a tech company because it's easy to move into an investment bank afterwards, whereas it's less common the other way around. Mobility options are their mobility options in investing backs? Yes, always, people are leaving their roles a lot. People in the front office back office, they do a few years and they leave. So all these opportunities crop up. You just need to keep an eye out, and you can move internally. It's pretty easy. You just need to make sure your networking catching up with the right people, making sure you're putting yourself out there, and then when the opportunity comes up, you just apply. Your manager usually encourages you to explore different opportunities, so, yeah, mobility options are always there. You just need to keep an eye out on the internal website and make sure you are networking as much as possible. Which divisions work most closely together? The front office divisions work very closely with operations and risk as well as legal finance. Work closely with order or internal order complaints, work closely with everyone. Hate or work closely with everyone. But once again, if you're looking to move from back office, the front office focus on operations on risk while the rankings in investment banking. So when you work for an investment back, the typical rankings are on a list for two or three years, and then you become an associate if you're good enough and then associate for two or three years and then you become a vice president or a director and then an executive director or the managing director, depending on the organization, most people become VP's so vice presidents and they stay there for the rest of their careers because the jump to managing director is too hard. No, everyone makes it, and most people get SVP, and that's where their careers tend to flatter. Now, only the really dedicated their fully dedicated to the field are able to make it. Teoh, managing director on some firms have partner level, that's the next level up. But those aren't guaranteed with time. Those are purely for the exceptional individuals at the organization. I hope you found this course interesting and that you learn that thing or two. You should now have a strong and Thora understanding about the different divisions in an investment bank and how the inner workings of an investment bank actually operate. Your understanding should allow you to discuss and explain the differences between each division each divisions function and the role it plays within the investment bank, as well as the different work life balances for each division. You should also be able to explain how the different divisions might work together in order to ensure the efficiency and operation off the investment bank as one unit. If you enjoyed this course, I would love to hear your feedback on if you didn't let me know what could be improved. All your feedback means a lot, and it allows me to create good courses that will allow you to get further in your careers . Also, if you have any ideas off course is that you would like me to create in the near future do you let me know. Thank you. Good luck. And I'll see you in the next course 22. The class project: the product for this course is as follows. I want you to record an upload and answer or a written answer to the following questions. Why do you want to work for your favorite division in your own words? What would you say is your favorite division on Dwight? What makes you suited for a role in your favorite division? I want you to give examples for each of your answers and keep video answers between one and three minutes each and written answers to less than 300 words per answer. Do this for two separate divisions, if possible on. Once you upload your video or your written responses, I would love to give you feedback on each off your answers. I'm sure you benefit from written feedback from your peers as well as myself.