Associate vs. Analyst: How Does the Role Change?

You’ve spent a ton of time and worked hard to get an analyst spot, whether that’s in investment banking, private equity, or another finance vertical. But what comes next? Here’s an overview of the differences between the associate vs. analyst roles and what you should expect as you climb the ladder.

Associate vs. Analyst Summary

Typically, the most junior person on the team is an analyst (an exception is equity research analysts). They’ll typically remain an analyst for a period of 2 – 3 years before promotion to the associate position.

At the highest level, the analyst produces work while the associate provides guidance and direction. This typically involves the associate receiving high-level direction from an MD or VP, and outlining a deliverable to the analyst. The deliverable could be a pitch deck, model, CIM, AVP, or any number of ad-hoc analyses.

Analyst Responsibilities

The most important part of the analyst role is ‘owning’ the work product. They are in the Excel and PowerPoint completing specific tasks – it’s their responsibility to get the work done.

In M&A processes, they’ll also have additional process and administrative-related work. This may mean adding prospective buyers to the virtual data room, scheduling diligence calls, or tracking diligence request lists.

None of these should come as a surprise, but this list provides an outline of the key skills required in the analyst position.

• Superb Excel and financial modeling skills – Analysts should be at the top of their modeling game, memorizing all keyboard shortcuts, understanding optimal structure, and having deep knowledge of DCFs, LBOs, comps analyses, etc.
• Work Ethic – It’s not always pleasant being an analyst. There are going to be times when there is way too much work on your plate, but the expectation is you power through. Top analysts are able to grind it out.
• Attention to Detail – Not the most exciting item, but crucial. Analysts need to prevent mistakes in models, ensure proper formatting in decks (free of typos and other issues), and closely track all process-related items. Good analysts will have a reputation for being error-free and organized.

Associate Responsibilities

While still a junior member of the team, there are a number of differences in the role of an associate vs. analyst.

Within investment banking, associates take on a managerial capacity. It’s their responsibility to make sure the analyst produces the right work correctly, meeting expectations of senior deal team members and the client.

Associates will outline deliverables to analysts. This may mean a PowerPoint ‘skeleton’ or a bulleted list of directions. They need to think through proper structure to make sure the analyst is on the right path. Failure to do so means numerous revisions and a frustrated team.

Perhaps most importantly, associates are responsible for checking an analyst’s work. While analysts shouldn’t make mistakes, the reality is that they will (and frequently). The associate needs to ensure all numbers are correct, the model is accurate, formatting is correct, the deck is structured properly, and generally is the first and most critical quality assurance control.

If there’s an error, it’s the associate’s fault, not the analyst’s.

Strong associates will also provide critical insight to senior members of the time. It could be as simple as CIM structure in banking, or it could be a critique of the investment thesis in private equity. Associates will gradually grow into thought partners for VPs and MDs as they progress in the role.

Associate Role in Investment Banking vs. Private Equity

It’s important to note that the role of an associate is different in private equity than investment banking. Typically, a private equity associate will remain the team’s most junior member as most firms do not have analysts (although this is starting to change at a number megafunds and upper middle market firms).

As such, private equity associates can expect to continue owning any work in Excel and PowerPoint. With no one under them, they can also expect to shoulder the most monotonous and unpleasant administrative and process work.

Private equity associates must both complete all work and check all work, ensuring that everything is correct.

Investment banking associates, on the other hand, often do not ‘go into the model’. They leave that for the analyst and review outputs.

Regardless of banking vs. private equity, associates are relied upon to know the deal cold. They should be able to answer any deal team or IC questions on the company, data room, CIM, model, diligence, etc. They’ll also have more responsibility interacting with clients, management teams, and prospective buyers, often leading calls and diligence sessions.

It’s also worth mentioning that, on the whole, associates will have slightly better work-life balance than analysts. This will vary widely from firm to firm, but is generally a reasonable expectation.

Analyst to Associate Promotion Overview

If you’ve decided investment banking is worth it and want to stay, medium-to-strong analysts will receive an associate promotion within ~2 – 3 years. Most banks have moved toward the earlier side of the timeline, partly in an effort to reduce attrition to private equity.

It is generally a fairly straight-forward exercise to receive the associate promotion. Well-liked analysts should have no issues, as investment banks often prefer internal promotes to the alternative of MBA associates (who have no actual banking experience).

Private equity associates typically join the firm in the role after a two-year analyst stint at an investment bank. They’ll often recruit for the position immediately after joining the bank, knowing what their next stop is nearly two years in advance.

Associate vs. Analyst Compensation Overview

For both roles, compensation is structured as a base salary plus an annual discretionary/performance bonus. Associates and analysts are often bucketed into bottom, middle, and top tiers, with bonus size commensurate with tier.

Analyst Compensation

Standard analyst base salaries are in the ~$110 – $130k range. Typically regional boutiques pay the least (often below this band), bulge bracket and middle market banks in the middle, and “elite boutiques” are at the top.

The performance bonus is where things really start to vary. Analysts can expect anywhere from ~$50k – $100k+, with the majority falling somewhere in the middle. This puts total compensation anywhere from ~$150k – $250k, with the majority falling around $175k – $200k.

Note that the bonus will be highly dependent on bank and market conditions. These figures are my opinion on rough averages across both strong and weak years.

Generally, analysts can expect a $10k – $25k bump in compensation between their 1st, 2nd, and 3rd years.

Associate Compensation

Things really start to vary at the associate level based on IB vs. PE and firm.

Within banking, associates can generally expect something between $300k – $500k. Note that this is highly variable, and roughly half of this compensation will be the annual bonus.

In 2021, coming out of COVID, some senior associates clocked in far above the top end of the range. However, with 2022’s economic turbulence it’s likely that associates trend toward the bottom-end of the spectrum.

In private equity, compensation ranges can be broadly split between lower middle market, middle market, upper middle market, and megafunds.

• Lower Middle Market — Typically thought of as firms with latest fund size under $1B, all-in associate compensation is in the $200 – $275k+ range
• Middle Market — Between lower and upper middle market in fund size, middle market associates can expect $250k – $350k+.
• Upper Middle Market and Megafund — Associates at the largest firms can expect somewhere between $350k – $450k+.

Associates can expect a $25k – $50k bump in compensation each year, typically starting at the lower end of the above ranges and working up (but still highly firm-dependent).

Note that these figures ignore any benefit from carry (uncommon at associate-level) or co-investment (when firms allow associates to personally invest in their deals, occasionally with the use of leverage).

Associate vs. Analyst Closing Thoughts

As an associate vs. analyst, your grinding has finally started to pay off and you’re climbing the ladder. With it comes a ton more responsibility, but that can also make the job much more interesting. Just make sure you practice your slide outlines and paper LBOs so you can get there.

If you continue to progress, the next step will be the VP promotion. At that point you’ll be well on your way to becoming a master of the universe — or will have lost all of your friends outside of work and gained 30 lbs.