What does 'Front Office' mean
In a financial services company, the front office consists of the sales personnel and corporate finance employees; these people generate most of the revenue for the firm. A financial services company is logically broken up into three parts: the front office includes sales personnel and corporate finance, the middle office manages risk and corporate strategy, and the back office provides administrative, technical and support services.
BREAKING DOWN 'Front Office'
The origin of the term "front office" comes from law enforcement in the early 20th century. Criminals in the underbelly of society called the main police office or the main detective bureau the front office because it was the highest law enforcement office in a local area. By the 1930s, "front office" changed to encompass the most important staffers in a company, such as managers and executives.
Front office staffers have the most direct contact with clients among any employees at a financial services firm or an investment bank. This means revenue generators hire experts in wealth management, sales, trading, investments and private equity. The one exception to this rule is the equity research department; it doesn't directly generate revenue, but it plays such a vital role in the decision-making process that these employees must work closely with people who invest clients' money. Researchers write reports about earnings prospects and companies that could benefit from investments.
People who want to work in a front office should lean towards careers as commodity brokers, financial traders or corporate investment bankers. These people know how to shift large sums of money to get the optimized return on client investments. Investment bankers advise companies on mergers, acquisitions and raising investment capital through various markets. Traders buy and sell investment products, such as stocks, bonds and commodities, on behalf of clients.
The middle office and the back office both support the activities of the front office. The middle office includes employees who ensure an investment company remains solvent and doesn't engage in bad investment practices. These departments include corporate strategy, compliance and financial control. The middle office works closely with the front office to help run the revenue-generating aspect of the investment bank smoothly.
The back office entails support staff such as administrative assistants, human resources and accounting. The back office also includes technology departments, such as IT employees and technical support. Due to a greater technological role that computers, software and algorithms play in everyday investments, the back office has become more prominent in the daily functions of financial services companies. Without the support network in the middle office and back office, the front office fails to make money for the investment bank.