Middle Office

The middle office (MO) refers to the section of a financial services firm which cannot be grouped under front office (FO/client facing) or back office (BO/operations). MO manages risk and accounting, and sometimes information technology. While there is some overlap with the goals of the front office and back office, the goals of the MO ultimately serve to act as the "voice of reason" in the three offices. This is primarily due to the MO's strong focus on compliance and risk management. The daily tasks of the MO include: reconcile trading information to be sent to the BO, generate daily risk reports, create a standard operating procedure for client queries, coordinate projects with the FO and BO, and monitor internal dealings to ensure the absence of fraud.

Middle Office Investment Bank

How the Middle Office Works

A financial services corporation is typically split into 3 parts:

The front office (FO) is the most customer facing and may include Sales and Corporate Finance. FO is the primary revenue generator in a financial institution. They primarily offer their firm's financial products and services for sale to corporations and individuals.

The MO also acts as a liaison between front office and back office. This is done by monitoring transactions as well as deals done by the front office and ensuring that they are properly fulfilled and executed by the back office. While MO is not the primary revenue generator in a financial services corporation, they serve an important role in supporting the FO with tasks such as: calculating risk, fulfilling any legal requirements of a deal, and running any necessary information technology (IT).

The back office (BO) is the least customer facing role and may include departments such as Human Resources and Compliance. Back office also acts as support for the front office by handling administrative work, compliance, and record keeping.

If a financial services corporation were a circuit, the FO would be the light bulb, the MO would be the switch, and the BO would be the battery and wires. Alone they cannot produce much, but together they can create light.

Why Is the Middle Office Important?

The MO is important as it serves as the primary hub of a financial institution's data. Without the MO, there can be inconsistencies in the firm's data quality, unnecessarily repeated information in presentations, and unnecessary time spent running reports or extracting data. It is ultimately the job of the MO to standardize the firm's data quality, ensure a procedure for presentation creation, and streamline the report process. Without the middle office, a firm could devolve into a chaotic mess.

Furthermore, with the increase in new government regulations, performance returns, and unique client challenges, the middle office's task in a financial services company has undoubtedly become more complex and demanding as they create solutions to meet these problems.

Qualifications, Salary, Schedule, the Future of Middle Office, and Exit Opportunities

As the MO isn't as client facing as the front office, the qualifications and schedule are easier, with the trade off of a lower salary. Compared to the front office, some key distinctions are, same minimum of a Bachelor's Degree, lower salary of about ~$70,000 a year, and lower work hours allowing for a better work life balance.

As for the future of the MO, it is becoming increasingly common for firms to be outsourcing their back office and MO roles to oversea countries or for the work to be automated by a computer.

If you're interested in exiting from the MO, it is possible to make it to a FO role through the use of heavy networking or a rebranding through a MBA/graduate scheme. Just be wary of being pigeonholed into a strictly MO/BO role if your end goal is to pivot out of it.

Qualifications for a Middle Office Position

Typically people in the MO hold at least a Bachelor's Degree. However, it is not uncommon for them to hold a Master's Degree or an MBA. Much like a position in the front office, it helps to be from a target school, but as strongly recommended as the MO isn't as competitive as the FO.

Salary of Middle Office

Employees in the middle office are usually better paid than back office staff, but not as well paid as front office staff. Salary ranges from about $60,000 - $80,000 a year. To compensate for this, their work hours are not nearly as grueling as the front office, allowing for a better work life balance.

Daily Schedule of a Middle Office Role

Compared to the front office, the hours in the MO are not nearly as grueling. It isn't uncommon to leave the office by 5 P.M. or 6 P.M. the latest. For a more detailed breakdown of the hours in a MO role, we've referenced a fellow user's experience below:

 

6:20 A.M. - Rise. My office isn't in NYC, but we work the hours. MO roles can be elsewhere to save the firm $$$ on compensation and rent.

7:05 A.M. - Out the door, and either biking or taking the bus (psh subway, you think this is NYC?)

7:15 A.M. - Arrive at the office. Building looks gorgeous, but the inside is the same as any open-plan office. We even have lockers for our stuff--who knew a BB was so like middle school? Then again, it's MO. Also keep cereal in the locker (like everyone) since the milk is free. Ever wonder what goes into SG&A expense?

7:15 - 8:15 A.M. - Catch up on the news and the companies I cover. I'm in credit risk, so each day starts with me scanning SNL, WSJ, Bloomberg etc. for news on mergers, bankruptcies, and especially rating agency actions (our contracts with counterparties often have rating-based breaks). If something occurs (Moody's writes an analysis of a sector, Crappy Bank Inc. defaults, Muppets & Co. defrauds clients...) I write a summary post and email the rest of my credit team (i.e. corporates/banks/funds/leveraged fin group) in my office and in NYC. If it's good, it gets posted to the MDs, and if you're really golden, they write back "thx"...or a list of 25 questions...

8:15 - 9:15 A.M. - Generally the first meeting of the day is slotted in here. Planning for our monthly credit review meetings, or for some change in our rating methodology, or a rearrangement of our portfolios.

9:15 - 9:30 A.M. - Starbucks, because our coffee in the office is ________.

9:30-11:30 A.M. - Review writing, part 1: We operate on a monthly review cycle--each analyst covers several hundred counterparties (not like equity research!) that are sorted by industry and/or geography. So a corporates group will have an analyst for TMT, for airlines/transport, for resources; financials will have insurance analysts, emerging markets coverage, munis may or may not be thrown in here; some firms may also split off their funds coverage from FIs while others include it.

11:30 A.M. - 12:30 P.M. - Lunch! Not everything about MO is bad. IBD may get the pay and prestige, but we get hour-long lunches most days (at least if you're productive). Christmas is over though, so no more 2hr sushi lunches with sake...

12:30 - 4:00 P.M. - Reviews, part 2. There may also be more meetings on side projects--credit risk tends to get pulled into some interesting firmwide projects since the higher-ups like a range of views. So it could be on tax policy, regulatory strategy, the Fed's latest diktats...it's a nice break from the more tedious review writing.

4:00 P.M. - Is it a Friday? Go home, since your VPs left at 3:45. Is it not a Friday? Is the MD gone? Leave 5 min after the VPs; yes, facetime matters here too.

5:00 P.M. - Facetime only matters so much. GO HOME. Seriously--the VPs don't care after this point. Unless your work isn't done, in which case you stay late.

Or you have a call with an Asian office.

6:30 P.M. - If you're finishing up that team call with Tokyo/HK/SG, send some pings to your team about dinner. Order dinner--make sure to also get lunch for tomorrow. Our dinner $$$ is the same as NYC's, but goes a lot farther. Time it so you're done eating by 8:05. Leave.

8:10 P.M. - No one is here. Literally not even the cleaners; they left at 7:45

10 - 10:30 P.M. - Bed. This city isn't known for its nightlife. Seriously.

 

To read their full breakdown reference this forum.

Considerations for the Future of Middle Office

In order to cut costs, financial service corporations have been moving their MO and back office positions to overseas countries where the populous is still well educated, but the labor is significantly cheaper. Some countries where the work has been exported are India and Ireland.

As technology advances, financial firms have also been shifting to automate their MO and BO positions with computer systems. These computer systems allow the firm to reduce operation costs and increase efficiency.

Exit Opportunities Out of Middle Office

While you can continue to progress your career to more senior roles in the MO, many people exit out of the MO through the use of a MBA or alternative graduate scheme. It can be very easy to get pigeonholed into a MO or back office position and if your end goal is to make it to the front office, then it is recommended to continually network as much as possible. It can ultimately be possible to make it to a FO role, however; the skills you will have learned through your time in MO act more as "the basics" rather than some of the more hard marketable skills gained from FO. To learn more users thoughts on exit opportunities out of MO, reference this forum.

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