Careers in Finance

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Careers in Finance

• Prof. Ben J. Sopranzetti, Ph.D.
• Department of Finance and Economics
• RBS Newark and New Brunswick

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This information comes from

• www.careers-in-finance.com

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Industries

• Commercial Banking
• Corporate Finance
• Financial Planning
• Money Management
• Insurance
• Consulting
• Investment Banking

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Commercial Banking

• Not just your average bank teller!

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Commercial Banking Overview

• Commercial banks are in the business of providing
  banking services to individuals, small businesses
  and large organizations.

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Skills and Talents

• Broad Business Understanding
• People Skills
• Accounting and Writing Skills are Crucial
• High Grades less important than work ethic
• International talent is in high demand
• Marketing Types Wanted
• Balanced lifestyle

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Credit Analyst

• Common entry level job which requires that you
  evaluate business and consumer loan applications
• Duties include projecting a company's future cash
  flow, evaluating its current financial soundness,
  visiting and interacting with financial people at
  businesses and dealing with lenders.
• Success will depend on how detail-oriented you
  are, your knowledge of accounting and your
  ability to communicate

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Loan Officer

• Highly desirable job which involves making loans
  to businesses and consumers.
• Being a loan officer requires that you have good
  selling skills, an ability to understand a
  business and a solid understanding of how banking
  works.
• Most people in upper management at banks were
  once loan officers.
• Nice entrée into Private Equity/Lev Finance

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Branch Manager

• Oversee all activities at the branch including
  opening new accounts, loan origination, solving
  customer problems, foreign exchange and safe
  deposit boxes.
• SALES responsible for establishing relationships
  with customers.
• Many bank managers start as tellers or customer
  service representatives.
• Key things customer service skills, empathy,
  quantitative ability, strong work ethic,
  organization and a solid understanding of banking
  .

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Trust Officer

• Help high net worth clients plan for their
  financial future
• Requires a keen understanding of financial
  planning and tax laws
• Fantastic entrée into Money Management

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Corporate Finance

• CFO and Controller Tracks

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Corporate Finance Overview

• Designing, implementing and monitoring financial
  policies
• Planning and executing the financing program
• Managing cash resources
• Interfacing with the financial community and
  investors.
• Accounting-related functions

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What to expect in corporate finance

• You generally work in teams
• You'll have many opportunities to travel and meet
  people
• The pay in corporate finance is not bad
• Balanced lifestyle
• Hours are usually decent (50 or so per week), but
  can get out of control at monthly close

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Corporate Finance Skills and Talents

• Accounting
• Leadership
• Teamwork
• Communication Skills
• Patience
• People skills
• Excel and Access
• Did I say

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Accounting?
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Are You An Impatient, Entrepreneurial Type?

• One of the most common complaints among new
  entrants in corporate finance jobs is that they
  are surprised by the low level of the work. "I
  didn't go to school to do this..."
• Keep in mind that corporate environments reward
  longevity and loyalty.
• Be patient, learn from mentors and invest in
  yourself along the way.
• You need to learn the ropes
• If you complain early on you may never get the
  break you want that comes from doing a minor task
  particularly well.

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Treasury ROCKS!

• Duties involve financial planning, raising funds,
  cash management and acquiring and disposing of
  assets.
• This is an upper management job which requires
  both analytical skill and the ability to manage
  and motivate people

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Financial Analyst general title for a variety
of positions

• Determining financing needs
• Analyzing capital budgeting projects
• Long-range financial planning
• Analyzing possible acquisitions and asset sales
• Working on budgets
• Implementing financial plans, etc.
• This can either be a challenging job that
  requires good analytical skills, computer skills
  and a broad understanding of finance or it can
  be horribly boring

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BE CAREFUL!

• Many Financial Analyst jobs are actually
  accounting positions in disguise!

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Investor Relations Officer

• Duties involve dealing with the investing public
  by disseminating financial information,
  responding to queries from institutional
  investors, issuing press releases to explain
  corporate events and organizing teleconferences
  with investors.
• Many who hold this job have backgrounds in PR or
  advertising.

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Controller be prepared to do journal entries

• Duties involve financial planning, accounting,
  financial reporting and cost analysis.
• Monthly and year end closings
• May need to develop forecasting models to project
  revenues and costs.
• This job requires extensive accounting
  experience.
• Firm may recommend that you study for your CPA

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Controller track jobs are

• Accounting positions

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Financial Accountant

• Financial accountants prepare financial
  statements based on general ledgers and
  participate in important financial decisions
  involving mergers acquisitions, benefits/ERISA
  planning and long-term financial projections.
• One day you may be doing journal entries.
• The next day you may be visiting a customer or
  supplier to set up a new account and discuss
  business.
• This work requires a good understanding of both
  accounting and finance.

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Auditor

• Work in audit involves checking accounting
  ledgers and financial statements within
  corporations and government.
• Audit is the bread and butter work of accounting.
  
• This work can involve significant travel and
  allows you to really understand how money is
  being made in the company that you are analyzing.
  
• It's great background for the right person

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Management Accounting

• Management accountants participate in decisions
  about capital budgeting and line of business
  analysis.
• Major functions include cost analysis, analysis
  of new contracts and participation in efforts to
  control expenses efficiently.
• This work often involves the analysis of the
  structure of organizations.
• The new buzz-word is supply-chain finance

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Tax accounting

• Tax accountants prepare corporate and personal
  income tax statements and formulate tax
  strategies involving issues such as financial
  choice, how to best treat a merger or
  acquisition, deferral of taxes, when to expense
  items and the like.
• This work requires a thorough understanding of
  economics and the tax code.
• JD and an CPA would be especially desirable

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Try for a leadership development program

• Rotational programs are an excellent way to
  develop your skills and try out a variety of
  positions

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Watch for the bait and switch

• Many firms hire in the fall, but have no idea
  what are their EXACT staffing needs. You take
  what they give you.

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Financial Planning

• Not for the risk averse

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Financial Planning Overview

• Financial planners help individuals plan their
  financial futures.
• Requires excellent interpersonal skills.
• Must understand investments, taxes, estate
  planning issues and knows how to listen.
• It's essential then that you have a certain
  amount of entrepreneurship given that you will be
  running your own business.
• Increasingly, it pays to obtain the Certified
  Financial Planner (CFP) designation.

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A Variety of Compensation Approaches Available
for Planners

• Financial planners can be compensated on a flat
  per-hour fee basis, a commission basis or both.
• The way you are paid in this business clearly
  affects the incentives you have with your
  customers.

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Financial Planning Salaries

• The median salary for financial planners job
  rankings issue was 55,000 in a recent survey.
• The salary distribution in this business is
  highly skewed.
• The 90th percentile salary in financial planning
  was in excess of 150,000

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Insurance

• No, you dont have to sell insurance

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The Business is About Risk Transfer

• Insurance companies are in the business of
  assuming risk by writing policies which transfer
  risks from customers to themselves.
• This work is challenging, complex and likely to
  continue to prosper.
• The stereotype of a slick, sleazy, fast-talking
  insurance salesman is largely a figment of the
  past.

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Actuary quant jock!

• Actuaries use their analytical skills to predict
  the risk of writing insurance policies on
  property, businesses and people's lives and
  health.
• Actuaries are a crucial part of the insurance
  process because they use statistical and
  mathematical analysis to determine the risk of
  providing coverage.
• To perform effectively, actuaries must be
  informed about general societal trends and
  legislative developments which may affect risk.

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Agent and Broker

• Agents and brokers advise people and
  organizations on how to protect things they value
  by selling customers insurance contracts.
• You will be the first person contacted after an
  accident, fire or injury.
• An understanding of insurance contracts is
  essential to this type of occupation.
• This work is highly time-flexible, requires some
  background in business and is best if you enjoy
  interacting with people.
• Often combined with Financial Planning

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Claims Adjuster

• Adjusters negotiate insurance claims with people
  have experienced a loss.
• The adjuster is responsible for reaching a claim
  settlement that is fair to all parties.
• Doing well in this job requires a person who is
  resourceful, tactful and good with people.

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Underwriter excellent gig!

• Underwriters decide whether to provide insurance
  to applicants seeking coverage.
• An underwriter evaluates an applicant's exposure
  to risk and decides whether an applicant meets an
  insurer's standards.
• An underwriter may also become involved in
  setting prices for insurance applicants

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Asset Management

• Insurance companies are a great way to break into
  asset management
• Those policies need to be invested somewhere!
• Nice entrée into Wall Street
• Private placements, portfolio management

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Most People in Insurance Don't Sell

• Many people avoid insurance careers because they
  perceive that the business is about selling and
  slickness.
• This is a HUGE mistake!
• Insurance companies can provide excellent jobs
  with superb long-run prospects

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Money Management

• Tough to get into, but the pay can be insane

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Money Management Overview

• Money managers hold stocks and bonds for
  institutional clients and are on the buy side of
  Wall Street
• It is hard to get started in money management.
• Many people cross over into money management
  after getting years of experience on the sell
  side of the business in investment banks or on
  the buy-side of an insurance company.

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On the Buy Side

• The field of money management involves working on
  the other side of the fence from the investment
  banks.

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Must be Able to Take Risk

• Money managers get to face the challenges of
  investing.
• Must understand risk
• Have the ability to see the big picture
• Understand macro and microeconomic factors and
  how they affect value and liquidity
• Must read avidly and be aware of current events
  and future trends

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Think About How You Are Going to Get Started

• You have to bring something to the table in an
  interview that others can't..
• This will either be superior knowledge and
  understanding or experience.
• A good place to start is to get experience in
  investing by working for a public pension fund, a
  bank trust department or for a mutual fund

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Portfolio Manager

• Portfolio managers select and manage investments
  which meet the goals of a group of investors.
• Many managers now work in specialized commodity
  funds or hedge funds.
• Portfolio managers have different styles ranging
  from a bargain-hunting approach (value investing)
  to a growth stock selection approach.
• This work requires patience, discipline and a
  strong understanding of financial markets and
  companies.

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Investment Advisory

• There is a large industry of firms which provide
  investment advice, performance evaluation and
  quantitative analysis to the money management
  sector.
• Wilshire, Bloomberg, CapIQ
• This work requires strong quantitative skills and
  deep appreciation of financial markets

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Mutual/Pension Fund Analyst

• Do the analytical work required before an
  investment is made.
• Is a particular municipal bond safe?
• What is its interest rate risk as measured by
  duration and convexity?
• Similar to equity research
• Some of this work is analytical and requires a
  working knowledge of computers, perhaps in the
  programming dimension.

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Hedge Fund Principal/Trader

• Hedge funds are opportunistic, private funds
  which invest in stocks, bonds, currencies and
  derivatives often using significant amounts of
  leverage.
• These funds hire analysts and traders and have
  exhibited insane growth in recent years.
• Extremely difficult to get into as an
  undergraduate

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Private Equity/Venture Capital/Merchant Banking
Analyst

• These funds invest their own money and hire
  analysts and associates to determine the
  profitability and liquidity of their investments.
• EXTREMELY difficult to get into as an
  undergraduate.
• Usually requires investment banking experience

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Salaries in Money Management are tied to
performance

• 55,000-75,000 plus bonus

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Consulting

• Smart people long hours

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Management Consulting Overview

• Help a client obtain information and advice which
  leads to real and lasting solution of a problem.
• Consultants think, analyze, brainstorm, cajole
  and challenge good organizations to become even
  better by adopting new ideas.
• Great consultants are driven by ideas and a
  strong desire to have a positive impact on
  clients.

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Financial Consulting Overview

• Financial consultants provide financial advice to
  corporations and money managers.
• This advice may involve the strategies for
  creating shareholder value, business valuation,
  MA advisory, economic forecasts and analysis or
  suggestions for Treasury management.
• The Big 4 are a great place to start!
• Hot topics include valuation of intellectual
  property, real options and corporate financial
  systems.

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There is no substitute for smarts

• At it's essence, consulting is using stretching
  and using your brain.
• A consultant sells ideas, smarts, brilliance
  (and, of course, talks a lot about transforming
  ideas into action).
• People with serious smarts and analytical
  firepower are in constant demand from the very
  best consulting firms.

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Industry knowledge counts.

• If you have serious experience working in a
  specific industry, be it utilities, paper,
  airlines, retail or financial services, there
  probably is a consulting firm looking for you.
• Firms want specialists with deep knowledge in
  specific industries who can understand the
  present and envision the future.

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Presentation skills matter.

• If you can understand a clients needs, help them
  formulate a solution and then present your
  findings effectively
• Whether it be one-on-one or in front of a crowd
  with the latest multimedia technology
• You will be in demand.

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It's Not Always Fun...

• There are plenty of times when the work is less
  than glamorous.
• Taking an idea you already understand and
  applying it to a new client.
• Or doing laborious industry research.
• The travel and hours can be a grind

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Consulting can pay off!

• First Year Analyst (bachelors degree)
  50,000-80,000 (plus a bonus of 5,000-10,000)
• Second Year Analyst (bachelors degree)
  55,000-100,000 (plus a bonus of 5,000-20,000)
• Management Consultant (MBA) 70,000 - 160,000
• Senior Consultant (MBA 2-5 years) 200,000
• Junior Partner (MBA/Ph.D 5 years or more)
  300,000
• Senior Partner (MBA/Ph.D 5-20 years) 500,000
  (bonus up to 2,000,000)

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Investment Banking

• Bulge Bracket versus Boutique

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Investment Banking Overview

• Investment Banks help companies and governments
  issue securities, help investors purchase
  securities, manage financial assets, trade
  securities and provide financial advice.
• Investment banking is all about client services

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Hard Work Expected and Respected

• Investment banking is a high work, high risk,
  high reward profession.
• When you start your hours will typically be long
  (100 per week!) but the work can be exciting.
• Be prepared for moments of frustration where you
  are stretched too thin and moments of
  exhilaration where everything clicks.

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Tough to Break In

• It's relatively hard to break into investment
  banking.
• You need to be prepared to pursue firms on your
  own after you have thoroughly prepared yourself.

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Analyst Jobs Are the Best Entry Point

• Many college graduates start in investment
  banking in an analyst position.
• To succeed in these positions you need to be
  extremely dedicated, have good spreadsheet skills
  and be analytically fluent.
• Your next step will be to become an associate.
• Same skills, just raise the volume and the pay.

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You will live in Excel

• Comps
• Modeling
• Learn how to build financial models in Excel

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Communication and Completion Abilities Detail
Counts!

• Pitch Books
• Formatting never mattered so much
• In mid-career, your success usually will depend
  on your ability to communicate with clients and
  get deals done.

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Accounting Skills Critical

• The ability to analyze accounting numbers
  critically is crucially important in most analyst
  positions.
• Equity research - should aim for the CFA
  designation if you would like to be a securities
  analyst

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Getting Things Done is Important

• As an analyst in an investment bank, you are
  usually responsible for getting projects done
  well and on-time
• Whether it be writing reports, running
  spreadsheets, trading, doing research or coding
  programs.

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Later,

• Once you get involved with clients and ideas for
  generating revenue, you will be rewarded greatly
  if you can bring in business.
• At higher levels (usually Director, Managing
  Director and up) you are exposed to much greater
  risk.
• At this level, people are often fired for
  non-performance, whereas at lower levels you may
  not be scrutinized as closely.

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The hours are

• HORRIBLE!

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Seriously the hours are

• HORRIBLE!

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Corporate Finance / Investment Banking

• Help companies raise capital needed for new
  projects and ongoing operations.
• Determine the amount and structure of fund needs
  of a client through equity, debt, convertibles,
  preferred, asset-backs, or derivative securities.
  
• As a rookie analyst you would usually work on a
  client team and would prepare registration
  statements, build pitch books and models, and
  attend road shows

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You would also

• Work like a fiend!

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A rose by any other name

• Jobs in corporate finance are often referred to
  as investment banking positions.
• When you hear phrases such as IBD or IBK people
  are referring to corporate finance.

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Mergers and Acquisitions

• Setting up deals where one company buys another
  is an important source of fee income for many
  investment banks.
• If you go to work in this area you would help out
  with a team which acts as an advisor to a client,
  values transactions, creatively structures deals
  and negotiates favorable terms.
• Worldwide, Goldman Sachs and Morgan Stanley are
  the recognized leaders in MA advisory.

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Project Finance

• Typically project finance involves funding
  infrastructure and oil capital projects off of a
  company or government's main balance sheet.
• Banks like CSFB and Deutsche Bank are active in
  this area.
• Project financed deals have been some of the
  first significant conduits of foreign capital
  into countries such as China, Yemen and
  Indonesia.

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Sales and Trading

• Some of the most desirable jobs in investment
  banking are in sales and trading.
• Your responsibilities would involve undertaking
  transactions in equities, bonds, currencies
  (referred to as Forex or FX), options or futures
  with traders at commercial banks, investment
  banks and large institutional investors.
• Trading can be tumultuous and requires a thorough
  knowledge of markets, financial instruments and
  an intuition for human psychology.
• HIGH STRESS!

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Trading what?

• Equities trading positions often involve "telling
  a story" to other traders about why they should
  purchase your stock.
• Fixed income trading positions call for strong
  analytical know-how and the wherewithal to manage
  large amounts of inventory in an often-thin
  market.
• Derivatives traders need very strong analytical
  know-how (perhaps even an engineering degree).
• Foreign exchange trading is based more on your
  instincts about markets, politics and
  macroeconomics.

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Structured Finance

• Involves the creation of financing vehicles to
  redirect cash flows to investors (known as
  asset-backed securities).
• Typical asset-backs securitize credit card
  receivables, auto loan receivables or mortgages.
• Sub-prime mess is hurting this area at the
  moment.
• Other growth areas include asset-backed
  commercial paper, collateralized bond obligations
  (CBOs), and repackaged asset vehicles.
• It would be beneficial to have a solid
  combination of spreadsheet, accounting and legal
  skills.

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Derivatives

• Options, swaps and futures are examples of
  derivatives.
• If this area interests you, start studying math
  (especially stochastic differential equations and
  derivation of common models like Black-Scholes).
• Questions about models are likely to come up in
  interviews.
• Sales skills are also important in this area.
• A related and popular area is credit derivatives
  which might involve selling an option which pays
  off when a defaults on one of its debt
  obligations.

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Advisory

• Advisory services are often provided by
  investment banks to public and private clients
  involved in MA and financings.
• The area of risk management advisory has been
  popular at many investment banks.
• Often work will be done to determine a client's
  value, options for creating value or on a
  client's industry conditions.

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Equity and Fixed Income Research

• Security analysts are usually assigned to an
  industry or region.
• You could be responsible for making buy or sell
  recommendations to investors about a stock or
  bond.
• Your duties would involve visiting companies and
  heavy telephone contact with institutional
  investors.
• Requires strong financial modeling skills

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Quants versus Fundamentalists

• Analysts are often referred to as either quants
  (elves) or fundamentalists.
• Fundamentalists make recommendations based on
  what's going on at a company--how's the CEO, what
  are the earnings etc?
• In contrast, quants (elves) look at computer
  programs that identify undervalued securities or
  markets

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International Sales/Emerging Markets

• Hong Kong
• Moscow
• Singapore
• Shanghai
• Johannesburg
• Hot, Hot, HOT!

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Public Finance

• The market for municipal bonds is very large and
  calls for analysts, municipal advisors and
  traders.
• Positions in public finance are usually
  difficult to obtain but offer high rewards.
• Persons with previous experience in public
  administration would be attractive to investment
  banks in this capacity.
• A major growth area in municipals is in the
  project finance area.

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Retail Brokerage (Stockbroker)

• Stockbrokers are in the business of selling
  stocks, bonds, insurance and other investments to
  individuals.
• Some brokers specialize in high net worth
  individuals while others span a variety of
  clients.
• This is a tough business to get started in
  (especially if you are much younger than your
  clients), but the rewards to a good people person
  with great sales skills are high.
• Try to start with a firm like Merrill Lynch that
  has a good training program.

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Computer Guru

• Some of the best jobs in computers and
  information systems are on Wall Street.
• A firm with good trading software, pricing
  software, or back office software can get a
  strong competitive advantage.
• Six figure salaries are not uncommon for really
  good systems people.

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Ratings Analyst Moodys and SP

• One way to break into investment banking is to
  start as a ratings agency analyst.
• The pay is relatively low and advancement
  opportunities aren't great, BUT the investment
  banks know it and use the agencies as hunting
  grounds for new analysts.
• These agencies are highly profitable and grade
  the credit quality of companies and sovereign
  entities accessing the markets

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Operations and Trade Support Back office

• Transactions support
• Know your accounting
• Attention to detail
• Some students complain that the work is sometimes
  repetitive and unchallenging
• Provides a taste of Wall Street without the crazy
  hours or the crazy salary
• Balanced lifestyle
• Usually very nice co-workers

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Can I move from Operations to the Front-Office?

• Extremely Difficult!
• Beware if they tell you otherwise!

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Parting Thoughts

• Develop your own personal brand