Careers in Financial Markets 2010-2011 PDF
Careers in Financial Markets 2010-2011 PDF
Careers in Financial Markets 2010-2011 PDF
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Copyright 2010, The NASDAQ OMX Group, Inc. All rights reserved.
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Welcome
Welcome to the sixth edition of Careers in Financial Markets, from eFinancialCareers. Investment banking remains a popular career choice among todays very best graduates and MBAs, so the competition to secure that all-important first foot in the door is intense. The aim of this guide is to offer you real insights into the world of Wall Street and the securities business, and to give you the knowledge you need to stand out. As you develop your career, we hope eFinancialCareers will be your online companion. We serve the global financial community as the Webs top site for career management and jobs in the securities, investment banking and asset management fields. Professionals from analysts to managing directors at the worlds leading investment banks, hedge funds, ratings agencies and trading firms rely on us every day. In addition to job listings, eFinancialCareers provides premier job market and pay analysis, employment advice and a series of tools to help you maximize your career opportunities. One such tool for job seekers is our career guides published in the U.S. and Europe. These unique guides profile the current trends, career paths, top players and skills required for the principal financial professions. If, having read this guide, youd like to learn more about the industry, conduct some pre-interview research, or simply post your resume for your next job, come and visit us at eFinancialCareers. Be sure to check out our Campus Connection, which provides news, tips, background and other information especially for business students. With best wishes for your career,
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Contents
Welcome Table of Contents How to Use This Guide 1 2 3 Where Youll Be in Five Years Networking Within Your Company and Industry Pursuing Multiple Job Offers Job-Hunting While Employed 4 5 Working with Corporate Culture Negotiating Compensation (and Related Hints) Profiting From Performance Reviews 6 7 9 11 12 13 14 15 16 17 18 19 29 31 32 33 34 36 37
Overview
A Career in the Financial Markets The Brave New World
Finding a Job
A New Dawn The Campus Recruitment Process: A Survival Guide Campus Recruiter Q&A All About Internships Landing Your First Job Ace the Interview Make Your Online Identity Work For You Not Against You Resumes and Cover Letters How to Research Potential Employers Networking in College Online and Off Your First Finance Skill-Set The Ins and Outs of an Overseas Job
Diversity
Trends in Diversity Finding the Right Fit Working with Diversity Networks and Groups Q&A: Aynesh Johnson, Goldman Sachs 39 42 43 45
Sectors
Mergers and Acquisitions Debt and Equity Capital Markets Sales and Trading Research Quantitative Analytics Hedge Funds Foreign Exchange Asset Management Commercial Banking Private Banking and Wealth Management Accounting Operations Investment Consulting Private Equity 46 48 50 52 54 56 58 60 62 64 66 68 70 72
Careers in Financial Markets is published by eFinancialCareers Ltd, www.efinancialcareers.com Editor: Mark Feffer; Deputy Editor: Jon Jacobs; Design: Michael Ballou Dudley; Marketing: Maria Slabaugh, Adam Fudala Writers: E. Chandlee Bryan, Dona DeZube, Mark Feffer, Rose Horowitz, Jon Jacobs, Scott Krady, Myra A. Thomas Additional copies: [email protected] +1 800-380-9040; 2007-10 eFinancialCareers Ltd; no part of this publication may be reproduced without permission.
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Global Custody Risk Management Compliance Human Resources Legal Information Technology Marketing and Public Relations Ratings Agencies Information Providers
74 76 78 80 82 84 86 88 90
Resources
Resources Diversity Initiatives Glossary Endpaper: A Higher Sense of Responsibility By Steve Allen, Board Member International Association of Financial Engineers 92 93 94 96
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Vice Presidents
Successful associates move into the role of vice president, and its at this level life starts to get exciting. While the title may sound daunting, dont be deceived: Any large investment bank has scores of VPs in its ranks. In corporate finance, vice presidents manage the day-today affairs of associates and analysts, and usually have more frequent contact with clients. Those working in sales, trading or research often have their own book of customers, more flexible risk parameters when trading, or their own list of companies to research. Because sales people and traders operate on their own, exceptionally talented trading-desk VPs can make more money than their firms managing directors. At this level, career transitions are more difficult. So, many VPs will stay in place for longer than the typical three years. Those who dont progress at one bank often jump to another, where they can join at the next rank: director or executive director.
Analyst
In investment banking, the first rung on the ladder is the analyst. Its in this position graduates invariably begin their careers. In the language of Wall Street, analyst is simply another way of saying trainee. The work analysts do varies from division to division. In corporate finance, theyre the number-crunchers who study a firms financial reports and put together pitch books the company and sector research that helps a bank win business. In sales, they hit the phones, calling (relatively unimportant) clients on various (non-crucial) matters. Analysts assigned to the trading floor cant trade until theyve passed their regulatory exams. Even once they have, theyre heavily constrained until they prove theyre not going to press the wrong button and lose millions. Most banks keep analysts in place for three years, then decide whether or not to renew their contracts. Of course at that point, analysts have the option of deciding whether they want to stay on or make their way in another firm. Analysts being considered for promotion must demonstrate an aptitude for leadership, the ability to present their point of view persuasively even when its contrary to the views of others and an understanding of the needs and motivations of both their firm and its clients.
Managing Directors
At the upper echelons of the investment banking hierarchy are the managing directors. These are the rainmakers who work directly with clients and bring in business. As happens in any pyramid structure, few of those who started as analysts will make it to this level. One large bank promotes only 6 to 8 percent of its directors to managing director each year. At Goldman Sachs, the ratio of employees to managing director is roughly 16 to 1 (as of April 2009). At the end of the day, individual performance, revenue generation and client service are keys to moving up in the investment banking world. How long should it take? Its not unreasonable for a hungry new analyst to become a managing director by his or her early thirties.
Associates
Associates are either analysts whove made the grade or business school students whove joined the bank after earning their MBA. Typically, associates manage and allocate work to their own teams of analysts. Here again, they usually hold their position for three years.
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A New Dawn
Entering a reinvigorated campus hiring market
If youll be graduating or seeking a summer internship for 2011, peers who hit the job market a year or two ago may envy you. The global financial crisis that blotted out most Wall Street hiring has lifted and banks are back on campuses in force. But dont punch the air just yet. While the financial industry has been flexing its hiring muscles of late, theres an everpresent risk that market conditions might roll over and torpedo the job outlook. More important, competition for slots in investment banks analyst programs and internships is fierce. Even in good times, leading global banks and hedge funds have their choice of top-ranked students at the most prestigious universities. So youve got your work cut out for you, even if you attend a so-called target school. In fact, although the odds of success are better now, the path that will carry you to an investment banking job is no different than it would be in a bear market. Lets start with the tangible assets recruiters look for in students: A near-4.0 GPA from a painfully selective college. A related major such as finance, business, accounting, financial engineering or economics. Making the effort to understand the business strategy of each employer you interview with. Alumni to champion your cause. Leadership experience in extracurricular groups. Stellar communication skills. Prior internships in investment banking. Division I athletic experience. A relative in the business. Seek out as many items from that list as possible. Do what it takes to keep your GPA high. Get tutored, study when youd rather party, and build personal relationships with your professors by visiting during office hours. Major in a relevant field. High level math and information technology coursework are proof you have what it takes to estimate risk or price securities. Join the business club and volunteer so much they make you president. To improve communication skills, join the Toastmasters Club or take a public speaking course. Start building alumni relationships the day you arrive on campus. Alumni wont hire you just because you went to their school, but they may talk to you about company culture, make sure your resume gets seen and steer you to the right classes and internships. Join professional associations and go to live events and informational interviews. Spend the summer in an investment banking or a related internship, not counseling kids at Camp Wikiwacky. As for relatives in investment banking youve either got them or you dont. If you do, make use of them.
Up Your Odds
Then there are the intangible assets that can put you above the competition: Likeability and charisma. Organizational skills. Your energy and effort levels. Devoting time to job seeking. A quiet brand of confidence that reflects emotional maturity not bravado. A realistic attitude about the challenges youll face. If youre not well-liked by many, try to figure out why not and fix your flaws before you job hunt. Ask your bluntest friend how you come across. Do a practice interview at the career center and beg them to be harsh. The single most effective thing you can do to stand out during interviews and campus events is to study up on the companies and the people youre about to meet. Start at the companys Web site, read annual reports and news stories, then dig deeper with networking conversations. Pay attention to culture and the differences between individual firms. Be ready to discuss current company issues, who you are, what you want to do and whats in it for them if they hire you. Be humble and portray yourself as someone who knows some things but still has a lot to learn. This takes a lot of time and energy. So starting your freshman year, schedule a regular day and time for job hunting. Log your research and networking efforts. File flattering memos from your internships and copies of brilliant work. When all this work pays off and you finally get an offer, dont even think about jerking them around. Respond ASAP. Careers in Financial Markets 2010-11
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Start Early
While not everyone enters investment banking through campus recruitment, its the route taken by between 80 and 90 percent of the students hired. In addition to on-campus events, banks use online applications and in-person interviews to seine waves of candidates. If you want to secure your spot on Wall Street, start acquiring coursework, extracurricular activities, social skills and relevant internships as early as possible. Groundwork laid in those areas during your freshman and sophomore years will help you during the on-campus process when youre a senior, advises Dr. Phil Gardner, director of the Collegiate Employment Research Institute at Michigan State University. Indeed, the search for your banking job should start the first week of your freshman year. Check with your schools career center to see which banks make campus recruitment visits and learn how to sign up for events. If the school doesnt draw investment bank recruiters, does it draw large Careers in Financial Markets 2010-11
less than fully dressed (no bare chests even for men) or doing anything you wouldnt want shown on a Today Show segment your grandmother was watching. Google yourself to make sure you havent missed anything.
Meeting Prep
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If youre at a top-tier university, youll likely do a first-round interview or be invited to attend on-campus presentations followed by networking receptions. But before attending any event, or starting your networking efforts, be sure to prepare, says Lara Berkowitz, associate director, finance careers, for the London Business School. Remember that even information chats are interviews. Read up on the sector, the company, look at investment banking models, pitch books, and research. Learn to talk the talk, know why you want to do what you want to do and how youre going to sell yourself, she says. Know how youre going to keep the conversation going. Practice sessions and other programs offered by your schools career counseling center can help prepare you for more formal on-campus interviews, which are designed to test your skills and probe your personality. Usually, youll face a panel of junior staffers from the business to which youve applied, along with a human resources professional (see Ace The Interview on page 13). Portray yourself as a team player and a leader, with technical and companyrelated knowledge. If you succeed, your next step is a second-round interview at company headquarters. If you make it that far, youre a champ: At this point, about 400 of 10,000 applicants are still standing. Of those, between half and two-thirds will receive the coveted offer of a full-time job.
While you may not land the exact position you wanted, you can set yourself up to take another run at your dream job in a few years. One option is to find a slot in another department, such as operations. When people did that in the past, it wasnt terribly effective, notes Viv Dykstra, a director and co-founder of Graduate Solutions, a London-based graduate-recruitment consulting firm. But some experience is better than none, and some work is better than none. Another option is to increase your skill set by continuing on for a masters degree in a high demand area, such as quantitative analysis or financial engineering. Fluency in one of the languages spoken in emerging markets including Russian, Chinese, Arabic or Nordic languages can also help land you a position, says Diane Morgan, director of the London Business Schools career services department. Morgan also suggests developing transaction-related skills by finding deal-oriented work. Asset management start-up companies are coming to us looking for students with research, modeling, forecasting and company evaluation skills, she says. Some of the roles with the smaller startup asset managers and hedge funds are unpaid, but youre getting experience. Or, land a compliance position at a regulator and aim to return to the private sector within a few years. It may make sense to get industry expertise and then return for your masters in business administration in a few years. Learn about a particular industry and use that knowledge combined with an MBA to move over into banking, Hewitt suggests. Finance is a skill that every organization needs, so you dont have to work in financial services to use those skills. Hot industries right now include pharmaceuticals, health care and alternative energy. If youre completely enamored with banking, perhaps you can stay in the sector by working in another niche. Regional commercial banks tend to recruit from Midwestern schools and tend to be conservative, but they can be great places to work. Financial services sales, including insurance and financial planning services, are another option. As a last resort, students who dont find any work should be prepared to do an internship that will eventually lead to a permanent spot, says Dykstra.
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Q&A
Donna Mastroianni, Director, Corporate Recruiting Marsh & McLennan Companies, Inc. What advice would you give recent graduates about navigating todays job market? Undergraduates, when searching for a job, should think in terms of their next job rather than their last one. When I meet with a student who wants to be a valuation analyst in M&A, I advise them to think of the first job that will lead them to that last one. The valuation analyst job is an end, but its important for students to think about the means to get there. When Im interviewing someone, Im interested in what that person can contribute to the firm. We have great jobs and a great environment. You will learn along the way, but what we want and need are active contributors. In a tight job market, both undergraduate and graduate students should consider expanding their focus: not so much their occupational skills, but the view on where they can put them to use. People looking for careers in finance tend to focus on financial institutions. Im not sure that they think about the global consumer product or pharmaceutical companies. Toyota, for example, manages a tremendous portfolio of assets. My advice is that as markets pick up, students stay true to their occupational goals, but think more broadly about the industries they are targeting. What information from a resume makes a candidate stand out for you? Our campus recruiting initiatives are targeted toward corporate finance hiring. In this space, Im looking for a pattern in an individuals career path that demonstrates a consistent interest in finance. In an interview, what are some things that will stand out for you? Its a combination of the hard skills that the individual garnered through their business school training and their communications skills. Their energy level is very important to me. Im looking for individuals who are very enthusiastic about corporate finance. Can you cite specific qualities in a candidates background that impress you? In the campus recruiting I do, Im mainly looking at individuals who are enrolled in business school. Therefore, I have the luxury of seeing about five to seven years of business experience and their previous undergraduate successes. The candidates Im interested in have been associated with firms that are leaders in their space. Im looking for individuals who have been promoted within one company. People whove been associated with global firms, multibrand firms, and people who had the opportunity to work on some plum projects. Its important that candidates distinguish between their day-to-day work, and the project work theyve been able to do for their group, on their resume. I also look at their prior academic accomplishments their GPAs, how they scored on their GMATs and any project awards that theyve won in school. Are there any particular questions that you like to lob at interviewees? As a recruiter, there seem to be some typical things that people ask about when things are going well in someones day-to-day job: Tell me about a project that you worked on and how it went. But I also like to ask about experiences where things havent gone so well. Tell me about a time when you didnt make the deadline. Tell me about a time when you coordinated a project that didnt go very well. The answers to those questions are very telling about an individuals style. How can you tell if somebody is going to be a good match with Marsh & McLennans corporate culture? I pose a set of behavioral questions, probing for a pattern of behavior that demonstrates whether someone is able to size up a situation and adapt to it, and become successful. I ask: Tell me about a time you encountered a policy that you didnt agree with, and what you did about it. This offers great insight into a persons ability to assess a situation, and respond in a way that will effect positive change at the organization.
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Keep up with the fast-paced Financial industry by joining the New York Society of Security Analysts a leading forum for the investment community. Take advantage of NYSSAs seminars, conferences, professional development courses, and special events to help you succeed at all levels of your career. To join, visit www.nyssa.org/membership.
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Right Pedigree
How do you show value? By having a solidly built foundation. Did you take classes that led to a major relevant to Wall Street? Did you intern in investment banking? If you graduate from college and all youve done is scoop ice cream or painted houses, youre not going to convince a hiring manager to hire you over everyone else, says David Staiti, a principal with Winter, Wyman & Co. in New York. Can you explain why banking is the right career for you? Have you networked with alumni working where you want to work? A lot of people think they can jump haphazardly into the Wall Street world, Staiti says. They think it will be glamorous and theyll make a lot of money. Its not all glitz and glamour. I talk to people who are about to graduate and they dont seem to have any idea about what the job entails and the hours that will be involved. To make sure investment banking is the right career, have candid conversations with your business professors, alumni and students whove done internships about what a day in the life of a banker is like. Theyre going to tell you that a typical week is 80 to 90 hours, Staiti says. Some people love it, but that is a rare breed. Doing the due diligence is a very important piece for people. If the hours and the challenge of actually finding a job in investment banking dont scare you off, remember that someone is going to get hired and it could be you. Those who are really keen and those who have a passion for the financial markets are not going to be deterred by whats happening, Dykstra predicts. The good people will still find jobs.
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Socrates Said It
Know thyself. To answer questions about your skills and experience with fluency and grace, prepare a mental checklist of the professional assets you offer. Interviewers may ask open-ended behavioral questions to assess your organizational and oral communication skills. Tell me about yourself and Tell me about a time when are perennial favorites. Dont give a chronological history of your life, but do talk about your academic and professional background, why you want the job, and why youre the right person for it. You may also be asked about specific occasions where you demonstrated a particular skill, such as persuasiveness or team-building. If you consider your resume to be thin in these areas, think back to relevant instances during a part-time or summer job, when you were on a sports team, on a group trip, or working as a volunteer. In this way, youll uncover pertinent anecdotes. Dont be surprised if youre asked how youd respond in a hypothetical situation. A question like this can gauge your soft skills, things like the ability to think under pressure, intellectual curiosity, drive, and commitment. Before responding, its okay to take a moment to gather your thoughts.
Other Considerations
Protocol and etiquette count during and after an interview. Whether its for an internship, summer position, or full-time job, dress modestly and professionally. Make sure youre immaculate and well-tailored from head to toe. Go easy on the perfume or cologne. And, in the category of we shouldnt have to say this, but. - leave the flip-flops home. Also: Bring extra copies of your resume with you. They also should be immaculate. Shake hands and make eye contact with your interviewer. Wait until after the interview to jot notes about what you discussed. Send a prompt thank-you note. If you interviewed with more than one person, send a separate note to each. Its okay to e-mail it, but remember this is a business letter, so format it as such. Dont use abbreviations or emoticons, and spell everything correctly especially the recipients name. Customize the message for each recipient by reiterating something you talked about during the interview. Dont ever lie. Dont even exaggerate. Turn off your cell phone before you enter the building.
Demonstrate Interest
Companies want to hire people who have a realistic understanding of the job and why they want to do it. If youve thoroughly researched the firm and the position for which youre interviewing, youll be able to demonstrate professional passion and business savvy. So try to talk with people who work there and people whove left. Talk with people who work in similar capacities at firms in the same sector. Seek out related chat rooms and professional organizations, and be well-versed in issues facing the firm and its sector. Careers in Financial Markets 2010-11
Make Your Online Identity Work For You - Not Against You
Your online presence can make or break your candidacy
Beyond such essentials as a strong GPA, quantitative skills, teamwork and leadership ability, to land a permanent job in financial services you also need an unblemished reputation. In corporate finance, success is determined not only by your achievements, but also by peoples willingness to trust you. Reputation management is essential, because your employer and clients need to feel that they can depend on you.
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Set up a Google Alert on your name (www.google. com/alerts). You will be e-mailed when your name (or that of a namesake) hits the web.
In the worst case, your digital footprint what comes up in a Google search of your name can act as a roadblock to employment. In the best case, it can pave the way. We do not use Facebook for recruiting, remarks Cynthia Bush, director of recruiting at boutique investment bank Houlihan Lokey. But still, there has been a time when someone found out about someones work habits through a social interaction using Facebook and shared that with me. Follow these simple steps to manage your online presence and strengthen your candidacy for a position.
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Your Resume
If the goal of a cover letter is to get the hiring manager to look at your resume, the goal of your resume is to be invited in for an interview. A well-crafted resume is an at-a-glance synopsis of your skills, experience, and education. If its well written, it will convey competence and spur managers to want to know more. While its not the great American novel, it is your professional autobiography. But remember: Youre not writing a narrative. Avoid using personal pronouns. Focus on action verbs to emphasize your achievements, words such as demonstrated, managed, achieved, analyzed, created, implemented. Use nouns and avoid adjectives. Use short, easy-to-read sentences. Fragments are okay. Include bullet points where appropriate. And keep it concise. Even the most experienced candidates resume shouldnt exceed two pages. Stay objective and avoid the personal. That means dont mention the previous boss you considered to be mentally deficient, or the business practices you deem subpar. It also means not including personal information beyond your name, address, and pertinent contact information. Dont mention hobbies unless theyre career-related. As a new entrant in the job market, consider using a chronological resume. This format lists your work history in reverse chronological order, with the most recent job first. Its the most commonly used form and the one most employers are familiar with.
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Court Records
You can learn a lot about a potential employer by looking at lawsuits that have been filed against it, as well as cases it files against others. Search for that information at the federal judiciary Web site, PACER (www.pacer.gov), using the company name, or the names of company officers. You can also check lower courts in the state in which the company is headquartered just Google state name courts (i.e., Delaware Courts) and the firms corporate names.
News Searches
To get the latest dirt, you need more recent sources such as newspapers, magazines and blogs. Check these sources before you apply for a job, and follow them throughout the interview process. As you search for information about a company, see how much emphasis the company places on its values, integrity and ethics, suggests Jeff Thomson, chief executive officer of the Institute of Management Accountants. For instance, does it participate in the Global Reporting Initiative (GRI), in which companies commit to corporate sustainability reporting? Does it have internal networks for women, gays or minorities? What charities does the company support?
Online Information
Begin your research with public sources available online or via your campus library. The companys Web site is a good place to start, says David Staiti, a principal with Winter, Wyman & Co., a recruiting firm in New York. The bigger firms will have informative sites, private equity and middlemarket firms may not. If youre looking at a publicly traded bank, theyll have lots of information online because they have public filing requirements. Other public records sources include the U.S. Securities and Exchange Commissions Web site (www.sec.gov), which offers information about litigation and administrative proceedings against firms and individuals, as well as EDGAR (Electronic Data Gathering, Analysis, and Retrieval), a database of public company filings. Your campus career center likely has access to general, regional and industry-specific business directories such as Hoovers (www.hoovers.com/free), which provide background such as competitors, revenues and officers.
Inside Scoop
If you really want the inside scoop, youve got to talk to someone whos seen the company from the inside. Start with your own social network, looking for someone who works for the company. Alumni and professors can also supply contacts, as can social networking sites such as LinkedIn, Plaxo and Twitter. If you talk to alumni who work there, youll hear behindthe-scenes information that will help you figure out if this is the kind of place youd want to work, Staiti says. Careers in Financial Markets 2010-11
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Target Alumni
A good starting point is in your own backyard: your schools alumni. Your campus career center or alumni office may have searchable databases where you can find contacts based on industry, job function, home town, or major. If your school lacks such information, use business networking sites such as LinkedIn or Plaxo, or social networking sites like Facebook to find alums.
Campus Connections
Take advantage of on-campus connections, too. If you play a sport, ask the coach for the names of older players who can act as mentors as you choose classes or find internships. If you want to become a portfolio manager, reach out to the schools portfolio manager. Remember, someone is managing that endowment. Many campuses offer formal networking events sponsored by student organizations or academic departments. While these functions create great networking opportunities, they also terrify even the most capable students. What you may not realize is that networking events frighten adults, too. Everyone has the same feeling of panic before networking events, says Shawne Duperon, a Novi, Mich., networking and media consultant. Your game is to make friends. Focus on friendship and miracles will happen. Careers in Financial Markets 2010-11
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Registered Representative
Obviously, you need sales ability to become a financial services salesperson, but you also need math skills. If youre terrible at math you shouldnt even consider being a financial advisor, says Darin Manis, chief executive of financial recruiter RJ & Makay. You do have to pass the Series 7 and Series 66 license exams. Both are math intensive and most companies will make you take a math test.
Analyst
This fast-paced job comes with immediate demands. New hires will be called on to develop financial models and evaluate companies, says Tinto. Theyll be asked to read balance sheets, income statements, cash flow analysis, etc. and translate the information to their partners. To do that youll need analytical, evaluation, math and accounting skills, as well as Excel and PowerPoint training. Polish those skills at campus club or career center seminars, corporate-sponsored challenges or special programs.
Client Facing
When seeking a client-facing position, expect to have your communication skills examined. These include being comfortable speaking to groups, ease in using PowerPoint, flawless grammar, and the ability to quickly and smoothly produce written documents such as case studies. Sales and general communication skills will be evaluated carefully, and your ability to work hard and to work with clients and teammates are probably equally important, Dykstra adds.
MBA
Masters program graduates need excellent Excel, valuation and financial modeling skills, which they pick up in their finance and accounting classes, says Lara Berkowitz, associate director, finance careers, for the London Business School. They also need communication skills to transform those analytics into the pitch books and live presentations that land new accounts and retain existing business. Careers in Financial Markets 2010-11
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Your first step should be an exploration of where your talents, skills and interests can take you, and what options might await you at the entry level, says Roy Cohen, a New York executive coach and author of The Wall Street Professionals Survival Guide: Success Secrets of a Career Coach. Once youve surveyed the landscape, examine potential avenues that could run through each one of them. What you do is like decision-tree analysis, explains Cohen. If you explore one option, then you say, Okay, based on this option, what are the potential directions that could emerge? This step is likely to require a good deal of research. A good place to start is with a simple Google search on a descriptive phrase, such as private equity. Reading up on each career on Web sites like eFinancialCareers is another good idea. You also should talk to people who work in the sectors that interest you to gain an understanding of what they do. Find out what motivates them, and what excites them. Ask how they got to their current position, and look for parallels in their career paths. Also ask what they value when hiring at the entry level. Focusing on a dream without knowing much about it can be dicey. Unless youve grown up in the financial district, you may not know that you want to be a hedge fund manager or an investment banker, points out Cohen. So take the time to examine your interests, talents and skills and understand your options. Your ultimate destination may not be so apparent at the beginning of your career. And many jobs may cease to exist as Wall Street restructures itself.
Set Goals
Once you start working, and learn more about the direction youd like to take, map out a game plan for where youd
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Extend your networking online to social networking sites such as LinkedIn and Facebook. But dont mistake it for real networking, says Denise Palmieri, director of client relations at the Pinnacle Group, an executive recruiting firm in New York. Its a hologram of your networking, she says. All you are doing online is interlinking your networks. The reunion where you really see each other and make genuine connections is the real networking.
When it comes to the people that you work with, try not to take things personally or blame yourself unnecessarily. Often young people will get frustrated or disappointed, then make an impulsive decision. When it comes to career management, the biggest error you can make is being impatient and making a job move too quickly. Wall Street is not a fraternity, says Cohen. It can be a very rough experience. Youve got to be thick-skinned.
Continue Learning
Give after-work activities such as continuing education their due. Professional development classes are available through many professional societies, along with specialized educational firms. Formally recognized programs such as a part-time MBA or the Chartered Financial Analyst program have helped many a professional advance his or her career growth. Although many businesses have pulled back from sponsoring career-related education, some still do reimburse a portion of their employees course fees. Its also important that you read trade publications, such as Institutional Investor and others, to get exposed to industry lingo and the major trends in your field.
Managing Yourself
Not long ago, advice on career management included discussions about the need to maintain an adequate work-life balance. For juniors and seniors graduating into a hyper-competitive job market, that may be impractical, says Cohen. The only way that they will succeed is by bending over backwards and working 110 percent, he says. This is a market that demands extra, not just enough. Extra. The good news is that if youve done your homework, youll have found a career youre passionate about. Youll have aligned your personal and professional goals and will likely be willing to make that commitment early on. Thats not to say that you should be working 24 hours a day. Dont let yourself get overtired. To stay on your game, youll need to maintain a high level of energy and preserve your health. Bear in mind that managing your career is a process, and the various elements often go hand in hand or overlap. The above isnt a to-do list where you check off an item and then move on. These basics are worth revisiting periodically. It wont be unusual to find your interests and passions changing, your goals in need of realigning, or that youve fallen out of touch with your network. An annual, semiannual or even quarterly career management check-up will serve you well.
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Careers perform best when designed with an underlying structure and purpose.
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Voices of Experience
Professionals offer advice on financial market careers
Heidi Wood, Managing Director, Senior Equity Analyst Morgan Stanley Train yourself to think as originally as you can. Your job is to figure out the spread between what is true and what isnt. Many people are trying to obscure your ability to get to the truth. Dont let no stop you. One of the best ways to differentiate yourself in a competitive world is the ability to persevere and consistently follow-up in cases where you have an opportunity to break in. Chad Rakvin, Global Equity Index Director Northern Trust Dont underestimate the value of communication skills. Everyone lists this on their resume, but few people actually have proactively developed their communication and interpersonal skills with specific courses or seminars. Phil McHugh, President Fifth Third Investment Advisors You must have the ability to listen to your clients and identify their dreams as well as their needs. If you can do that, youll have the ability to design solutions to help them reach their goals. The ability to identify tax savings for a client is one of the biggest differentiators among successful private bankers. Anu Aiyengar, Managing Director, Mergers and Acquisitions JPMorgan Investment banking requires you to be aware of whats happening in the world in economics, financial markets, regulation. Read the Financial Times, The Wall Street Journal and watch CNBC not because you have to, but because it interests you. Also talk to people who are in the business. Theres still no better way to determine whether investment banking is right for you than an internship. Caroline Arnold, Global Head of Client Relations & Facing IT Morgan Stanley You want to think and operate like an owner. Its important to be able to take ideas, move them forward to execution, and be accountable for the results. The most successful people in IT are great technologists who are able to strategize with the business about a new opportunity, and then execute. Its a thrill to see products youve created make a difference to the bottom line. Jon Bloom, Managing Partner Broadlawn Capital Most people dont have the risk discipline needed to become a successful trader. This characteristic is innate for some, but others can acquire it through training, playing online games of chance, or casino gambling. Without it one cant be a successful trader. Patrick OLeary, Compliance Officer BNP Paribas The top priority is to serve clients, so you need to be practical. Ideally, rather than simply telling businesspeople a particular business cant be done, compliance professionals work with the business to roll out a particular offering in a way that is compliant with applicable regulations. Michelle Khalili, Managing Director, Equity Capital Markets CIBC Know who you are what your strengths are so you can capitalize on them, and if you do have areas of weakness, make sure you work on them. Its very important to network even when you are in college. Rich Silverman, Senior Partner Silverman Communications Group A large part of being a valued PR professional is gaining the ability to effectively communicate sophisticated and complex issues in a manner that is easily understood and without appearing to be insulting or dumbing down the issues. This is an important quality that your client will undoubtedly appreciate.
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give you the cold shoulder, and theres no leadership change in the offing, its time to look for a new job.
Since the question for new grads isnt if you should change jobs but when, here are signs to help you recognize when its time to move on.
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Stay in Touch
Once youve connected with a recruiter, youll want to make sure youre top of mind when a position comes up that might fit you. The best way to build a mutually beneficial relationship is to share information about what youre seeing in the job market. For example, let recruiters know when your company is hiring. After youve secured that new position, keep in contact.
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Office Politics
Yes, they exist. But you can turn them to your advantage.
Politics exist in every workplace, and financial companies are no exception. Amid the constant competition for clients, resources, promotions and raises, nearly everyone has a story of unscrupulous co-workers who took advantage of a situation by cutting corners or stomping on toes. Yet, office politics shouldnt be considered the exclusive domain of back-stabbers and manipulators. To the contrary, those who can understand the political landscape in their organization can use it to a career-boosting advantage. Office politics most often boils down to a struggle for control, usually over resources, information or people, says Timothy Johnson, chief accomplishment officer for Des Moines, Iowa-based consulting firm Carpe Factum, Inc., and author of Gust: The Tale Wind of Office Politics. Individual or group success typically depends on tough tasks like pushing a project to the top of the queue, finding the right people to work on it and getting the time and tools to do the job right. Each department will have its own dynamics in play at any given time, as well. For example, Show me an IT pro who doesnt answer to at least two different bosses, either implied or not, says Johnson. Then you look at all the different technical issues going on, like who has the best software selection, who can make decisions about operating systems and compatibility. Information is also part of it, such as who has what information at what time. The answer to all this: Play the game the right way. That means mastering a few simple strategies and avoiding a couple of key mistakes. Perhaps the biggest faux pas is to make off-the-cuff comments to co-workers without considering their ramifications. For example, dont remark on the ugly car parked in front of the building: It could belong to your new group managing director. Another common mistake is publicly displaying potentially career-damaging information. If you call in sick with a family emergency, dont go to a party that night and post pictures of it on Facebook. Its not much of a stretch to imagine one of your co-workers spotting them and alerting the boss. In 2009 an insurance company employee in Switzerland was fired after a colleague reported seeing her on Facebook while she was out sick. Remember: In the world of social networking, you never really know whos connected with whom. (For advice about managing your online presence to advance your career rather than torpedo it, see Make Your Online Identity Work For You Not Against You, on page 14.)
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Careful Communication
First and foremost, being a successful office politician means developing a rapport with co-workers without being gossipy or delving into personal issues. Its important to understand the communications style of your group or department, especially since those who rise to management positions tend to be good communicators. That extends to e-mail and electronic communications. Be judicious when using the reply all and bcc options, and write every e-mail calmly and respectfully. A good rule of thumb: Imagine the division head will read it. Finally, do more observing than talking. Before long, itll become clear what most peoples motives are. Be cognizant of whos around you at any given time. Its might be okay to say something controversial to a friend, but if theyre not a friend, what you say may come back to haunt you.
to say to someone, Will you mentor me? You just tell them you have a lot of respect for them and their knowledge of the area, and youd like to talk to them about what youre thinking. Then, you stay in touch. Once youve found your first mentor, dont stop there. Susan Battley, a New York-based executive coach and author of Coached to Lead: How to Achieve Extraordinary Results with an Executive Coach, recommends finding multiple mentors. One person may help with concrete ambitions like getting up to speed on trading technology, while another may be a sounding board for sensitive, interpersonal topics. Cast a wide net and build a personal advisory board, Battley says.
Look first to your instructors. Many professors have real life business experience, especially adjunct professors, says Jeff Thomson, president and chief executive of the Institute of Management Accountants (IMA). Alumni also make great mentors, so check to see if your school has a program like DePaul Universitys Alumni Sharing Knowledge (ASK), where students can search for mentors by the industry they work in, the company they work for, their country of origin, their profession or their location. Gillian Steele, managing director for the Career Center at DePaul, says on-campus events as well as student finance and business club meetings also offer opportunities to find mentors.
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Think about what youll need on your resume in five years, as a waypoint to your long-term objective.
Not long ago, your first career management challenge might have been competing for a coveted spot in a bulge brackets training program. Now that a global crisis has shaken up the worlds top-tier banks, their relationship with government and how theyre perceived by the public, your main challenge might be figuring out just what your first step should be. To do that, you might need to rethink your professional and personal ambitions, says Denise Palmieri, director of client relations for Pinnacle Group International, an executive search firm in New York. If you had your eyes set on Wall Street as your next target, what was that about? Palmieri asks. Dig into the underlying basis of why you wanted to go to Wall Street. For example, did a parent or teacher suggest finance was the career for you? Or are you intrigued by analytics, research, or the technology?
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Hello, Reality
Unfortunately, dreams need to be flexible. If you find other aspects of your life your finances or relationships, for example are suffering, you may have to reevaluate your goal or try another road toward reaching it. Focusing on dreams and plans isnt something you do only at the outset. All through your career, you should stay tuned in to them. As time passes, your dreams are likely to change. Whats more, youll have to stay up to date on the business worlds evolution in order to make sure your goals and your strategies remain valid. You may have to reframe your dream in the context of the market, notes Austin. Balancing dreams with reality often requires resilience. Its important to be able to bounce back from the disappointments that youll inevitably encounter. Having a strong network of people to whom you can turn for support and guidance is key, as is having a contingency plan. Be open to trade-offs. To stay on course, you may need to manage your expectations. A setback in the morning doesnt mean you cant still accomplish something that moves you closer to your goal, says Greg Sells, a Chicago-area Certified Financial Planner. Persistence can be one of your most powerful assets, he says. Reality may impose limitations on your dreams. But when youre committed to a lifelong mission that you truly believe in, such setbacks need only be temporary.
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Be Pro-Active
You cant wait for people to contact you, says ThanasoulisCarrachio. If there is a pause in the communication, call the employer and ask if anything has changed and if so, what can you do to address it. When an offer arrives or appears imminent, she says the right way to communicate it to another prospective employer goes something like this: I expect to get two offers this week, but you are my No. 1 choice. If given an offer at this company, I would accept. Do you think well be at that stage soon? The wrong way is to present the other employers offer as an ultimatum, where your message seems to say, Make me an offer, or Im gone. Vicky Oliver, author of 301 Smart Answers to Tough Interview Questions, likewise advises job seekers pursuing multiple offers to tell a favored potential employer they are the preferred choice. Enthusiasm is a big key, and after that humility is big, Oliver remarks. Its important to maintain cordial relations with every prospective employer youve interviewed with, says Cohen. You never know if the job you eventually accept will work out. So avoid alienating anyone and always behave in a professional manner. Be prepared to respond to any job offer in less than a week perhaps in two or three days. When telling other prospects about the offer, experts differ on whether its wise to disclose the employers name.
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Being Discreet
If youre at all good at job hunting, youre eventually going to have to sneak out to do interviews. If you cant schedule interviews on the weekends or before or after work hours, be careful how you dress, warns Johnston. If the office is casual, a suit is going to be noticed, he says. Keep your interview clothes in the car or in your off-site gym locker and change on the way to the interview. Another alternative is to schedule all your interviews for a single day, and then take the time off with a vacation or personal day. One day off looks less suspicious than a half day here and a half day there, Reymann says. As you tiptoe around, keep in mind you may end up staying put, Johnston says. You may realize after three or four interviews that the job you have is your best job, he says. We always caution people not to damage the bond of trust they have with their current manager. At your next job, you may be learning new skills that will enable you to manage the company you just left. Besides, showing respect is the right thing to do. If you are disrespectful toward your firm during your job search, Senna concludes, you are unlikely to receive a strong recommendation from your manager. Practicing proper etiquette can help you avoid burning bridges.
Look Inward
Be cautious about who you share your restlessness with. Network for opportunities with those you trust, says Roberta Chinsky Matuson, CCP, president, Human Resource Solutions in Brookline, Mass. This will help reduce the likelihood that your current employer will find out about your search before youre ready to tell them about it. The hush-hush attitude should carry through into your dealings with recruiters, adds Jim Boghos, president of Corporate Search America in Longwood, Fla. Usually the way an employer finds out someone is looking is when a potential suitor ... (breaches) confidentiality, he says. The perils of real life arent the only risks a job hunter faces. What you do online can also reveal your intentions. When you post your resume at eFinancialCareers, your first decision is whether to make your contact information visible or keep your profile confidential. If you want to remain anonymous, be careful about what you put in your resume. Dont do anything thats a dead giveaway to where you work, like mentioning your experience with a proprietary software or unique delivery Careers in Financial Markets 2010-11
Ask Questions
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During your first month, try to find out these three things about every person whom you meet: How they came to the organization. Why theyre passionate about the organization. Why theyre passionate about their job. After talking to several people, youll begin to see themes emerge that will reveal the true nature of the companys culture. As you talk to people, listen for clues about the companys value system. Every business has a different process for getting things done, usually based on what the organization values most. For example, a fast turnaround might be more important than being thorough. Or maybe being organized is what gets emphasis. Youre going to get some consistent answers, says J.T. ODonnell, founder of Careerealism. com, a career news Web site based in North Hampton, N.H. The sooner you figure out the companys values and how you can represent them, the sooner youll rise to the top. The key question you want to answer is: What makes a person successful here? For your first 30 or so days on the job, hold back from offering any opinions. Instead, be an observer. If youre asked your views on a business policy or decision, say youd rather not answer since you just joined and are still learning how things work. Its okay to respond with something like, Im the new person here and can you ask me that in a month.
Avoid Gossip
When conversations with co-workers turn gossipy, dont go there. Walk away. People often use gossip as leverage to get one up on one another, as if to say, I know something that you dont know. Whats more, gossip can make colleagues wonder what you might say about them when theyre not around. Avoiding gossip shows youre career minded, and that you want to maintain your professionalism.
Manage Up
Your boss is your No. 1 customer. Make it your goal to find out whats truly important to him or her, and help achieve those goals. Try to see where theyre coming from, says ODonnell. Your next step is to leverage that knowledge.
Knowledge &
Professional
Building
Relationships
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Sleep On It
If, after one or more interviews, you receive an offer, ask for time to consider it. When the offer is extended, show appreciation and interest, but dont respond immediately, recommends the Career Development Center at Brown University. Let the employer know that you want to review the offer (which you should ask for in writing) and that you need time to make the best decision for you and the employer. Ask when a decision is expected and, if needed, request more time to compare offers or do necessary research. The offer will not be withdrawn if you make this request. Even in your first job out of school, if the salary isnt competitive, you can ask for more, Miller says. But, he cautions, ask, not demand. In other words, say, would it be possible rather than I need to have. And never mention your high rent, significant student debt, or materialistic romantic partner as justification for wanting more money. Underwriting your private life isnt your employers responsibility.
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Plan Ahead
Like every important business meeting, performance reviews have a planned agenda that requires certain information compiled in advance. Typically, there is a review meeting and related evaluation and self-evaluation forms that both supervisor and employee must complete. As an employee, youll aim to emphasize your strong points, obtain high ratings, and turn discussion of your weaker areas into a springboard to opportunities like education, training, or involvement in a project that will look good on your resume. When the employee understands it properly, they can actually guide their manager, observes career coach Bettina Seidman. Performance appraisals really should be professional development plans, she says. You might even get some seminars paid for, or even a graduate degree. Planning ahead is vital. A favorable review is more attainable if youve recorded your own achievements as they occur, have pro-actively managed your relationship with your boss, and are prepared to pitch your own professional development goals for the next year or two. Keep track of your successes over the course of the year. Dont try to remember them at the last moment, advises New York career coach Win Sheffield.
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Trends in Diversity
After the tumultuous conditions in the financial community in 2008 and 2009, it wouldnt be surprising if retail banks and investment houses had scaled back resources for diversity initiatives. Yet, despite budget cutbacks and layoffs in the industry, affinity programs, association partnerships, scholarship opportunities, and networking groups established at the big banks and bulge bracket firms appear relatively unscathed. The markets turnaround since mid-2009 also bodes well for future recruiting efforts, including diversity hiring, for the remainder of 2010 and beyond. Mass layoff events in the finance industry decreased significantly between the second quarter of 2009 and the first quarter of 2010, according to data from the Bureau of Labor Statistics (BLS). Moreover, total payroll employment in finance and insurance stopped shrinking and stabilized in the first half of 2010. ally employ last-in, first-out policies when they do mass layoffs, she says. While Markus admits there is no real hard data to assess the landscape, lower-level employees are often the hardest hit in a recession. Most often, women and minority professionals are lower in the pecking order, and its not necessarily a competency thing, she adds. Now the business climate in finance has turned around, and Markus sees strong career opportunities in venture capital and alternative investments. The concerns of employers have shifted a bit since mid-2009, she notes. Banks and other institutions were cutting heads right and left then. Now, theyre adding positions, and I am beginning to see bidding wars for talent.
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For professionals in areas that lack an industry association or nonprofit, many of the relevant organizations utilize social networking sites Facebook in particular to connect with a diverse talent base. Thats another illustration why finance professionals should take every opportunity available to advance their career goals. The banking and investment world thrives on go-getter types. That sentiment is especially true for women and minority professionals.
interest out there again when I am sitting at the table with the larger investment firms. Despite the recent upturn, Roldan wonders why financial services firms are still asking the same questions about diversity as they did a decade before. A bigger question is, just how effective are the programs currently in place? Roldan believes a sweeping and concerted effort is needed to truly address diversity in the financial services world. We need to mobilize and get the CEOs of the major banks and investment firms to come together to develop a large scale and industry-wide strategic plan to work towards building a more diverse succession pool, he concludes. The Dodd-Frank Act of 2010 includes a provision aimed at getting financial regulators more involved in industry diversity efforts. Section 342 of the act requires various agencies to create an Office of Minority and Women Inclusion that would monitor diversity within the agencies themselves, and in companies they regulate or contract with. Many parts of the Act have not been explored and this one has received barely any scrutiny, Proskauer Rose, a top law firm, wrote its clients in July 2010. Depending on how it is implemented, however, the section could have a large impact on how diversity issues are handled and whether there will be a new focus on enforcement of diversity requirements, equal employment obligations and minority business set-aside requirements by the covered governmental agencies.
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A Solution
Looking ahead, Kenneth Arroyo Roldan, author of the book Minority Rules and chief executive of minority-focused recruiting firm Wesley, Brown, and Bartle, says diversity programs need to concentrate on moving professionals up the ranks. He finds many more programs and organizations facilitate entry-level positions for minority and women professionals. Meanwhile, he says, The vice president and managing director level is still not as diverse as it could be. Roldan admits the economy is partly to blame for the career stall of minority and women professionals. The implosion of the financial sector has had a disparate impact on women and minorities. Theyve cut staff, and there were fewer women and minorities at these firms to start. Given the upheaval in financial services, Roldan observed many talented professionals shifting from investment banking to either retail banking or other roles in Corporate America. But were beginning to see a turn for the better. Theres Diversity Initiatives
Organization ALPFA www.alpfa.org American Indian Graduate Center (AIGC) www.aigcs.org Asian & Pacific Islander American Scholarship Fund (APIASF) www.apiasf.org Financial Womens Association (FWA) www.fwa.org Graduate Management Admission Council (GMAC) www.gmac.com Target Hispanic/Latino
Organization HISPA (Hispanics Inspiring Students Performance and Achievement) www.hispa.org Hispanic Alliance for Career Enhancement (HACE) www.hace-usa.org Management Leadership for Tomorrow (MLT) www.ml4t.org National Black MBA Association (NBMBAA) www.nbmbaa.org The Robert A. Toigo Foundation www.toigofoundation.org
Target Hispanic/Latino
Hispanic/Latino
Asian/Pacific Islander
Women
This is a partial listing. For additional organizations and details, see page 93.
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Gut-Check Exercise
After all this, what if you still having trouble making up your mind about a company? You have to trust your gut, says Palmieri, suggesting this gut check exercise. Youll need a bowl and two slips of paper. On one slip, write Take the job. On the other, write Keep looking. Tell yourself youre going to draw one slip out of the bowl and, no matter what, youll do what it says. Make your draw, read the paper, and then check your gut. Do you feel your heart sinking, or is your reaction: Great! Thats what Ill do! Even if you know youre taking a job that isnt ideal for you, this exercise will tell you if youre compromising. Youll be able to go into it with your eyes open, knowing in advance it wasnt perfect but you chose to accept it regardless. If you find yourself in this situation, remind yourself that every job is temporary. Youre not going to be there forever. Focus on the good aspects of your experience. Youll have the opportunity to build your skills, particularly the ability to deal with a situation that isnt 100 percent perfect.
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Office of Global Leadership and Diversity Human Capital Management Division, Goldman Sachs
At Goldman Sachs, Aynesh Johnson is managing director and global head of global leadership and diversity in the firms human capital management division. She joined Goldman Sachs in 1992 and spent three years as a financial analyst in the corporate finance department. After leaving to pursue her MBA, Johnson rejoined the firm in 1997, spending six years as a banker in the investment banking division covering clients in the industrials sector. In 2003, she transitioned to the human capital management division. Johnson became a vice president in 2000 and a managing director in 2009. She earned a BA in mathematics from Duke University in 1992 and an MBA from the Harvard Business School in 1997. Is there a specific mission for the office of global leadership and diversity? The office of global leadership and diversity (GLD), established in 2001, seeks to drive leadership, commitment, and accountability from top to bottom. GLD is responsible for making specific recommendations to the firms business leaders about their diverse talent and following up to ensure actions are taken to address career development needs. In addition to setting annual diversity priorities and conducting annual diversity planning, GLD is directly involved in the planning and execution of a series of broader, more visible diversity events and training programs. GLD employs a focused strategy that seeks to create real change and traction by affecting cultural transformation, advancing leadership and management skills across the firm, and integrating diversity considerations into our key business and people processes, such as recruiting, training, career development, compensation, promotions, succession planning, and other key retention strategies, as a means to achieve our objectives. Does the firm have a working definition of diversity? When we talk about diversity at Goldman Sachs, we are referring to a broad spectrum of diversity including different styles and approaches, and a variety of professional, personal and educational backgrounds. Gender, sexual orientation and disability are consistent areas of focus across the globe but there are regional differences for other areas of diversity such as race/ethnicity in the U.S., and the concept of locals in Asia. Our efforts and focus constantly evolve based on the changing landscape and needs. We understand that for us to be successful, our men and women Careers in Financial Markets 2010-11 must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional. How has the downturn impacted managements support of the diversity programs in place? Obviously, financial constraints have to be borne across all divisions. Entering the downturn, we made a very concerted effort to make certain that diversity was not viewed as a bull market phenomenon. As a result, we worked very closely with senior management and used the downturn as a catalyst to signify the strategic importance of diversity at the firm. For instance, during this time, we enhanced the efforts of our multicultural womens initiative, as well as added incremental programming to our Black and Latino professionals initiatives in the Americas. In addition, to provide a supportive and inclusive environment, we have developed and support over 70 affinity networks and interest forums globally at the firm. How do you measure the effectiveness of the diversity programs implemented? We measure the effectiveness of our diversity programs by conducting annual audits of our efforts, as well as leveraging the feedback from our employee climate surveys. Through our efforts, we have created broader awareness, increased engagement in advancing and supporting diversity at the firm, and developed a more globally diverse workforce. In partnership with Goldman Sachs University, our internal learning and professional department, we have developed a fulsome diversity and inclusion curriculum, encompassing over three dozen diversity training programs. In 2009, 98 percent of our employees completed two or more hours of diversity training. How has the reputational crisis affecting Wall Street influenced your efforts? While we are very mindful of the publics perception of Wall Street at this time, the reputational crisis affecting Wall Street has not had a direct impact on our work. At Goldman Sachs, across the firm, we have approached the crisis by remaining vigilant and dedicated to client service and continuing to execute with excellence. From a diversity perspective, this means continuing to promote an inclusive and respectful work environment.
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Recent Developments
The credit meltdown that began in late 2007 cut the legs out from beneath the merger business. The pace of M&A deals has remained sluggish into 2010, even as broader financial markets and economies gradually regain health. The deal dropoff sapped demand for investment bankers, sparking layoffs across Wall Street. Beyond that, many of the biggest U.S. and European investment banks which long commanded the greatest power and prestige suffered damage to balance sheets and reputations. Government bailouts and limits on compensation opened the door for upstart M&A boutiques and mid-size institutions to hire hundreds of bankers away from the global giants, often referred to as the bulge bracket. The newer boutiques founders typically, top dealmakers who left Wall Street to run their own shows hope to grow into tomorrows bulgebracket banks, filling the space left by the disappearance of Lehman and Bear Stearns. Near the end of 2009, global bulge-bracket banks resumed hiring M&A professionals. But the hiring pickup ran ahead of any rebound in merger business and revenue, leading some observers to question whether it can continue. While M&A volume has failed to recover in the U.S. or Europe, the outlook for investment bankers is far brighter in Asia and Latin America. In Asia, bankers fees for both M&A deals and stock and bond offerings soared 68 percent to $5.6 billion in the first half of 2010, nearly on par with Europe. Latin American M&A volume posted a record high in the first quarter. Deal volume across all emerging markets nearly doubled in the first half of 2010 and accounted for 33 percent of worldwide M&A, the highest percentage ever.
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Near the end of 2009, global bulge-bracket banks resumed hiring M&A professionals. But the hiring pickup ran ahead of any rebound in merger business and revenue.
M&A requires hard work. At their clients beck and call, the people involved are often in their offices nights and weekends. Once a deal is underway, junior bankers can expect to keep busy assembling the reams of financial information and legal documentation necessary to get it done. A variety of firms act as M&A advisers. While the top-tier global banks still dominate the volume rankings known as league tables, middle-market and niche advisory firms have been gaining on them. Deals smaller than $150 million might be handled by the M&A divisions of accounting firms, or by boutiques that specialize in smaller transactions or deals in a particular sector. Although the biggest deals get the headlines, its the numerous smaller deals, which occur on a regular basis, that drive the business.
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Q&A
As a rule of thumb, the more senior you become in M&A, the more contact youll have with clients. But as an analyst, youll spend a lot of time working on pitch books, which outline a banks ideas for a particular transaction. For example, should the client buy company X or company Y and, if so, how should the deal be financed? M&A analysts usually conduct basic industry research and build financial models, which are used to price the companies concerned. Associates, who are one level higher in the banking hierarchy, oversee analysts work and check to make sure their models are correct. A further rung up, vice presidents oversee the work of analysts and associates, and often order the pitch book to be partially or completely rewritten even when it means staying up until the early hours of the morning. Vice presidents report to the directors and managing directors who are the main points of client contact. Its not unusual for pitch books to come to nothing. Clients may decide not to go ahead with the suggestions, or they may engage a rival bank. When a pitch book elicits a positive response, the M&A team moves into execution mode seeing the deal through to completion. If youre interested in pursuing a career in M&A, be diligent and keep banging on doors. Its critical to be a hard worker and a team player. It also helps to be bright. Anu Aiyengar, Managing Director, Mergers and Acquisitions JPMorgan Whats a typical day like for you? I travel frequently for meetings, and also am on conference calls on a regular basis. I shift from one situation to another in a short time frame, and juggle multiple projects simultaneously. You could be in the early stages of a deal, talking to clients about their strategic alternatives, marketing, or presenting a company to potential buyers, or being on the buy side, doing valuations, looking at models, presenting to the board on bid strategy and tactics. Or, you could be in the middle of a deal, and be spending days in a lawyers office negotiating documents. What advice do you have for an up-and-coming M&A professional? Its important to learn as much as you can about the business. Sites such as eFinancialCareers make it easier to do so. Attend career sessions when firms visit campus. Talk to people on the Street to get an understanding of what mergers and acquisitions is and talk to people at firms to help you decide if its right for you. Its important to have an analytical mind and the ability to work in a high pressure environment. You must be able to multi-task, and have the attitude that you want to learn and be the best at what you do. What are the most important skills for a career in M&A? The skill requirements change over time. What attracted me to mergers and acquisitions is that there is a good balance between corporate finance, accounting, legal elements, strategy and psychology. Mergers and acquisitions is about people coming together and deciding the company is better off doing the merger, sale, or acquisition than not. Its a decision made by people and it involves a great deal of psychology. What should people wanting to work in M&A be doing to prepare? Investment banking requires you to be aware of whats happening in the world -in economics, financial markets, regulation. Read the Financial Times, The Wall Street Journal and watch CNBC not because you have to, but because it interests you. Also talk to people who are in the business. Theres still no better way to determine whether investment banking is right for you than an internship.
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Recent Developments
The fees that investment banks generate from stock and debt offerings depend on corporations aggregate need for new capital, which in turn reflects the level of economic activity and the trend of stock and bond prices. As the global economic downturn ensued in 2008, issuance of new securities sputtered. The credit crisis that began in the U.S. with sub-prime mortgage defaults spread to Europe, dragging down global equity and debt markets. Aided by trillions of dollars worth of bailouts and other government-funded assistance, conditions in major financial markets recovered during 2009. Worldwide issuance of stocks and bonds rebounded 38 percent in 2009 to $7 trillion, according to data provider Dealogic. That brought Wall Street banks a total of $42.1 billion in underwriting fees, up 51 percent from the crisis year 2008. The recovery remained patchy, however. In the equity market, much of 2009s issuance arose not from natural demand but as a quirk of bailouts, as individual banks conducted huge stock sales to raise their own capital and meet government-imposed conditions for repaying bailout aid. During the final weeks of that year, Citigroup, Bank of America and Wells Fargo sold a total of more than $50 billion in stock comprising three of the five largest stock sales ever made by U.S. companies. Meanwhile, initial public stock offerings considered a better indicator of the capital markets health than sales of stock by already-public companies continued to shrivel. U.S. IPO volume shrank 47 percent to $16.6 billion, the second lowest yearly total ever, according to Dealogic. Chinese companies accounted for three times as many IPOs as U.S. companies and more than twice the dollar volume. Equity issuance remains dormant in 2010. Global equity issuance fell to a five-year low $309 billion during the first half, as issuance during the second quarter slid 48 percent Careers in Financial Markets 2010-11
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from second-quarter 2009, according to Thomson Reuters. Companies in central Asia and Asia Pacific, largely from China, made up almost half of worldwide IPO activity. Bond market issuance fared much better, rebounding to record highs in 2009 before faltering in the spring of 2010. Worldwide corporate bond sales for 2009 grew 31 percent to a record $3.04 trillion and issuance of high-yield or junk bonds soared 181 percent to $207 billion, also a record, according to Bloomberg data. Bankers fees for debt underwriting recovered to match 2007s record high. However, 2010 has been a different story. After a robust first quarter, corporate bond sales declined in May and June as fears that Greece and other European governments might default on their debts led investors to shun most kinds of risk. Second-quarter sales of U.S. investment-grade corporate bonds fell 45 percent to $103 billion, while junk bond sales dropped 10 percent to $43 billion. Michelle Khalili, Managing Director, Equity Capital Markets CIBC Describe your career path. I graduated from the University of Toronto with a bachelor of commerce degree in economics and accounting. I joined PricewaterhouseCoopers in its audit group, working in both Kuala Lumpur and Toronto. During this time I became a chartered accountant. While I enjoyed what I was doing I realized that what I really wanted to do was help companies look forward and to grow. So I moved to the advisory side at PWC, then to an M&A advisory shop and then to the investment banking group at a boutique investment dealer, where I got my CFA designation. I spent a number of years there in a generalist role, doing M&A, advisory work, and financings. This role helped me focus and realize what I loved most about this business the equity markets. I then joined CIBC, where Ive been for the past 10 years. Describe your role at CIBC. My role is to provide clients with market intelligence and color, transaction guidance, deal execution, and after-market support. I work with clients in the oil and gas sector but also have clients in other areas, such retail and consumer products. I also work with internal clients and partners, including investment banking, sales and trading and retail brokers groups, to ensure the full financial needs of CIBCs clients are met. What is a typical day like for you? I wear many hats in a given day, which is a great thing about my job. Recently, for example, I spent time meeting clients and giving them insight on the current state of the equity markets and new equity issue environment. I was also engaged in launching a financing for an oil and gas company to acquire assets. In another transaction, we sold an investment in a power company for one of its shareholders. In each transaction Ill work with different CIBC investment banking groups or with the equity sales desk. What advice do you have for a student or professional starting a career in capital markets? Be well-prepared for every conversation and meeting that you have with someone in the capital markets industry. Research the companies and people you are meeting with. Know whats going on in the business world. But also know who you are what your strengths are so you can capitalize on them, and if you do have areas of weakness, make sure you work on them. Also, its very important to network even when you are in college.
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Sales
Salespeople spend the bulk of their time communicating with clients via phone calls, e-mail and other means. Theyre in contact with clients from the moment the financial markets open until the moment they close, as well as for several hours before and after. Clients might be high net worth individuals, hedge fund managers, institutional investors or corporate finance directors. Ultimately, salespeople take orders for financial products and communicate them to their trading desks for execution.
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Salespeople have to be charming and persuasive in short, they need to be good at selling. Most clients are knowledgeable and sophisticated buyers of financial products, whether stocks and bonds or derivatives like interest rate swaps or credit derivatives. Its the salespersons job to introduce new investment opportunities to customers, and to keep them informed about changing conditions that might affect the value of securities in their portfolio. Sales professionals typically start their day by reviewing financial publications like The Wall Street Journal, along with reports from their research staffs. They also listen in on morning conference calls conducted by their research departments, where they learn of upgrades or downgrades to securities already covered, or of new issues being added to the coverage list. All this material becomes fodder for the days sales calls.
Other Jobs
In between salespeople and traders exists a hybrid: the sales-trader. Like salespeople, sales-traders call clients to recommend securities. Like traders, they trade the securities once a sale has been made. Firms particularly larger investment firms also employ research-sales professionals, whose job is to sell their employers research expertise. While investment sales professionals and sales-traders will use the bottom line results of a research report to pitch actual investments, research salespeople must be intimately familiar with the details of the analysis to be successful.
Trading
Traders are the people who actually buy and sell products on the secondary markets. They must make snap decisions that can involve millions of dollars and earn substantial profits in the process. If you work as a trader, youll have to be at your desk before the markets open. Youll spend the rest of the day sitting before an array of computer screens in the company of scores of your peers. The screens are a window into the financial markets, showing movements in the prices of stocks, bonds, commodities and other financial products,
Recent Developments
Besides erasing thousands of jobs creating, selling and trading certain mortgage-related securities, the global financial crisis also upended the pecking order between flow traders and propietary traders. Now the Dodd-Frank Act of 2010 is making global bulge-bracket institutions cast about for ways to continue employing any proprietary traders at all. A Dodd-Frank provision known as the Volcker Rule bans banks from making proprietary trades in many types of securities. As of August 2010, big institutions like Goldman Careers in Financial Markets 2010-11
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Sachs and Bank of America that still have substantial prop trading businesses are weighing options such as moving their prop traders onto client trading desks or launching hedge funds that would invest money for clients, thereby taking banks capital out of the picture. With banks pulling out, aspiring proprietary traders will need to build their careers within specialized trading firms or hedge funds. Another area of change is the inroads of electronic trading platforms. Computer systems that let institutional clients enter orders directly have rendered public trading floors like Chicagos famed commodity pits all but extinct. The spread of various high-tech, high-speed trading systems is slowly molding sales-traders into consultants who instruct clients how to navigate the latest platforms. Jacqueline Szeto, Vice President & Director, Debt Capital Markets, TD Securities Describe your career path. I graduated with a bachelors in commerce from the University of Toronto with a minor in Spanish and East Asian studies. I began in a bank training program where I rotated to different areas within the organization. Soon a fantastic opportunity came up to work for TD Securities selling foreign exchange, money markets, and bonds to large institutions in Asia. So I moved to Hong Kong and covered clients in Singapore, Thailand, and Hong Kong for one and a half years. For the past 12 years Ive worked in TDs Toronto office, selling bonds and money-market instruments to institutions such as pension funds, mutual funds, asset managers and insurance companies. What is a typical day like for you? Im usually in the office by 7 a.m. My day starts with a review of what happened in overnight markets around the world and how it will impact Canadian markets. Ill participate in conference calls with colleagues where we talk about market and economic news and deal flows. At 8 a.m., Ill start making calls to clients to understand their investment needs, make some proposals, and help facilitate transactions. In this highly competitive industry, its important to think quickly, be creative and see where different financial products are moving in real time. What advice do you have for students and aspiring sales professionals? Core subjects like finance, accounting, and economics will help you understand the various aspects of how capital markets operate. Taking the CFA course is also helpful. Political science courses open your mind to a different way of thinking. And its important to stay on top of current events and understand what impact they could have on the markets. For example, you should understand the ramifications of an oil spill for oil and commodity process, or the potential impact of higher interest rates on the economy. Summer internships and co-op placements are great ways to get an inside look at an organization, its culture and to see what a job is really like. I recommend that you begin to network early in your career get to know as many people in as many organizations and industries as possible. What skills are most important to be successful in sales? To be successful in capital market sales, you must be a self starter, highly motivated and able to work in a dynamic and ever-changing environment. Sales requires you to manage your time and juggle several things simultaneously while being detail oriented. Also, you need to be humble, to handle rejection and not take it personally.
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Research
Providing the fundamental analysis behind investment decisions
Investment analysts provide the fundamental research that helps drive investment decision making on Wall Street. While money managers and traders ultimately decide what to buy and sell, the basis for their choices frequently starts with analysis provided by researchers at investment banks and independent research firms, whose work is then supplemented by internally produced reports. Research reports are valuable because they fill in information gaps that can lead to inefficiencies in the market. Without a sense of a companys fundamental value, investors will tend to overvalue or undervalue its stock. By providing the basic information investors need to make wise buy or sell decisions, researchers help level the playing field. Not all research professionals focus on equities. Analysts are also employed to study instruments such as corporate or government bonds, municipal securities, mortgagebacked securities and credit derivatives even currencies, entire economies and entire markets. Analysts who work for institutions like Goldman Sachs, Morgan Stanley or Citigroup are said to work for the sell side of the market. They produce reports on industries and companies, which their employers use as a basis for recommendations to institutional and individual investor clients. When the media says a firms stock rose or fell due to a change in an analysts recommendation, the analyst is typically working on the sell side. At the same time, institutions on the buy side of the investment landscape hedge funds, mutual funds, pension funds and other firms that manage money for individual and corporate clients also employ analysts to ferret out investment and trading opportunities. Over the past decade, the buy side pulled ahead of Wall Streets sell side in career growth opportunities for stock and bond analysts, economists and other research professionals. Buy-side and sell-side analysts draw upon the same broad body of knowledge to generate their reports. Both have the same basic mission: to forecast returns and risks for different investments and make buy and sell recommendations. Yet, it isnt easy for an analyst with substantial experience in either camp to change spots and become employed across the aisle. Jumping from sell-side research to a hedge fund is particularly challenging. Beyond investment banks and asset management firms, many analysts work in independent research shops. These niche firms sell their analytical expertise alone, without an investment banking component.
Recent Developments
The 2008-09 financial crisis and consolidation of the banking sector eliminated thousands of research jobs. Major buy-side institutions cut back too, and dozens of hedge funds shut their doors. Meanwhile, a legal settlement that had steered more than $400 million toward independent research firms between 2003 and 2009 ended, hobbling several independent shops that had depended on this revenue stream. Three areas that grew strongly in recent years are midmarket financial firms, boutiques and expert networks. The decline of full-service institutions such as Merrill Lynch elevated mid-size banks and narrowly focused boutiques into vital career alternatives for many a professional who otherwise would have pursued or stayed within bulgebracket banks. While a number of big banks moved to rebuild research departments as the industry regained its footing in 2009 and 2010, growth in research career opportunities remained more evident on the buy side and among mid-size and smaller firms. A Greenwich Associates survey of buy-side analysts released in June 2010 found mid-sized broker-dealers, regional firms and sector specialists raised their combined share of the research market from 24 percent in 2008 to 32.4 percent in 2010. Bulge-bracket firms share dipped from 73 percent to 64 percent. Also during the past decade, a new brand of research providers called expert networks sprang up. Rather than publish their own analysis, these firms set up contacts between their clients (primarily hedge funds) and scientists or others whose specialized knowledge could help an investor gauge the prospects of a product, company or market. This corner of the research business mushroomed from nine firms in 2000 to 42 in 2009, according to Integrity Research Associates. Gerson Lehrman Group is the largest. Research career opportunities are widening among various buy-side institutions too. The creation of new hedge funds and mutual funds picked up speed starting in mid-2009, Careers in Financial Markets 2010-11
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creating a need for research analysts to support portfolio managers with investment ideas. Another category of buy-side institution family offices that manage assets of ultra-wealthy clients plans to recruit more financial analysts over the next three years, according to a December 2009 survey by U.S. Trust and Campden Research. Heidi Wood, Managing Director, Senior Equity Analyst Morgan Stanley Describe your career path. I decided to become a Wall Street analyst after trying a number of different jobs during my twenties. I liked the idea because it provided a scoreboard whereby I could see how I was doing. In research you have the ability to make a call and get it right or wrong. This tapped into my competitive spirit and was invigorating. I had three job offers and was hired as a junior associate covering the defense sector. Ive been in research for 17 years and at Morgan Stanley for the past 11 years. The culture at Morgan Stanley was instrumental in helping me become the first female aerospace analyst in 40 years in the sector. Describe your role at Morgan Stanley. I am Morgan Stanleys authority on aerospace and defense. On the sell side Im able to delve into a level of detail and develop relationships and insights that arent possible on the buy side. My opinions and analysis are utilized by our clients to decide whether to buy, sell, or hold stocks. I get a high when I get something right ahead of the market and see that call get validated in stock price movements. What is a typical day like for you? Im on the phone with traders on the floor who are buying and selling stocks, talking to clients and contacts at companies I cover. Im also writing reports, delegating work to other team members or talking to colleagues about the industry. I speak to our strategists about the overall industry, asking strategists about the overall market and how it filters into their views on stocks. What advice do you have for an up-and-coming research professional? There can be three to five days a week where you get very little sleep. This can be exciting for many people but after a few years you want to slow down. For undergraduate students, Id recommend refining your accounting skills, and building your questioning and listening skills. Train yourself to think as originally as you can. Your job is to figure out the spread between what is true and what isnt. Many people are trying to obscure your ability to get to the truth. To break in requires perseverance. It took me a while to get into this business. The walls are high and can only be scaled by those who are determined. Dont let no stop you. One of the best ways to differentiate yourself in a competitive world is the ability to persevere and consistently follow-up in cases where you have an opportunity to break in.
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Quantitative Analytics
The brains behind financial models
In the international financial markets, successful trading strategies are devised by highly educated, mathematically oriented professionals known as financial engineers or more colloquially, quants. These are the people who create the financial theories, computer models, valuation techniques and trading programs used by hedge funds, investment banks and other market participants to exploit opportunities that might be missed by average mortals. By and large, this terrain is occupied by people with advanced degrees in disciplines such as physics, economics and computer science, or any of several mathematical specialties such as multivariate calculus, linear algebra, differential equations, probability theory and statistical inference. Generally, these people also need to be familiar with the C++ programming language, the most widely used in the field. The fathers of computational finance are considered to be the economists Myron Scholes, Fischer Black and Robert C. Merton. Scholes and Black are synonymous with options pricing theory, having developed the famous BlackScholes equation. Their model provided the fundamental conceptual framework for valuing options, and has become the de facto standard in the worlds financial markets for valuing those instruments, along with many types of bonds and derivatives that contain embedded options. Beyond advanced degrees, many employers require prospective quants to pass a rigorous vetting process that includes verification of references and, ideally, published research to point to. One recruiter who specializes in the field tells of one candidate she placed with a high-profile New York hedge fund. The job offer was rescinded after a professor provided a less-than-glowing reference. This hedge fund actually went through the trouble of contacting the professor that supervised his dissertation, rather than the professors he listed as references and that professor was located in Brazil, the recruiter says. The moral of the story: Make sure you have built strong relationships with your advisers and fellow researchers to go along with your good academic record. for many sell-side quants during the housing boom last decade, were an early and lasting casualty. Opportunities to work in hedge funds long a prime destination for quants were decimated as investment losses and clients withdrawing money forced hundreds of fund companies to close their doors. Apart from the business cycles impact (which is abating in 2010), perceptions of the ultimate value of quantitative finance took a beating too. For instance, a JPMorgan Asset Management survey in late 2009 found more than a third of European institutional investors felt less positive about quantitative equity strategies than a year ago, while 80 percent of the largest ones felt more positive about a fundamental approach to picking stocks. Events during the spring and summer of 2010 cast a cloud over two other vital quant niches: proprietary trading and algorithmic trading. The Dodd-Frank Act, enacted in July, bars banks from trading most types of securities for their own account (known as proprietary trading). And a concentrated selloff in U.S. stock markets on May 6 - quickly dubbed the flash crash - amplified calls for policy makers to enact rules curbing algorithmic trading. The use of computer-driven models or algorithms to both identify and rapidly execute profitable arbitrage opportunities has grown rapidly in recent years, to account for as much as two-thirds of daily trading volume. To continue executing trades for funds that rely on those models, brokerdealers large and small are adding engineers to refine the platforms that communicate orders, and adding modelers to write software for pinpointing arbitrage opportunities. On the bright side, the crisis and the outside scrutiny it brought made financial institutions up their investment in risk management yet another area thats long utilized advanced quant credentials. Theres a growing need for better quant models and more transparency and people who can identify risk quickly, says Jim Geiger of Analytic Recruiting, a New York search firm. Risk-focused quants also work for specialized software vendors that create and produce risk management products. All in all, while demand to hire quants on Wall Street is more selective than it was before the crisis, banks, asset management firms and hedge funds continue to need hardcore quant skills. Careers in Financial Markets 2010-11
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Recent Developments
Financial engineers, like other investment professionals, faced a more challenging job market after the financial crisis descended in 2007. Careers designing and trading complex structured mortgage and credit products, a focus
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Roles and Career Paths
If you become a quant, much of your time will be spent developing, programming and updating financial models. When just starting out, you may be required to work completely by yourself, spending long hours building models from scratch and coding for several hours straight. Still, good communication skills are essential. A quantitative professional can be viewed by other members of a firm as a resource who can explain why and how their models work. Plus, after long periods programming complex models, youll need to ask colleagues to review your efforts. Quantitative analytics is one area where a candidate with a doctorate isnt considered to be overqualified, although a masters degree in the appropriate discipline can sometimes suffice. Unlike with MBA candidates, the pedigree of your university isnt always viewed as a hiring advantage. Its more important to demonstrate you have the skills needed to succeed in the job. Emanuel Derman, a Columbia University professor and former Goldman Sachs quant strategist who wrote the widely read autobiography, My Life as a Quant, advises prospective financial engineers to begin with a bachelors degree in solid subjects such as mathematics, statistics or applied math. Then, in an ideal world, learn some finance and then work for two years in the financial business, Derman told TradingMarkets.com. That will help you decide whether you like the research side or the trading and sales side of the business. Then, if you want to be a financial engineer, come back and get a masters degree or a Ph.D. in that field.
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Hedge Funds
Live and die by your portfolio returns
The term hedge fund is based on the idea money managers can hedge their bets to ensure a profit, regardless of whether the market goes up or down. Although their greatest influence has occurred during the past two decades, the first was created some 60 years ago: In 1949 money manager Alfred Winslow Jones began short-selling stocks while buying others to offset his risk. Hedge fund managers balance their exposure by using tools such as options or futures, or simultaneously holding long positions while also short-selling. What distinguishes them from traditional mutual fund managers is their willingness to push the boundaries of normal investment techniques in a quest for unusually high returns. Their results dont often closely track those of stock or bond markets. In addition, hedge fund managers historically faced little regulatory scrutiny. However, the era of unregulated hedge funds ended with passage of the Dodd-Frank Act in 2010.
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Hedge funds are considered risky because they use borrowed money (known as leverage) to pump up returns, can hold long or short positions, and put money into illiquid investments. To counter this risk, some investors put their money into funds of funds, which spread their money and supposedly, their perils across several funds. Hedge fund managers live and die by their investment returns. Perhaps more than any other corner of the finance world, the fee revenue earned by hedge funds and the compensation of the people who run them closely reflects each funds short-term performance. Nearly all hedge fund firms charge fees in the form of a fixed percentage (usually 20 percent) of the prior years investment returns plus a small percentage of assets managed (usually 2 percent). After a losing year, most funds stop collecting performancebased fees until theyve earned back all the losses, an arrangement called a high-water mark.
Hedge funds traditionally compete for top talent with the leading investment banks. However, the investment banks generally have more conservative bonus structures, are more risk-averse than hedge funds, and are subject to complicated compliance procedures. For some, all of this makes working at a hedge fund extremely attractive. Most hedge funds follow a particular investment strategy. Popular strategies include: Global Macro: Instead of focusing on the movements of particular stocks, global macro funds create and manage portfolios based on their reading of worldwide political and economic trends. Event-Driven: Managers using this strategy aim to profit from one-off events, such as mergers, acquisitions or leveraged buyouts. Distressed: These funds buy debt (or occasionally equity) of companies in or near bankruptcy. They strive to buy securities whose market prices are below the value of company assets under a bankruptcy plan or similar reorganization. Market Neutral: This strategy rests on hedging bets owning one group of securities the fund manager believes will perform better, while short-selling other, borrowed securities he believes will do worse.
Recent Developments
Downturns in global financial markets during 2008 took a heavy toll on the hedge fund business. Worldwide hedge fund assets shrank 32 percent that year to $1.81 trillion, according to Hedge Fund Intelligence, a firm that compiles news and data on the global hedge fund industry. The combination of investment losses and clients withdrawing assets forced a record 1,471 funds to close during 2008, according to Chicago-based Hedge Fund Research. Hundreds more closed during 2009. In 2010, the industrys fortunes are gradually turning around. After 2009s hefty investment gains, by April 2010 industry-wide assets under management had rebounded to within 2 percent of their 2007 record high. Many new fund companies are being launched by wellknown traders leaving investment banks. While thats a long-running trend, it got a major boost from the DoddFrank Acts prohibition on banks operating proprietary trading desks essentially in-house hedge funds whose sole client is the bank. Even before Dodd-Frank was enacted, dozens of star prop traders struck out on their own rather than wait for parent banks to wind down their units. Its worth noting, though, that new hedge fund companies tend to operate very lean for their first couple of years,
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doing little or no hiring until theyve established a track record. So the current uptick in fund formation wont generate immediate job opportunities. However, hedge funds are taking on new staff beyond their core areas of portfolio management, trading and research. The Dodd-Frank Act compels many fund companies to register for the first time either with the Securities and Exchange Commission or with state securities regulators. Theyll also be subject to expanded reporting and disclosure rules. Funds will therefore need to hire compliance staff. Funds also are hiring more marketing and client service staff to meet growing demands for transparency from both institutional and wealthy individual clients.
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Foreign Exchange
The worlds biggest market
The foreign exchange market (also called the Forex or FX market) is the worlds largest in terms of cash value changing hands daily. FX trading involves converting one currency into another and predicting changes in exchange rates based on global events. The point is simple: to profit from currency price fluctuations. FX is an extremely liquid market with numerous participants. Anyone who has lost money by buying a foreign currency before going on vacation, only to find its worth fell before they arrived to spend it, will appreciate the need to keep an eye on the value of currencies. Banks and their clients face a similar problem, but to a much greater degree. For example, a U.S.-based company that owns hundreds of millions of euros stands to lose huge amounts if the currency drops even minutely against the dollar. On the other hand, business is increasingly global: If the dollar weakens, U.S. companies with significant sales in European and Asian markets can reap significant bottom-line benefits when they convert their euro or yen-denominated sales back into dollars. Working in foreign exchange means predicting whether one currency will fall (depreciate) or rise (appreciate) against another. If depreciation is forecast, salespeople and traders advise clients to sell the currency and buy one thats appreciating. Its a simple variant of the buy low, sell high maxim of financial markets. The trading of currencies themselves is known as the spot market, and is transacted by the worlds banks. However, many of the products bought and sold in foreign exchange markets arent actual currencies, but deferred-payment currency contracts known as futures, and one-way bets on the direction of foreign exchange price movements, known as options. Both futures and options are types of derivatives: contracts whose value is based on the performance of an underlying financial asset, index, or other investment. Large investors like pension or hedge funds, or multinational corporations with significant overseas sales use these derivative products as a hedge against the rise or fall of the actual currencies. Its a form of insurance meant to protect against fluctuations in a portfolio or on a balance sheet. While geographically diverse, the top 10 FX trading institutions account for about four-fifths of the estimated $3 trillion daily volume. According to the magazine Euromoneys 2010 survey, they were Deutsche Bank, UBS, Barclays Capital, Citigroup, Royal Bank of Scotland, JPMorganChase, HSBC, Credit Suisse, Goldman Sachs and Morgan Stanley.
Recent Developments
Jobs and pay for FX traders proved resilient during the recent global financial crisis, even as career opportunities for other traders and bankers got hammered. Wider fluctuations among exchange rates spurred demand for both simple and complex currency products, which kept business humming through the downturn. Between April and October 2009, FX trading volumes in the U.S. rose 28 percent to $675 billion a day, according to a Federal Reserve study. Deutsche Banks currency platform for retail investors had 40 percent more customers in 2009 than in 2008. Early in 2010, the Greek sovereign debt crisis provided a fresh spur for currency trading by sparking fears that Greece and possibly other countries might withdraw from Europes unified currency, the euro. Meanwhile, the massive debt the U.S. government ran up bailing out the financial system and combating the recession have the potential to trigger fresh waves of currency instability and trading activity at any time. FX traders pay attention to what is happening in the government bond markets (particularly trading of U.S. Treasury securities) because economic policies can impact the FX market. Currency traders are set to become the new kings of the financial markets, Bloomberg News columnist Matthew Lynn wrote in February 2010. The sovereign-debt crisis, the demise of the dollar and the creation of new reserve currencies all mean that the great financial reputations and fortunes will be made in foreign exchange in the coming few years. Before Europes debt crisis arose, it was widely believed the euro was on a gradual path toward eventually replacing the U.S. dollar as the worlds reserve currency. While that appears less likely now, other forces could dethrone the dollar over time and bring new currencies to the fore. In the long run, the chronic trade deficits in the U.S. tend to pull down the dollars value, because businesses must continually trade away dollars to obtain the foreign currencies needed to pay for goods made overseas. An important near-term influence on careers in FX trading (along with stock and bond trading) is the Dodd-Frank Careers in Financial Markets 2010-11
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Acts ban on proprietary trading by banks. In the months before it became law, many proprietary traders - including some specializing in foreign exchange - left bulge-bracket institutions to join hedge funds or other firms whose trading wont be subject to Dodd-Frank. Global banks, for their part, are making plans to comply by shifting proprietary trading jobs, such as folding prop desks into client trading or letting them run newly launched funds that will manage money for clients instead of trading the banks capital. Bob Tull, Managing Director of FX Group Fifth Third Bank Describe your role at Fifth Third. I oversee the banks foreign exchange trading and sales functions, which includes everything from managing the positions Fifth Third Bank has as result of hedging that we execute for clients to ensuring the systems are operating properly. What is a typical day like for you? Im up by 5 a.m. and am usually in the office by 6:30. Before I head into the office, I check overnight markets. I also check orders that clients leave with us overnight to ensure they have been executed. At the office, I check to see if there are any issues with counterparty banks that we need to be aware of. Ill read risk position reports and see where exposures are on the currency side. Once Im armed with this information, its meetings, meetings, meetings. Ill contact clients and discuss how movements may affect their bottom line. Ill meet with the banks credit department to look at any possible internal risks. I will have a lot of external meetings where I meet with clients to create solutions. What advice do you have for undergraduate students or aspiring foreign exchange professionals? As an undergraduate, a strong knowledge base in math and economics is paramount. You need to have a love for finance and geopolitical issues because they are so closely linked. Internships are invaluable, as they allow you to get exposure to markets and learn. What skills are most important to be successful in foreign exchange? You need to be able to communicate clearly and concisely. Being concise is critical, especially when giving a price and discussing strategy with clients. Strong written skills are also important. Its also critical today that you be able to build relationships and be trusted internally and externally with clients. You must be honest and have integrity, as once you lose your integrity in this business, its very hard to regain it. Also, you need to be consistently reading. Unlike the equities or bond markets, foreign exchange is a 24 hour a day, six day a week business. You may leave your physical office, but the good foreign exchange traders are reading at 10 p.m. and up at 2 a.m. That is what differentiates the good from the great in this business.
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Asset Management
People, process, philosophy, performance
Asset managers, also called fund or investment managers, are professionals who invest money on behalf of their clients. The term can refer either to a firm that provides investment management services or an individual who makes investment decisions for others. Whichever definition fits, an asset managers clients may include pension funds, insurance companies and other sources of institutional cash. Individual investors employ asset management professionals through their investments in mutual funds, either directly or as part of an Individual Retirement Account or other retirement plan. Traditional investment managers select financial products in the belief their value will rise over time. Today, many investment vehicles, including hedge funds, seek to augment returns through a broad range of added tools that can include short-selling, either hedging or multiplying risk through the use of options or other derivatives, or passively owning an index product for one asset type (such as U.S. large-company stocks) while conducting active trading in a different category of asset, perhaps foreign currencies. (For more, see our profile of the Hedge Funds sector on page 56.) In this section, we focus on the two basic kinds of funds: Passive funds and active funds. Passive funds, also called index trackers, are designed to mimic the performance of well-known stock market indexes like the S&P 500. A passive fund might not hold exactly the same stocks as listed in the index its intended to mimic. Taking the opposite tack, active fund managers decide for themselves which financial products to buy or sell. Their work follows more closely the common idea of what asset management is all about. They invest in products their research indicates are likely to rise in price over time, thus allowing investors to share in the appreciation of the stocks and saving them the work of ferreting out opportunities on their own. Funds invest in everything from stocks, bonds or real estate to physical commodities such as oil or metals. Because different types of clients tolerate different amounts of risk, asset managers usually offer several funds at a time. Some offer fast growth along with a larger measure of risk, while others offer slower growth at less risk. Funds also can be highly specialized, targeting specific sectors or regions of the world. Some managers are only interested in small capitalization growth stocks, while others focus on the worlds biggest companies. The ways in which investment products can be categorized are virtually endless, as are the types of funds that cater to the desires of investors.
Recent Developments
Consolidation among investment managers, already under way long before the global financial crisis, picked up speed in 2008 when a number of large investment banks along with their asset management arms disappeared or were acquired. Then, in December 2009, BlackRock acquired Barclays fund management business, Barclays Global Investors. That deal more than doubled BlackRocks assets under management to $3.4 trillion, making it the worlds largest asset management firm. The biggest investment shops are expanding in scope as well as size. BlackRock plans a major expansion of its advisory and exchange-traded funds operations, particularly in Asia, its Chief Executive Laurence Fink said in July 2010. Pimco, one of the biggest and most successful fixed-income investment managers, launched its first actively managed equity funds early in 2010. TIAA-CREF, the biggest manager of retirement funds for school and college teachers, began recruiting staff to enter the business of managing money for endowments and foundations. Goldman Sachs also reportedly recruited endowment executives during 2010 in an effort to attract more business from that market segment. Even while the industrys biggest players flex their muscles, the past year also saw a proliferation of new asset management start-ups. For instance, 15 companies opened their first mutual funds during the years first quarter, compared with just five in the first quarter of 2009. The figure doesnt include new managers operating other legal vehicles, such as private placements or separately managed accounts. Some new contenders are led by prominent industry figures such as Lewis Sanders, former chief executive of AllianceBernstein, Gary Black, ex-CEO of Janus Funds, and Jeffrey Gundlach, a top-performing bond fund manager formerly with TCW.
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Roles and Career Paths
Fund managers focus on the business of managing portfolios, and none are hired without experience. Many have an advanced degree, like an MBA, and many will also have a Chartered Financial Analyst (CFA) designation. Early on, you might gain exposure to fund management as a researcher responsible for identifying potential investment candidates, and eventually work your way into a job assisting a principal fund manager. You could also work in the industry as a fund marketer or in an operations role. In the case of institutional asset management, marketing and sales professionals present the firms investing track record and capabilities to potential clients in an effort to persuade them to invest money. They also manage relationships with existing clients, meet investment consultants and play a role in the development of new products. Mutual funds can be sold through investment advisors such as Merrill Lynch financial consultants or through direct marketing to individuals as is done by companies like Vanguard and Fidelity. Analysts help steer fund managers in the right direction when it comes to choosing assets in which to invest. They spend their time analyzing companies results and meeting with senior management to discuss strategy. They then write reports communicating their conclusions. Like their counterparts in investment banks, operations staffers do everything from work in information technology to settle and report trades. Funds employ compliance staff to ensure they meet regulatory requirements, internal auditors to make sure internal systems and controls function properly, and financial staff to manage the firms own money. Chad Rakvin, Global Equity Index Director Northern Trust Describe your career path. My first job was with a small personal financial management team where I quickly understood the long-term value proposition of index investing. From there, I went to Dow Jones Indexes, working my way to become manager of quantitative analysis. I developed a network of professional contacts and was able to demonstrate my specific skill set as I interacted with associates at other firms. For the past 11 years Ive worked on the portfolio management side of indexing, but on a daily basis I use skills developed earlier in my career. Describe your role at Northern Trust. Im responsible for the management of over $200 billion for clients around the world. Northern Trust is one of the five largest index managers globally, and our clients range from sovereign wealth funds in Asia to pension funds and wealthy families in the United States, as well as mutual funds. I manage a team of more than 20 portfolio managers and strategists around the world. This requires constant communication - whether its about trading strategies, product development, or personnel and governance issues. What advice do you have for undergraduate students or aspiring fund managers? First, dont underestimate the value of communication skills. Everyone lists this on their resume, but few people actually have proactively developed their communication and interpersonal skills with specific courses or seminars. Technology is essential. Ten years ago it was a differentiator; today it is a requirement. You dont have to be a software developer, but you do have to be able to anticipate and communicate your needs to the developers. Typically, new graduates will not be hired as portfolio managers. It takes a few years of experience to be considered. A majority of portfolio managers started their careers in an operational or support role. Those who can differentiate themselves by demonstrating investment acumen, a strong work ethic or specialized technology and communication skills have the best opportunity to become portfolio managers. Apart from that, the CFA program is the single best foundation for developing skills and making yourself marketable.
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Commercial Banking
Consolidation may lead to pressure on opportunities
Commercial banking is the broad term given to banking services that large companies, governments, or other big institutions need in order to function day to day. The responsibilities of commercial bankers range from the relatively simple business of issuing loans to handling more complex matters such as helping minimize the taxes paid by overseas subsidiaries, managing changes in foreign exchange rates, or working out the details of financing packages necessary for the construction of a new office, plant or other facility. If an organization is exporting overseas, commercial bankers might arrange a process of international payment or put together trade finance packages to ensure the firm is paid by foreign customers. In many cases, theres an overlap between commercial banking and capital markets. Bankers working in capital markets help companies raise money by issuing equities or debt. Commercial bankers typically help clients raise money through loans. But, when its necessary, commercial bankers will bring in the expertise of their capital markets colleagues. Increasingly, commercial banking requires an understanding of complex financing methods like securitization, where a company sells bonds based on the money it will earn in the future from assets such as rented shop space or a back catalogue of products. This trend was given a boost with the repeal of the GlassSteagall Act in 1999. Glass-Steagall was a Depressionera law that barred U.S. commercial banks from owning brokerages or being involved in the securities markets. With its repeal, the roles of investment bankers and commercial bankers began merging. In addition, the increasing globalization of the financial markets makes it imperative for large money-center banks to be able to offer a broad array of services to help their business clients raise needed capital. Another important development has been the rise of leveraged lending extending credit to highly indebted companies, often to finance buyouts by private equity firms. When taking over a company, PE firms tend to borrow as large a portion of a deals price as the market will bear, in order to multiply their return on the equity they contribute. The acquired firms assets become the collateral backing the loan. As a result, a company acquired in a leveraged buyout, or LBO, can end up carrying large debts on its books even if had little debt before it was taken over.
Recent Developments
During the buyout boom last decade, banks were so eager for commercial banking business that they offered loans to risky borrowers on ever easier terms. Such loans were labeled covenant-lite, because they did away with many restrictions, known as covenants, that less creditworthy companies traditionally had to accept in order to obtain credit. Banks were able to sidestep much of the risk of holding these loans by packaging them into structured bonds called Collateralized Loan Obligations (CLOs) that were then sold to investors. The financial crisis dealt a severe blow to this type of lending. Just as with mortgage loans to less creditworthy (subprime) home buyers, riskier corporate bonds and loans fell into disfavor among both lenders and investors. The market for structured bonds collapsed, leaving global lending institutions stuck holding leveraged loans they had planned to resell. In turn, that limited banks ability to make new loans. Two other big commercial banking markets severely affected by the recession and credit pullback are commercial real estate and municipal finance. A bright spot is emerging economies, especially in Asia. As with other business lines, its become common for global institutions to hire more commercial bankers for fast-growing markets like China, India and Brazil, even while theyre retrenching in the U.S. and Europe. Meanwhile, the financial crisis accelerated an ongoing trend toward bank consolidation. With the disappearance of Lehman Brothers, JPMorgan Chases acquisitions of Bear Stearns and Washington Mutual, Bank of Americas acquisition of Merrill Lynch and Wells Fargos acquisition of Wachovia, the number of top-tier financial institutions suddenly shrank. The JPMorgan and Bank of America acquisitions illustrate how universal banks, which combine commercial banking with investment banking activities, are displacing large standalone investment banks. The DoddFrank financial regulatory reform law isnt likely to reverse that trend.
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Roles and Career Paths
If you opt for a career in commercial banking, you may start out in any number of roles. For example, you may begin as a credit analyst, spending your time looking at companies balance sheets and working out whether its a good idea to issue loans to them. From the credit analysts role you could progress to being a relationship manager, responsible for lending money to a handful of the banks customers. Its a job that requires an intimate understanding of each companys strategy, a strong appreciation for the risks of default, and sales skills. The recent downturn made lenders increasingly conscious of the risk that existing or prospective corporate customers might default on loans thus boosting the value attached to credit analysis skills. If you arent interested in the relationship management side of commercial banking, you could go into treasury management. Treasury managers help companies cope with their cash flow. They ensure that businesses have enough money to pay for whatever they need to buy and help them deal with fluctuations in the value of foreign currency holdings. Commercial banking also offers a variety of operational positions, including technology and human resources roles. Various banks offer training in commercial banking. These include Citigroup, Goldman Sachs, UBS and HSBC. While all banks will want candidates to possess a college degree, an MBA isnt required to get a foot in the door of many commercial banking divisions. Jim Heinz, Executive Vice President, Head of U.S. Corporate Banking Wells Fargo Describe your role at Wells Fargo. I oversee 10 offices in the U.S. that cover large corporations (those with at least $500 million in revenues) from a relationship standpoint. Large companies need a surprising number of bank services and products. My job is to understand the needs of these companies and customize our offering to meet them. What is a typical day like for you? I spend about 60 percent of my time traveling, visiting with clients. You cant do this job effectively in the office. You need to be in front of clients, working collaboratively on deals. Im also often in meetings with our internal teams to work out the details. Well then get in front of a client and pitch and deliver our ideas and solutions to them. I spend a lot of time preparing for meetings and planning for what clients require and then when we win a deal the focus is on execution. Any advice for someone wanting to pursue a career in corporate banking? We can teach analytical skills, but its hard to teach people to take initiative and have a desire to make things happen. These are skills that people must have developed along the way; theyre hard to acquire once youve entered the work place. I encourage people to take courses that require writing or more specifically, business writing. Public speaking is also valuable. I also recommend people take courses that can spark an interest such as physics or history anything that prevents you from becoming too narrowly focused on a business curriculum. We look for demonstrated leadership skills, which you can get through part-time work, volunteering, or athletics. The person who spends their summer launching a child care business can be just as impressive as someone who does an internship at a big name European bank, because it shows drive and initiative. Finally, people can really help themselves by being willing to relocate to places other than major business centers. Being flexible and moving to a city such as Omaha, Minneapolis, Houston, can really help you to advance in your career.
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Recent Developments
Perhaps more than any other sector of finance, private wealth management requires being close to the customer close in geography as well as culture and philosophy. As a result, career opportunities for private bankers tend to concentrate where the ranks of the wealthy are expanding. These days, that means Asia primarily China, Hong Kong and India. Latin Americas high net worth population and the wealth it commands have grown in recent years too, despite the financial crisis. Another important geographic market for private banking is the Middle East, although recent growth in that region has been dampened by Dubais financial crisis that erupted in November 2009. While North America remains the single biggest private wealth market, Asia is on the verge of overtaking it, according to World Wealth Report 2010, a yearly compilation of data and analysis from Capgemini and Merrill Lynch Wealth Management. As of the end of 2009, North America had 3.1 million high net worth investors, making up 31 percent of the worlds high net worth population and commanding a total of $10.7 trillion of investable assets. Europe and AsiaPacific are close behind with 3 million wealthy investors each. But Asia, which pulled even with Europe for the first time, is on a tear. Its high net worth population soared 25.8 percent in 2009 and their wealth leapt 30.9 percent to $9.7 trillion, more than erasing the loss from 2008. Well aware of these trends, Western financial institutions are eager to enlarge their private banking presence in Asia. For instance, in May 2010 UBS reportedly placed advertisments in Singapore, Hong Kong and Taiwan newspapers to recruit 25 to 50 people without industry experience for its Asian private banking unit. Over the next few years UBS reportedly plans to add as many as 400 new private bankers to the 1,000 it already employed in the region. Other global banks hiring private bankers in Asia include Citigroup, Standard Chartered and RBS Coutts Bank Ltd. However, most say theyll consider only sector veterans with extensive previous experience.
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Having an MBA or majoring in business isnt considered critical for a private banker. In fact, a diverse background can be an asset.
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importance since the global financial crisis and the Madoff hedge fund fraud dented wealthy clients confidence in both financial markets and investment managers. People working on the investment side either invest their clients money or offer detailed advice to help clients make their own decisions. They are typically product specialists who are expert in a particular asset class. People working on the relationship side are essentially salespeople who spend their time building connections with clients and selling the banks services. This can involve a lot of traveling and close contact with interesting, unusual, and demanding people. When a relationship banker has established a clients needs, investment specialists are brought in to put more detailed solutions together. For clients who are very wealthy, the relationships are often entrusted only to experienced executives. A decade ago, most private bankers combined the investor and relationship roles. In some organizations, they still do. However, in most banks, investors and relationship managers are now separate - another sign of the industrys growing complexity. Firms such as Goldman Sachs, HSBC and UBS run graduate training programs for private bankers. If you dont find a place in one of those, its often possible to move into private banking if you have a background in corporate finance or, more particularly, fund management. Having an MBA or majoring in business isnt considered critical for a private banker. In fact, a diverse background can be an asset, because clients can differ considerably in their needs and personalities. Phil McHugh, President Fifth Third Investment Advisors Tell us about your career path and how you rose to president. In 1986, after graduating college, I joined the bank associate program at Fifth Third Bank. This program allowed me to experience various departments by rotating to different areas for brief periods. I found a good fit with the banks institutional trust department, where I stayed for eight years, helping to build the retirement plan services division. After the bank acquired Cumberland Federal Savings Bank I relocated to Louisville, Ky. to start and build Cumberlands private banking division. In 2001, I began to manage Fifth Thirds commercial banking business in Louisville. I became president and CEO of the Louisville affiliate and managed five lines of business. In January 2010, I returned to Fifth Third headquarters in Cincinnati to lead its investment advisors division. Describe your role at Fifth Third. I lead our investment advisors division, which has offices in 18 markets. My role is to provide strategies and product offerings for those markets as it relates to our retail brokerage, institutional, private banking, investment and institutional trust services. What advice do you have for an up and coming private banker? One of the best ways to prepare for a position in private banking is to pursue a position in retail banking and become a financial center manager. This role gives you responsibility for a specific location, enabling you to develop managerial and business skills, while forcing you to hone client management skills. Its similar to running an entire bank, however the responsibilities are limited to a specific office. Starting in retail banking provided me with the skills I needed to move up in financial services. What are the most important skills for a career in private banking? The most important skill is listening. You must have the ability to listen to your clients and identify their dreams as well as their needs. If you can do that, youll have the ability to design solutions to help them reach their goals. Many private banking clients encounter tax issues in their professional life as it relates to their personal life, so it is important to be aware of various tax issues and their implications. The ability to identify tax savings for a client is one of the biggest differentiators among successful private bankers.
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Accounting
The main job of public accountants is to prepare independent audits of the financial statements of companies that run the gamut from a privately owned restaurant business to giant global corporations like General Electric, Microsoft and Citigroup. To work in public accounting in most states, you must complete 150 hours of college classes then pass a stateadministered CPA (Certified Public Accountant) license exam. Most accounting firms give early-career employees CPA exam support such as paying for review classes, giving time off for study and paying a bonus when you pass. Generally, a firm will want you to pass the CPA exam within two years of joining. But taking the exam as soon as possible is smart, because everything is fresh in your mind immediately after graduation. Once youre working full time youll have less time to study, and the sooner you earn the credential the sooner youll see pay raises.
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youll likely work closely with the firm owners. The exception would be a boutique firm specializing in one area, such as valuation, forensics or a particular industry. In those firms, you could travel extensively to work with high-level clients.
Recent Developments
With hiring down in the past year, 2009 and 2010 graduates had fewer opportunities than those who graduated in earlier years. Dont get discouraged, advises Sandi Guy, partner and executive director of human capital at BDO Seidman, Charlotte, N.C. Its not as bad as you read. We didnt have to cut back significantly on positions in 2009, and we rebounded in 2010. But, its still going to be competitive in tighter segments, so keep your options open. Dont say, I only want to do forensic accounting. Once the recession ends, accounting hiring will quickly pick up. As the economy improves, firms that made personnel cuts during the downturn will likely need additional skilled professionals in a variety of disciplines to help manage increased customer demand, observes Max Messmer, chief executive of Robert Half International, a worldwide professional staffing and consulting firm. Along with the uncertain course of the economy, key challenges confronting CPA firms and their clients include the evolution toward International Financial Reporting Standards, and increased taxation and tax audits as state and federal governments scramble for additional revenue. Regulators in the U.S. and abroad continue to haggle over timetables for transitioning U.S. companies from Generally Accepted Accounting Principles to the more recent international financial reporting framework known as IFRS. As part of that process, the International Accounting Standards Board and the U.S. Financial Accounting Standards Board will have to converge accounting standards in areas where IASB and GAAP currently diverge, such as income taxes, debt agreements and revenue recognition. While market conditions can cause fluctuations in hiring, accountants with certain skills and qualities are usually in demand. Analytical thinkers who can help companies comply with new regulations and rules, solid communicators who can convey complex financial concepts clearly and Careers in Financial Markets 2010-11
New graduates have three options for public accounting work: The Big Four. KPMG, Deloitte Touche Tohmatsu, PriceWaterhouseCoopers and Ernst & Young are huge international organizations with large clients operating in many locations. PWC, for instance, has 163,000 employees in 151 countries. If you land a job at a Big Four firm, youll travel a lot and specialize in an area such as audit or tax a little sooner in your career. Youll also have opportunities to relocate as you progress in the company, and possibly do an international assignment. Middle market or national firms. The firms that make up the accounting industrys second tier, such as BDO Seidman, Grant Thornton, RSM McGladrey Inc., Crowe Horwath, CBIZ and many others, are still quite large. Working from offices all over the United States, these firms typically serve clients ranging in size from $500 million to several billion dollars. Like the Big Four, they offer opportunities to work in different cities and internationally. However, theres more overlap of specialties. Instead of doing personal or corporate tax, you might do both. More of your travel will be regional, rather than national. Small and local firms expose employees to a wide variety of clients, projects and tasks. Travel is usually local, and
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accountants with the marketing savvy to land new clients will find themselves in demand no matter what. Stacy Sturgeon, National Managing Partner University Relations and Recruiting KPMG How did you get where you are today? I joined KPMGs Dallas office in 1992 as an audit associate. Since then I have built a great career at KPMG providing audit and related services to public and private clients, including Fortune 1000 companies, primarily in the retail and consumer business industries. I have always been involved in areas outside of my normal audit responsibilities, such being an active member of KNOW(KPMGs network of women), recruiting, developing and instructing training courses, as well as being involved in retail industry organizations. I was admitted to KPMGs partnership in 2003 and was named the national managing partner of university relations and recruiting earlier this year. Whats a typical day like for you? I wear two hats: I serve as the lead audit partner on a large client in addition to overseeing our national campus recruiting. My day typically starts with an early morning trip to the gym and then seeing my kids off to school. After that, I am either in meetings or on conference calls with my client, or talking with my audit team. I may have a lunch meeting with a client or prospect, or perhaps a mentoring lunch with one of our young professionals. I also review audit documentation. I work with my national recruiting team on our strategy, branding, hiring needs and budgets, campus events, faculty relations, etc. Often, I am traveling to visit a college campus to talk with students and meet with faculty, attend one of our student leadership programs, or on client related business. Whats the work/life balance like for CPAs? KPMG offers alternative work arrangements that allow our professionals to work from offices closer to home or telecommute, shared work arrangements, reduced hours and phased return from leave. Over 70 percent of KPMGs professionals have used at least one type of a flexible work arrangement, mostly informal in nature. What are the keys to making it to partner? Being passionate about serving clients is critical. Having strong technical skills, ethics and integrity, communication skills, and the ability to build relationships are the building blocks for client service. Equally important are good networks, the ability to grow the business, and mentors.
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Operations
Regulatory overhaul brings rising demands on the back office
Operations may not be where banks make their profits, but its certainly an area where they can lose them. The more efficient a firm is at conducting its business, the greater the percentage of revenue that falls to its bottom line. The new era in regulation ushered in by the global financial crisis will bring tremendous opportunities to operations professionals. Fueled by hedge fund meltdowns, Bernard Madoffs Ponzi scheme and an unraveling of complex derivatives, investors and regulators are seeking to instill a greater level of transparency in the investment banking, trading and fund management industries. As a result, people working in operations will be well-positioned to help shape the industry of the future. Part of the Dodd-Frank Act aims to impose common standards on opaque markets such as over-the-counter derivatives. As instruments such as credit default swaps move from over-the-counter trading to organized public exchanges and central clearing facilities, an unprecedented era of oversight impacting areas such as reporting, trade capture, settlement, accounting and valuation will arrive. In this new world, operations professionals are poised to lay the groundwork for how third parties service asset managers and other market participants. One illustration: In July 2010 Goldman Sachs launched a new clearing services business to help clients adapt to changes in trading of derivatives. Investment banks and other firms need operations managers who can act decisively. The failure of Lehman Brothers in 2008 demonstrated the need for quick action in order to protect client assets. Yet, because operations encompasses a wide range of activities, firms need people who can wear multiple hats. Operations professionals must be able to consider what could happen on any given day. By weighing various what if scenarios, operations becomes critical to a firms ability to respond if an adverse event - such as a counterparty default - should occur. The ability to ask tough questions and instill a crisis procedure before its needed means operations professionals can help an investment bank stay ahead of the curve. like the traders, salespeople, bankers, fund managers and corporate financiers of the front office, operations people dont work directly with customers to generate revenue and profit. Instead, they serve in support functions. While their jobs may be behind the scenes, theyre critically important: An inefficient back office can drain a firms profits. Operations professionals ensure a firm functions smoothly and efficiently. Their work covers everything from information technology to human resources, trade support, accounting and finance, and risk management. In fact, the overall operations role is so broad that employees typically specialize in only one of these areas. At the core of operations is the function of clearing and settling trades. Clearing trades involves looking at the records made by traders or investment managers when they buy and sell financial products, then checking to make sure they match the records kept by the counterparties to those trades the people from whom securities were bought or to whom they were sold. Settling trades is about making sure securities are exchanged for the correct amount of money. Settlements cover everything from preparing the documentation required for a sale to making sure the bank has been paid for all of the shares it sold, or has paid for all the shares it bought. Another area is hedge fund operations, or prime brokerage. Prime brokers are the back office for hedge funds, offering everything from clearing, settlement and custody facilities to help in managing relationships with investors and raising new funds. Prime brokers play a lucrative role in large investment banks, but increasingly many asset managers are moving to a multi-prime broker model. Realizing just how important operations can be to profitability, investment banks and other firms are seeking a higher caliber of employee to work there. These professionals support trading operations by performing a multitude of functions, including reconciling a trading desks daily profit-and-loss statements or maintaining a firms internal portfolio accounting system. The electronic paper trails they maintain play an important role in risk management, helping supervisors ensure their in-house traders comply with position limits and other rules and policies.
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Roles and Career Paths
Roles in clearing and settlements are typically for exception managers, the people who deal with instances where data on electronic systems dont match. They try to work out the reasons for any discrepancy. If you work as an exception manager, you might find yourself talking to traders who claim to have sold shares for $3 each when the buyer says the price was only $2. You might also find yourself chasing payment from recalcitrant overseas buyers for transactions they deny ever took place, especially following periods where trading was particularly volatile and rapid. Electronic systems have vastly increased the speed with which simple trades are processed. But derivative trades are often too complex to be settled electronically. Many times, for example, trades are still confirmed by fax or through the review of actual contracts. The large number of documents required for derivatives transactions creates roles for documentation specialists. Some derivative operations positions require an accounting degree and a CPA designation, as well as experience in public accounting. Most operations jobs have a strategic element. Banks use operations staff to analyze ways of making processes more efficient, and project managers implement their suggestions. Thus, a finance background and knowledge of how securities markets operate can be important for success in this field. The more senior you become, the more likely you will work in this kind of strategic or project management role. Rob Prigge, Senior Vice President, Wells Fargo Trust Operations, Wealth, Brokerage and Retirement Division Describe your career path. I began my career with Andersen Consulting and spent three years there. I was hired by my client, a predecessor to Wells Fargo. Ive been with the bank for 23 years, the past 17 in trust operations, which I now head. My latest focus was on managing the transition of Wachovia trust customers to the Wells Fargo trust accounting system. What is a typical day like for you? Im in the office at 6:30 a.m. Since the integration of Wachovias trust operations into the Wells Fargo system began, Im working with our partner groups to effect a successful integration, including technology, risk management, finance, human resources, communications, and trust business leaders of each business to ensure their needs are met. How has the world of operations changed compared with when you first started? There have been more regulations related to the financial industry, and we expect this will result in material changes in the business. We support securities in the derivatives market and are expecting more regulations in that area. Technology was present when I started out, but today it has become a far more vital aspect of how we work. Since our transactions tend to be increasingly automated, we need problem solvers and analytical people who can deal with exceptions when something doesnt flow straight through. What advice do you have for an up and coming operations professional? Communication skills - verbal and written - are important to be effective in trust operations and any area of the trust business. Classes in writing, communications, accounting, computer science, quantitative methods and information systems would all be helpful. Any studies inside or outside of college that help in understanding financial markets, investment management, and security asset classes will put you ahead. Opportunities to participate in team-based activities or operate in a project management role would be helpful too. Operations involves multiple disciplines, so the next generation of professionals will need to have an aptitude for technology, risk management, and workflow re-engineering. What skills are most important in operations? Attitude, attention to detail, analytical and conceptual thinking skills, and a technical aptitude are all important. Its helpful to be disciplined in project management and understand risk management principles. Careers in Financial Markets 2010-11
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Investment Consulting
Strategic advisors to fund managers and scrutinizers of them
Investment consultants advise the trustees of corporate and public retirement plans, university endowments, foundations, healthcare systems, not-for-profit organizations, high-net-worth individuals and financial intermediaries on what to do with their money. They help these clients determine the asset allocation that will enable them to reach their investment goals, whether by making sure a pension fund can meet its payout obligations or maximizing the wealth of an endowment. In the process they recommend which fund managers clients should invest with, and what percentage of the clients money should be directed to non-traditional, alternative investments. Investment consultants will first work with trustees or other fiduciaries to analyze their investment goals and learn how their funds are governed. They want to understand what level of performance the trustees expect and their sensitivity to risk. The consultants then develop liability plans and profiles that enable them to recommend an acceptable investment policy. After establishing the appropriate allocation of funds across different asset classes and investment managers, investment consultants help implement their plan by identifying the fund managers who are most likely to meet the goals that have been established with the least overhead costs. Its also their job to monitor how the funds perform, and if the managers of those funds are meeting or failing to meet the benchmarks that have been established. Most traditional fund managers have lengthy track records they can point to, and investment consulting firms have developed tools and databases to help them monitor and rank those managers. Some of the larger investment consulting firms include Towers Watson, Hewitt Ennis Knupp (created by a pending merger of Hewitt Associates and Ennis Knupp, announced July 2010), Mercer, Wilshire Associates, Frank Russell Co., and Callan Associates.
Recent Developments
The growth of alternative investment vehicles primarily hedge funds and private equity funds confronted the consulting sector with a series of challenges over the past decade. For several years before the global financial crisis, endowments and large pension funds reallocated ever-larger slices of their total assets from traditional stocks and bonds toward these newer asset classes. Investment consultants facilitated those shifts. As the number of hedge funds and private equity funds swelled, consulting firms built expertise about them in order to better advise their clients. Previous experience working in or analyzing alternative investment funds became a valued credential for joining an investment consulting firm. In 2008 and 2009, the financial crisis sent the process into reverse. Steep portfolio losses took some of the shine off investing in hedge funds and private equity, and some institutions that had championed them suffered a black eye. A separate development affecting investment consulting is the Bernard Madoff fraud. Madoffs phony hedge fund a Ponzi scheme that regularly funneled money from new investors to pay off earlier investors went undetected for years even though many wealthy individuals and charities he duped had independent professionals supposedly screening the funds they entrusted money to. Although Madoff went to prison and few other fund scams emerged since then, the incident engendered a lasting (and very healthy) skepticism about claims made by fund managers. As a result, both institutions and wealthy individuals are demanding greater transparency from funds they invest in and more rigorous due diligence on the part of their investment advisors. That boosts the profile of investment consulting firms.
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Most traditional fund managers have lengthy track records they can point to, and investment consulting firms have developed tools and databases to help them monitor and rank those managers.
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Asset allocation specialists advise clients whether to invest in equities, bonds, or alternative asset classes in order to generate the returns they require to pay pensions or fulfill other long-term goals. Its a complex role that involves examining economic factors like interest rate changes, as well as the timing of the pension funds liabilities or pay-outs, and the likely risks and returns associated with each type of asset. To help them, asset allocation specialists create mathematical models that forecast how a clients money should be divided among asset classes. Fund selection specialists spend much of their time analyzing individual fund managers and asking questions about their investment strategy. They scrutinize particular funds and author reports on their strengths and weaknesses. Along with examining an investment managers staff and investment process, selection specialists dissect historical performance data using statistical tools designed to pinpoint sources of return and risk and gauge how well a fund performed relative to its peers. Most investment consulting firms produce confidential lists ranking fund managers according to their likely success going forward. Within fund selection and asset allocation are roles for relationship specialists, who are the sectors true consultants. While many asset allocation and fund selection specialists work in research and focus on a particular type of fund or investment product, relationship specialists are usually generalists. They are often more senior members of the firm. Staff in investment consultancies usually begin their careers in research and move into client-facing roles as they gain more experience. Most large investment consulting firms take on graduates. After entering investment consulting, youll typically go on to gain a professional qualification, such as the Chartered Financial Analyst (CFA) designation. Kyle J. Johnson, Investment Consultant Cambridge Associates Describe your career path. While at Harvard Divinity School after getting my undergraduate degree in comparative religion, I became interested in the intersection of finance and ethical issues and the role of the investor in ensuring positive social and environmental outcomes. I joined KLD Research and Analytics as a social and environmental research analyst. I then chaired the Domini 400 Social Index, which was the first benchmark index constructed using environmental, social, and governance criteria. From there I joined Domini Social Investments as head of institutional sales. It was there that I learned about Cambridge Associates, where Ive worked since 2005. Describe your role at Cambridge Associates. First, I serve as a client-facing consultant, working with a range of organizations on asset allocation and manager selection. Some have social or mission-related investment mandates and some dont. Second, I work on our mission-related investment team, where our goal is to help clients make informed decisions and help them achieve their social or mission-related investment goals. What is a typical day like for you? Each workday is part of a broad cycle, built around quarterly client meetings. Early in the quarter I begin to plan and think about how clients should be positioned in terms of asset allocation and manager selection. Throughout the quarter I try to stay on top of our market research to assess valuation opportunities. I also review investment manager performance or organizational developments to see whether we need to make any changes in my clients portfolios. I work with several client teams and meet with them frequently to prepare for meetings. Later, my teams and I work to make sure decisions made at the meetings are executed. What advice do you have for undergraduate students or aspiring investment consultants? Investment consulting is a fascinating mix of developing strong analytic fluency with mathematics and investment concepts, coupled with an ability to clearly articulate these concepts to clients. A big part of the job is being able to communicate an investment thesis to a client. You need to be a good writer and good speaker or teacher. A lot of what I do is about teaching. My background happened to be very transferable, as being a teacher and working with numbers has been especially helpful in my work.
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Private Equity
Youll need some experience or an MBA to make it in this sector
At a base level, private equity funds raise money for companies in need of a capital infusion. In that respect, theyre similar to investment banks. But while banks raise money by selling stocks or bonds on the public markets on behalf of client companies, private equity funds do it by raising cash from wealthy individuals and institutions like pension funds. The similarity between PE funds and investment banks ends there. Where investment banks dont take a controlling ownership interest in the companies they take public, PE firms use the capital they raise along with leverage gained from issuing debt to assume control of businesses either as co-owners or, often, sole owners. In ideal situations, PE funds invest in underperforming companies, turn them around, and sell their stake at a profit some years later, often in the public markets. Sometimes private equity companies engage in asset stripping, or breaking up a company and selling its assets separately in order to make their profit. Private equity funds sometimes use a technique known as a leveraged buyout (LBO) for all or part of a companys purchase costs. In an LBO, the acquiring group uses loans, bonds or other debt instruments to raise the capital necessary to buy the target. Often, they use the target companys own assets as collateral. Sometimes, a companys own managers work with private equity groups to raise the money necessary to buy the stock of the firm theyre running. These deals are known as management buyouts. A subset of private equity is called venture capital. Venture capital, or VC, firms focus on funding promising new businesses. Firms like Blackstone Group, Cerberus Capital, TPG Capital (also known as Texas Pacific Group), Carlyle Group and Kohlberg Kravis Roberts & Co. (KKR) are a few of the sectors big players. KKR was doing high-profile buyout deals as far back as the 1980s. According to Fortune magazine, it was the first PE firm to take over a public company when it bought machine-tool maker Houdaille for $355 million in 1979. The biggest PE firms tend to get the most media attention because of the size of the acquisitions they complete. However, many mid-tier firms are also at work, acquiring smaller companies that can benefit from an injection of capital and management talent.
Recent Developments
Between 2003 and 2007, private equity funds saw explosive growth. That made the sector into a highly coveted class of customers for the leading investment banks, who refer to PE firms as financial sponsors. However, the credit crunch that began in mid-2007 sent private equity activity into a tailspin from which it has yet to fully recover. The hardesthit segment was so-called mega-deals valued at $10 billion and above. With both banks and institutional investors pulling away from risky lending, funding for leveraged buyouts all but disappeared. The number of private equity deals plummeted from a peak of 2,859 in 2007 to 1,072 two years later, according to Pitchbook, a financial data provider. Value of the median-sized deal fell by almost half, to $61.3 million from $116 million. In the first half of 2009, PE firms accounted for just 2.6 percent of total M&A volume compared with 20.5 percent in 2006, according to Thomson Reuters. Restructuring and managing distressed assets including steering a portfolio company through bankruptcy court emerged as a substantial area of activity for PE firms, and for the financial services industry as a whole. In 2010, rising stock prices and a gradual return of liquidity have helped the private equity sector regain a bit of the ground it lost during the preceding two years. More boughtout companies have succeeded both in going public and in finding buyers among other PE firms thereby giving their first group of private equity buyers avenues to exit those investments at a profit. Credit is once again being offered to finance new buyouts, albeit on stricter terms and in a fraction of the quantity available in 2006 and 2007. Dow Jones Careers in Financial Markets 2010-11
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In 2010, rising stock prices and a gradual return of liquidity have helped the private equity sector regain a bit of the ground it lost during the preceding two years.
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Private Markets reports 123 PE deals were announced in the 2010 first quarter, up from 76 in the first quarter of 2009. Two further hopeful signs: a rebirth of multi-billion dollar deals and a flurry of recruiting for so-called FSG (Financial Sponsors Group) investment bankers who focus exclusively on doing deals for private equity firms. The return of a semblance of normalcy to the business is heartening to many industry players, The Deal magazine wrote in July 2010. James Coulter, co-founder of TPG Capital, likened the current buyout financing climate to the situation in 2003 and 2004 not a bad time for private equity, he says. All in all, while they wield less influence than they did four years ago, private equity funds remain a huge force in the global economy.
Vanessa Indriolo, Managing Director, Private Equity Division Fifth Third Bank
Describe your career path. Ive grown up professionally in private equity, always investing in funds on behalf of a bank. After college I began in Key Banks private equity division on the accounting side. After seven years I was brought in to Fifth Third Bank in 2005 to build a private equity investing practice and team. At the time, no one at the bank was focused solely on private equity. Describe your role at Fifth Third. I manage a team that invests the banks capital in private equity funds. My team evaluates each investment opportunity and makes decisions based on a funds strategy, historical track record, and potential to hit the banks return target. My team will source and research new investment opportunities. Once weve made an investment in a private equity fund, well introduce the fund manager to a Fifth Third Bank lender. The bank can often provide value through our lending products and services. What is a typical day like for you? My team and I meet early in the week to discuss active investment opportunities and new deals that could be in the pipeline. Due diligence with these deals can take several months. Im engaged in all of our due diligence activitiesinputting data into a model, making reference calls and writing investment recommendations and will sometimes take the lead on these deals. There are also inbound calls regarding other investment opportunities, so I spend much of my time meeting new fund managers as they come through Cincinnati. What advice do you have for undergraduate students or aspiring private equity professionals? There are a number of good (and free) blogs, such as Private Equity Hub (peHub). Everyone on my team subscribes to these, and it helps us keep in touch with whats happening in private equity on a daily basis. In terms of classes that undergraduates can take, I think those focused on entrepreneurship are helpful. Acquire a variety of experiences and dont fear coming into private equity through operations. Its also critical to have financial skills as everything we do, from picking fund managers to networking, requires an understanding of what is happening in financial markets.
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Global Custody
Providing transparency to increasingly complex investments
Global custodians undertake the job of processing crossborder securities trades while at the same time working to keep the financial assets of clients safe and servicing their associated portfolios. Before computers existed, global custodians had gigantic filing systems for their core work - storing certificates of stock and bond ownership for their clients. Today, official documentation for stock and bond ownership is stored electronically, making the business of custody much less space-intensive and easier to conduct. Thats not necessarily the case within the booming alternative investment sectors such as hedge funds and off-shore funds, though even in those industries formerly cumbersome tracking systems are moving toward more efficient electronic methods. names such as BNP Paribas, UBS, Socit Gnrale and HSBC. After Lehman Brothers bankruptcy filing in September 2008 stranded billions of dollars in assets Lehman had administered for some 700 hedge funds, broker-dealers seeking custody business face much greater scrutiny of their financial strength. The Lehman bankruptcy and the earlier distress sale of Bear Stearns triggered what Global Custodian magazine called a seismic restructuring of the hedge fund administration market, with more than half of the largest funds saying theyd terminated a relationship with a prime broker during the preceding year. Of those that did, one-third cited counterparty credit risk concern as the reason. Thats opened the door for the strongest banks to expand their niche in prime brokerage, broadening services to win over lucrative hedge fund clients. In recent years global custodians also have branched out to offer other services, such as securities lending and controlling risk for asset managers. And because asset managers find it less expensive to outsource the safe-keeping and administration of global securities portfolios to a single firm, global custodians are even more important today. As protecting assets, monitoring compliance, and determining risk exposures to everything from counterparties to foreign currencies has become more difficult, global custodians continue to play a significant role in financial markets. Small custodians lack the manpower and technological expertise for these higher margin activities, and so are gradually being subsumed into bigger players. Meanwhile, bigger players have merged so as to become even bigger. One sign of the trend: Securities industry consulting firm Buttonwood International ceased its Global Custody Yearbook survey after the 2009 edition, in part because the number of custodians participating had consolidated from more than 20 in the 1990s to just eight. In exchange for safeguarding client assets, custodians charge a fee based on the value of what they administer. The percentage fee level will vary according to the frequency of transactions, the complexity of the portfolio, and the specific services required. Over the past two decades intense competition put downward pressure on custody fees. With asset managers increasingly selective in choos-
Recent Developments
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Global custody continues to evolve as the investment landscape grows more sophisticated. In recent years the hedge fund industry has become the dominant customer base for global custodians. Today, their technology-rich services include record-keeping, reporting, and trade processing. According to Globalcustody.net, a specialist Web site that tracks the industry, global custodians provided fund accounting and administrative services to funds holding more than $107 trillion in assets as of July 2010, up 12.6 percent from a year earlier. A 2007 merger between Bank of New York and Mellon Financial produced the worlds largest global custodian, BNY Mellon Asset Servicing, with $21.8 trillion of assets under custody as of mid-2010. U.S. institutions also occupy the next three places on the list, with JPMorgan in the number two spot, followed by State Street Bank and Citigroup. The next tier is heavy in European and UK
In recent years the hedge fund industry has become the dominant customer base for global custodians. Today, their technologyrich services include record-keeping, reporting, and trade processing.
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ing a global custodian, this trend could continue.
Jack Klinck, Executive Vice President & Global Head, State Street Corporate Development and Global Relationship Management Describe your career path. After working at an advertising agency I entered financial services with American Express. There I came to appreciate the details around technology and operations and how they underpin financial services. Next, I moved to Mellon Bank, entering the custody business. At Mellon, I managed several departments including the banks credit card business, which has many parallels with custody services. For a time I lived in London, managing Mellons asset management business in Europe. What is a typical day like for you? It begins early so I can catch up on overnight news in Asia and Europe. I read four newspapers each day and Ill speak to several customers a day and discuss service issues and market news. Also, I spend a lot of time working with my team by mentoring and discussing important issues that come up. I consider myself a change agent, so I look for situations where people are getting stale. Im consistently monitoring workflow to fine tune it and change the activities that people are working on at a given time. What advice do you have for an up and coming global custody professional? Id recommend starting out in a line, custody, or account operations position because it will give you solid indication as to the daily pressures of producing work and getting it out accurately and timely. Be flexible and adaptable, be ready to adjust career plans based on new opportunities that arise. Move to different departments, but also move geographically. People who work in one place miss out on experiencing regional differences. You need to think and act globally if you want to work in a global custody role. What should students be studying or doing to prepare for a career in global custody? Math, science, accounting and engineering are all strong disciplines to pursue. I am a liberal arts graduate but returned to school. Global custody is a business of data, so being able to understand it and harvest it to build models is important. The business is analytical, but communications - written and oral - with clients is equally important as you advance in your career. Its not about simply doing the work, but being able to communicate it effectively. Try out different roles. If youve worked in operations, try working in sales or marketing. Often, people impose labels on themselves and this can be damaging.
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Risk Management
Brakes on a banks risky activities
Risk management can apply to a variety of aspects of the financial business. On a fundamental level, it involves protecting a company from negative events. In the banking sector, risk managers strive to make sure a bank isnt overexposed to borrowers or trading partners that might not repay debts or other obligations, plummeting stock markets, regulatory flaws, or other financial pressures that could jeopardize the strength of its balance sheet. Similarly, in the asset management and investment banking fields, risk management helps ensure the overall health of a firms portfolio and, sometimes, manages regulatory risk. The insurance industry uses the term to describe services and products its corporate and business clients use to help protect themselves from potential losses. The insurance industry also has risk professionals on staff including those on the underwriting or actuarial end monitoring the exposures a company might suffer from policy coverage and its own investment decisions. In corporate IT departments, risk managers are charged with ensuring the business can continue to function after a computer systems failure, terrorist attack, or natural disaster. They also track employee or business partner activities to prevent fraud. In recent years, banks and investment firms struggled to contain their exposure to systemic risk the potential for widespread, domino-like collapse of markets or institutions that began when the subprime mortgage market imploded. Many institutions slashed staff to cut costs, but those on the risk management side neednt fear: Chief risk officers are beefing up their teams. Moreover, recent edicts by regulators and policy makers promise to lift the prestige and influence of banks risk managers compared with members of the money-making or trading side of the business who traditionally wielded far greater clout. Banking executives try to manage three principal risks as defined by a series of international agreements known as the Basel Accords. These are a set of recommendations on banking laws and regulations promulgated by the Basel Committee on Banking Supervision, which is part of the Bank for International Settlements based in Basel, Switzerland. First theres market risk, which ties in with systemic risk. This is the hazard that a whole group of traded financial products, such as stocks, bonds, or commodities, will fall in value simultaneously. Market risk is caused by outside events, such as market fluctuations caused by rising oil prices, terrorist threats, a physical disaster, shifts in foreign exchange rates, or sudden interest rate hikes. Credit risk is the risk that a particular company or individual will default on its obligation to repay its debts. This category of risk gained prominence recently, due in large part to the failure of new products that were designed to help manage it: credit default swaps, along with a plethora of complex credit derivatives. While the explosive growth of credit derivatives last decade boosted demand for Ph.D.-level quantitative modeling within banks credit risk departments, lately the pendulum has swung back toward more traditional, fundamental tools involving the analysis of company balance sheets, cash flows and debt ratios. Finally, operational risk is the risk something might go wrong in the day-to-day running of a bank. This could come, for example, through the impact of a serious physical disaster or a large-scale fraud committed by employees or management. Reputational risk sometimes considered a sub-sector of operational risk is the risk something will happen to damage a firms reputation. The recent mortgage and credit collapse, along with an earlier wave of financial scandals surrounding biased equity research, improper mutual fund trading, and phony accounting, have made banks and investment houses increasingly sensitive to the need for reputation management after a crisis occurs.
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and meet with directors to determine an organizations financial health. Operational risk experts review the likelihood of particular events taking place, and formulate plans to implement if they do. Reputational risk specialists attempt to present the banks best side in public. They generally play a passive role unless an adverse event occurs. Then theyre working around the clock. Few banks employ reputational risk specialists, per se. The role is typically dealt with by in-house and external public relations specialists, the human resources department, or in-house counsel and outside lawyers skilled in the field. If you want a career in risk management, its a good idea to join a banks or brokerage firms graduate training program. At some banks, risk management training is covered by the IT or operations department. Additionally, many of the top investment banking firms and brokerage houses offer their analyst and associate recruits broad training, which generally provides classes in risk management, in addition to courses on corporate finance and the markets. With industry specific knowledge and risk management skills under your belt, it will be easier to advance in the risk world. Risk management training classes and certifications are also offered by a number of professional trade groups, including the Global Association of Risk Professionals, the Professional Risk Managers International Association, the Risk Management Associations accreditation program for credit risk managers and the Risk and Insurance Management Societys enterprise-wide and insurance risk classes and training courses. Tony Yung, Vice President, Investment Bank Risk JPMorgan Describe your career path. While an undergraduate at Harvard I spent two summers as an intern for a small French investment bank in their New York and Hong Kong offices. After graduating in 2000 I joined JPMorgan syndicated and leveraged finance group, working on transactions for investment grade and leveraged clients. I moved to the special credits group, working on bankruptcies and restructurings, and then to the credit risk management group where Ive been for the past three years. I cover investment banking clients in the consumer products industry and manage the firms credit exposure to these clients. Describe your role at JPMorgan. Im responsible for our consumer product clients, mainly in the food, beverage, tobacco, and household products industries. We partner with investment banking coverage and product groups when they deal with these clients. I work with the various client teams to make sure that the risks we take are reasonable and accounted for. What is a typical day like for you? It depends on the number of deals Im working on at a given time and what stage they are in. My goal is to protect the firms fortress balance sheet and I accomplish that by meeting with clients, performing due diligence, and working with the syndicated leverage finance group and legal counsel to devise financing terms. Regardless of the number of active deals there are, I must monitor all of my clients and stay current in the industry for news that may impact their performance. What are the most important skills for a career in risk? This work involves a fair balance of qualitative and quantitative skills. You need to have a strong analytical mind as the work requires you to take in a lot of information and derive conclusions. Strong communications skills are also important because you are always partnering with other groups, such as investment banking, and youre also interacting with clients on a regular basis. Its also important to be inquisitive and always have a view on a topic. Youll need to be able to get to the bottom of things and assess all major risks.
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Compliance
The internal watchdogs of the financial industry
When its time to party, are you always the designated driver? Would you be an FBI agent if only the pay were better? Do your friends still love you even after youre forced to tell them how stupid they sometimes act? If you can answer yes to these or similar questions, compliance may the right niche in investment banking for you. A compliance professional working for an investment bank, brokerage, mutual fund company or financial institution makes sure the firm follows local, state and federal laws, as well as the rules set by government regulators. To do this, they interpret ever-changing regulations, apply them to their companys individual business, then communicate the rules to the firms employees. Virtually no document thats going to be released to the public - from marketing materials to financial reports - gets out the door without being reviewed by a compliance specialist. In many cases, that review is conducted by an attorney. It takes a unique and specific type of person to work in compliance, and its not an easy job, says Jack Kelly, managing director at Compliance Search Group in New York. Youre really an internal affairs police officer on Wall Street. To succeed, youll need both analytical chops and people skills. You have to get along with people because youre perceived to be the guy whos trying to stop business from taking place, or as the one standing in the way of someone making money, Kelly explains. Analytical ability is key, too, because if you miss something, you could cost the firm millions. And by the way: Even though compliance experts at the top of the food chain might make $1 million a year, most earn between $150,000 and $250,000, so the people youre watching over have historically made more money than you. up hiring for those skills, the recent bank bailouts spurred new controls on banks risk-taking and related practices, including how they compensate traders and other employees who commit a banks capital. In 2011 and beyond, the Dodd-Frank Act will have a great influence on compliance careers both in the financial industry itself, and in the many government agencies that oversee it. Banks, hedge funds and other affected institutions began beefing up in-house compliance and legal teams even before the Dodd-Frank financial reform law was finalized. Many are eager to hire former regulators, such as bank examainers. Moves to strengthen compliance teams also have a commercial motive. In the wake of the crisis and scandals such as the Bernard Madoff Ponzi scheme, both institutions and wealthy individuals are demanding greater integrity and greater transparency from firms that handle their money. On the opposite side of the aisle, government regulatory agencies traditionally a good source of jobs for people just out of college are stepping up hiring too. The Securities and Exchange Commission, one of the most important agencies that oversees Wall Street, expects to add roughly 800 new positions in the next few years because of DoddFrank. The new law adds or expands SEC responsibilities for over-the-counter derivatives, credit rating agencies, hedge funds and private equity funds. Other watchdog agencies given greater authority under Dodd-Frank include the Federal Reserve and the Commodity Futures Trading Commission. The Federal Reserve, for instance, will house a new consumer financial protecton bureau thats expected to have an initial budget of about $500 million and hundreds of employees (although many may simply be transferred from existing federal agencies). Other important regulators include the Federal Deposit Insurance Corporation, the U.S. Comptroller of the Currency, the U.S. Treasury Department, the National Credit Union Administration and a private-sector body, the Financial Industry Regulatory Authority (FINRA).
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Recent Developments
Perhaps more than any other function within financial institutions, the jobs of compliance professionals have been reshaped and for the most part, upgraded in the aftermath of the global financial crisis. Just as the accounting scandals of a decade ago (and the Sarbanes-Oxley Act that was designed to address them) ushered in new standards for corporate accounting and internal controls and ramped
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ple, if someone pays cash for a large quantity of bonds, its likely to warrant your attention - particularly if that person or organization has never dealt with the bank before. Compliance training specialists focus on internal controls and preach the compliance message to a banks employees. They create and present training courses explaining what the rules and regulations are, and why bankers need to follow them. Monitoring specialists look out for infringements of rules and regulations that suggest employees are up to no good. Much of this role has been taken over by computers, which can monitor billions of e-mail messages per day and spot unusual activities such as dormant trading accounts that suddenly spring back to life. Compliance advisors interpret regulations and apply them to particular business areas and products. An increasing number are product specialists who offer advice on particular types of financial products. Product specialists sit on or near the trading floor, tell traders whether or not a particular trade can go ahead, and suggest alternatives that will still be satisfactory to the client. Compliance advisors need to know a lot about trading and about the products theyre advising on. Some are ex-traders. No matter where you decide to start in compliance, chances are youre going to be busy in the near term, thanks to the flood of rules coming out of the Dodd-Frank Act and other legislative and regulatory steps in recent years. Patrick OLeary, Compliance Officer BNP Paribas Describe your career path. I graduated from law school in 1999 and took a job working at the SEC in corporate finance, reviewing documents when companies went public. Later I joined a start-up hedge fund and spent three years as an assistant bond trader. After it shut down, I began to look for a compliance role that would allow me to combine my legal and trading backgrounds. I joined CooperNeff Advisors in September, 2005, providing compliance support for the firm and BNP Paribas Asset Management for hedge funds and traditional asset managers. Describe your role at BNP Paribas. I am a compliance officer responsible for asset managers within BNP Asset Management and a fund administrator, BNP Paribas Financial Services. My job is akin to that of a referee - overseeing traders to make sure rules are followed. I work with U.S. large cap equities and European investment grade and sovereign bonds. My job is making sure our SEC compliant program is in place and evaluating best execution on a regular basis, specifically determining whether we are getting best value for client trades. Finally, I work on anti-money laundering, Know your Customer, which is gathering documents on clients prior to accepting them. For instance, we need to make sure a client has the authority to enter into contract with us. What is a typical day like for you? About a quarter of my day is spent responding to questions from traders and our sales team. Its important that I interact with each team, so that questions about compliance can be answered. I need to be sensitive to the needs of the business. Ill also spend time reviewing trades, marketing presentations and client reporting. Our home office in Paris will often send us documents or questionnaires to complete, and other reporting to make sure we have an efficient compliance program in place. Well also meet regularly with the banks internal controls committee. What advice do you have for an up and coming compliance professional? Practical experience is important, as its difficult to find experienced compliance people who have this level of knowledge of markets and securities. The top priority is to serve clients, so you need to be practical. Ideally, rather than simply telling businesspeople a particular business cant be done, compliance professionals work with the business to roll out a particular offering in a way that is compliant with applicable regulations. Careers in Financial Markets 2010-11
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Human Resources
The people people of investment banks
When an industry is driven by human capital, leaders need human resources (HR) professionals to manage talent even during times of severe crisis. So despite massive layoffs in the securities industry, a few firms continue to hire human resource generalists to help retain and recruit talent. Since the industry stretches across the world, the most in-demand HR professionals have solid knowledge of investment banking and global markets. In todays market, HR professionals are at the forefront of helping Wall Street re-staff after the deep layoffs most firms instituted since 2007. They also form a defensive line, helping their own organization retain strong performers who rivals seek to lure away. Like other departments, HR is being asked to increase productivity and reduce costs. In some cases, that means taking on the management of several business lines rather than focusing on a single area. In other cases, firms are outsourcing human resources, or moving backroom operations to lower-cost markets outside New York City. Current economic, regulatory and market conditions have added to the challenges HR faces. For instance, HR must continue to recruit graduates despite limits on bonuses and recent negative publicity about banks of all types. With job candidates nervously listening to rumors, HR professionals must also take on the job of publicist to help bolster the banks image with current and prospective employees. HR takes care of all the people issues that arise in a company. It writes and enforces rules covering issues such as hiring and firing, employee pay, diversity, discrimination and employee monitoring. The life of HR professionals is a roller-coaster ride. When times are good, they scramble to bulk up the staff. When times are tough, they manage layoffs, including making sure managers follow the law when deciding who stays and who goes. Given the cyclical nature of finance, HR professionals can expect to shift from hiring mode to firing mode many times throughout their career. In recent years, most banks have outsourced HRs routine, peripheral activity. Questions about compensation, benefits or employee relations that once were addressed by HR people in each of a banks divisions now go to call centers. Consequently, fewer HR people work directly for the bank. Those that remain must prove their value as strategic partners who understand the business and can advise department heads about how to attract and retain the best talent.
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Legal
Sound advice needed to handle a new wave of regulations
Banks are large and complex organizations, and most of their activities have legal implications. Its the legal departments responsibility to ensure all contracts signed by the bank are watertight, that the bank fulfills its contractual commitments, and that lawsuits are avoided. Last decade, the Sarbanes-Oxley law enacted in 2002 brought new complexities to the role of general counsel in the form of corporate governance requirements, securities litigation, accounting, taxation, and reporting and disclosure requirements for all public companies (not just banks). Now, the banking legal profession in particular faces another watershed moment in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. To both influence and adapt to the coming vast array of new government regulations, banks, hedge funds and other institutions will need a steady stream of legal advice. DoddFrank also compels the creation of thousands of new jobs within regulatory agencies whose staffs were growing even before the new law, and which often serve as springboards for legal and compliance careers on Wall Street. At the same time, bank staff attorneys and outside counsel continue working on mergers, securities offerings and other bread-and-butter banking deals. Recent years also have seen banks increasingly involved with restructuring and bankruptcy law, since the recent credit crisis and recession deprived many companies of capital and credit, forcing them to restructure debts both in and out of court. Other than joining a bank, a law firm or the government, the countrys largest corporations are a prime source of opportunities for attorneys. Corporate counsels are responsible for anything and everything legal at the company, including the negotiating and drafting contracts, overseeing employment law compliance, advising senior management, and helping craft legal and business strategies. More important, these roles often give attorneys a seat at the table when it comes to forming the corporate growth strategy. More than ever, the increasing importance of corporate governance has elevated corporate counsel to the highest levels in an organization. cial services activities, including derivatives, trading, hedge funds, private equity, credit ratings, retail lending and credit cards, and even the racial and gender makeup of financial companies work forces. It also alters the current division of responsibilities among financial regulators, for example giving greater oversight power to the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission, while abolishing the Office of Thrift Supervision and splitting its functions (and current employees) between the Office of the Comptroller of Currency and the Federal Reserve. Dodd-Frank also requires the creation of an entirely new federal agency, the Bureau of Consumer Financial Protection. In a 130-page memo summarizing the legislation, the multinational law firm Davis Polk & Wardwell LLP observes: U.S. financial regulators will enter an intense period of rulemaking over the next six to 18 months, and market participants will need to make strategic decisions in an environment of regulatory uncertainty. The legislation is complicated and contains substantial ambiguities, many of which will not be resolved until regulations are adopted We expect that there will be both severe challenges for financial institutions as well as significant market opportunities, both at home and abroad, and that regulators and market participants will be dealing with the Acts consequences, both intended and unintended, for many years to come. Davis Polk says the act requires 11 different federal agencies to undertake 243 new rulemaking proceedings and 67 studies. As of mid-2010, many institutions were already enlarging their legal and compliance teams in preparation for Dodd-Frank. Professionals with experience in regulatory agencies such as the Federal Reserve were especially sought after not just for guidance on compliance, but also for the more immediate task of helping firms participate alongside regulators in drawing up detailed rules needed to implement the new law. In the years preceding Dodd-Frank, taxpayer-funded bank bailouts spurred a plethora of government-mandated rules some temporary, some permanent over how banks manage their operations and compensate employees. The bailout-inspired regulations add yet another layer to banks need for legal counsel. The government-driven boost for banking legal work comes Careers in Financial Markets 2010-11
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Recent Developments
The Dodd-Frank Act was signed into law on July 21, 2010. It overhauls the current regulatory framework over a broad swath of banking, investment management and other finan-
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at a time when demand for traditional transaction-related legal work is still struggling to recover from the recession. During 2008 and 2009, law firms and corporations laid off attorneys due to lower demand for their services. The early months of 2010 showed patchy improvement led by 9 percent growth in merger and acquisition (M&A) legal work, according according to a report by legal industry consulting firm Hildebrandt International covering the years first quarter. General corporate work, tax, capital markets and even real estate all showed very slight positive growth for the quarter, while bankruptcy-related work grew 2.1 percent but was seen trending lower as the economy improves. Lori Hoberman, Attorney Chadbourne & Parke Describe your career path. I started at Pillsbury Winthrop as a tax attorney. Originally I worked on the venture fund side, but today about 85 percent of my practice is company focused. Representing emerging companies in various industries favored by the investment community in New York, I get to work with entrepreneurs - the most eclectic, creative, unusual and fearless group of clients a lawyer could have. I joined Chadbourne & Parke to help build out the new emerging company/venture capital practice. What is a typical day like for you? There are many interactions with clients. Also, the venture capital business requires a solid network of investors, public relations firms and investment bankers. So, I spend a lot of time developing this network. One recent day began working with a retail company and ended with a technology client, which is indicative of the opportunity I have to learn about different industries. What advice do you have for an up and coming venture capital attorney? Develop a solid network of contacts and sources. You can do this by attending and speaking at events. My business is people driven. I always need people to whom I could refer deals and from whom I can get referrals. Ive created a quarterly networking lunch for New York City venture capitalists, and have been doing it for eight years. Its a great way to bring the venture capital community together and discuss topics of interest and build a network. What are the most important skills for a career in venture capital? The ability to give savvy, logical, cost-effective advice. I attend most of my clients board meetings and find that they have taught me a great deal about business. In becoming an attorney, you dont receive training in business, so getting this education has been most valuable to me in my practice. What should people wanting to work in venture capital be doing to prepare, i.e. groups to join, networking, reading? Attend local venture capital events. Theres a community and you need to be a part of it. Read some of the venture capital blogs, such as TechCrunch, or Fred Wilsons blog. There is a lot of valuable information you can read that can help you to develop a sense of whats going on in the business. In the end, its all about knowing who the players are and networking.
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Information Technology
The work thats increasingly outsourced overseas
An investment banks information technology (IT) department is responsible for the web of networks, computers and software that underpin any modern financial organization. Firms use technology for just about everything: communicating with staff, storing information on clients, and running complex computer models to price and trade financial products. They are known for having some of the worlds cutting-edge systems, especially for their trading floors. In recent years, a growing number of banking IT jobs are being outsourced to locations such as India and China. The good news is banks still need plenty of people in western financial centers to manage and coordinate with overseas employees. According to technology researcher Forrester Research, there will be no shortage of future demand for business analysts and project managers who understand the banking business and can manage the outsourced functions.
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York office. Financial services spend a greater percentage of dollars on technology than other industries, so it will continue to innovate and employ bright people. Indeed, BNY Mellons Chief Information Officer John Fiore says theres a shortage of new college graduates for earlycareer financial IT roles, even while experienced candidates are plentiful. At the junior or entry level, its more competitive among employers, Fiore told Wall Street & Technology in June 2010, because there are fewer new graduates with the right skills. As a result, Were all competing for a smaller population. Wall Street firms key IT priorities for 2010 and 2011 include innovating processes around trading, portfolio management and risk management, according to a survey from the Securities Industry and Financial Markets Association (SIFMA) and IBM, released in June 2010. Professionals who answered the survey also foresaw increased IT investments for risk analytics used in compliance. Another important cluster of IT skills banks seek these days revolves around managing new data technologies such as server virtualization and project management. And bank mergers are boosting the need for project managers and developers on a contract basis. Philip John Venables, chief information risk officer for Goldman Sachs, says college graduates can expect a full spectrum of career opportunities, especially if theyre willing to learn and adapt. Because firms depend on technology - particularly as a key competitive differentiator - theyll continue to invest in it. Generally, he says, there will be a need for people who can take their strong knowledge of technology and marry it with a business specialty.
IT professionals who want to stay in advanced technology are being advised to couple their technical expertise with deep knowledge of a vertical industry, such as financial services or pharmaceuticals, or to combine IT with business skills, perhaps by earning an MBA. Recruiters say financial firms increasingly seek candidates with a combination of business and technology skills, such as an understanding of fixed income and Java, or knowledge of equity index products and C#. In addition, firms want people who can communicate well, who can get their point across briefly and directly. Theyll often have to communicate with clients and interact with traders on the floor, so communication skills are very important. While companies want combined skills, they often dont offer an obvious path to acquiring them. So, IT professionals should keep an eye out for positions that offer a mentor who might help them broaden their role in the firm.
Recent Developments
The recent recession eliminated a large number of jobs in financial IT, and banks continue to be very selective in their IT hiring as of mid-2010. But as the industry reconstructs itself, The bright spot is the financial services industry is more dependent on technology than any other industry, says Paul Groce, a partner at search firm CTPartners New
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writing the computer programs that help financial firms do everything from pricing and booking trades to calculating risk. Programming languages used by banks include C++, Java and Microsofts .NET. Those on the business analysis side include business analysts who look at the way technology is used in the bank and analyze the opportunities for making it work better. A trader might complain about the length of time it takes his computer to execute a trade, so its up to the analyst to investigate whether the complaint is valid. Once big changes are underway, the responsibility for managing them often passes to another part of the IT staff: the project managers. These are the people who plan, structure and fulfill IT projects. If IT development work is outsourced, the project managers work with providers to ensure efforts are completed correctly and within the mandated time frame. Those who work in infrastructure administration are responsible for the day-to-day upkeep and maintenance of a companys hardware and software installations. Technical support staff requires razor-sharp technical skills and the thickest of skins to handle not only technology problems, but the frustration of irate traders as well. So customer service skills along with the ability to quickly diagnose a problem are essential. Its a role that carries a lot of responsibility: A computer problem on a trading floor lasting a few minutes could cost millions of dollars. Its up to the support staff to identify and resolve the problem. Another specialization thats gaining more importance is risk and security. In this area, roles range from designing network security systems to understanding systems and trying to figure out potential threats. People who work in information risk and security teams can come from different backgrounds, including MBAs or those with economic degrees. Caroline Arnold, Global Head, Client Relations and Facing IT Morgan Stanley Describe your career path. I took a less traditional career path. I was an English major at Berkeley, and minored in economics. I was always good at computing, but early on I didnt see it as my career path or the focus of my education. After graduation, I worked in theater. Programming was my waitressing; I did consulting work because it was flexible, and over time, I wound up starting my own consulting firm that worked with large banks and companies like Procter and Gamble. One of my consulting assignments was with Morgan Stanley, and at the end of my assignment, they offered me a permanent job as a developer in 1994. The next year I was promoted to vice president and began managing technology for our research business. Describe your current role at Morgan Stanley. I lead a practice area group that executes the technology strategy for client relationship applications, profitability, and many client-facing web sites. Nearly all of our software is custom built and Im responsible for technical decisions and project execution. For example, my team built the auction system to handle Googles initial public offering, still the largest IPO by auction ever conducted on Wall Street. In addition to our execution responsibilities, my team and I also put forward new ideas to build the business for the future. What skills are most important to be successful in IT? Deep technical skills are critical. Also, creativity and the ability to think critically about the business the technology supports. Its important to question accepted wisdom as that is what drives innovation. Developing an open and direct communication style and the ability to persuade others is a key asset. And you want to think and operate like an owner. Its important to be able to take ideas, move them forward to execution, and be accountable for the results. The most successful people in IT are great technologists who are able to strategize with the business about a new opportunity, and then execute. Its a thrill to see products youve created make a difference to the bottom line.
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Recent Developments
The recent financial crisis elevated the importance of PR people by subjecting all manner of financial institutions especially, the largest global banks to intense scrutiny and fury from a public that perceived them as culprits. Being portrayed as a villain in the media isnt just unpleasant, its bad for business. In its annual report for 2009, Goldman Sachs mentioned negative publicity as a risk factor affecting the firms business outlook: Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of
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Those interested in marketing or PR careers can look beyond investment firms themselves. Companies that sell products and services to Wall Street such as financial software developers, trading system vendors, or providers of information products often seek individuals with specific market experience to fill product management roles. Firms like Bloomberg and Reuters generally seek people with direct, hands-on experience in a specific market to fill product manager positions. While people in central marketing communicate to customers and work closely with sales staffs, people in PR encourage journalists to write positive articles about the company they work for or engage in damage control if a bank is attracting negative media attention. Investment banks typically have in-house PR departments. Larger firms may have a separate staff to handle the investor relations function, whose role is to communicate financial results. That job became more specialized for all U.S. public companies after the passage of the SarbanesOxley Act in 2002. Few financial firms train their own marketing and PR staffs in-house. Typically, they hire professionals with several years experience, usually gained in a blue chip company or a top PR agency. Similarly, product managers usually come with several years experience in large advertising agencies. However, large financial firms may sometimes hire entry-level marketing personnel either full-time, or as interns, to assist more seasoned professionals. There are also various independent PR agencies active in the financial world. Rich Silverman, Senior Partner Silverman Communications Group Describe how you came into the business and how your career developed. I got into financial public relations very much by accident. After 12 years as a journalist the last two covering Wall Street for Dow Jones News Service Merrill Lynch, the largest company in my beat, recruited me for its PR team. I began by overseeing media relations for the firms institutional business in New York. In 1997, I was transferred to London as head of media relations for Europe, the Middle East and Africa. I returned to New York two-and-a-half years later with a promotion to global head of media relations. After the Sept. 11, 2001 attacks, in which I lost a member of my staff, I needed a change. I joined Honeywell as head of global media relations and crisis communications. But I missed the financial sector, so in 2003 I jumped to Lazard. After three-plus years at Lazard, I moved to Brunswick Group, a global PR firm, as the partner in charge of its financial institutions practice. I opened my own communications shop, Silverman Communications Group, in July 2008. What are the key skills for gaining a foothold in financial communications? Writing. You must be comfortable writing and be able to turn around assignments quickly. You also must be familiar with whats going on in the financial markets. Id also recommend getting comfortable with the fundamental principles of accounting. The world of numbers is a different language, and you have to be able to speak it. If your employers treasurer or CFO doesnt have confidence in your ability to understand what theyre saying, they will be unwilling to walk you through critical financials. On the other hand, you gain tons of respect if you can gain a fundamental understanding of accounting. In addition to accounting, I would suggest learning a second language, preferably Spanish. For years, demographic trends indicate more and more of the U.S. citizenry will be speaking Spanish in the future. And finally, a large part of being a valued PR professional is gaining the ability to effectively communicate sophisticated and complex issues in a manner that is easily understood and without appearing to be insulting or dumbing down the issues. This is an important quality that your client will undoubtedly appreciate.
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Ratings Agencies
Grading the potential of market players
The role of ratings agencies is to assess the creditworthiness of companies and government agencies that issue debt instruments to investors. Although the debt issuers actually pay for the privilege of having their business scrutinized, the agencies are supposed to provide a neutral analysis of their ability to repay their obligations. The debt ratings sector is dominated by three companies: Standard & Poors (S&P), Moodys Investors Service and Fitch Ratings. Together, theyre believed to hold at least 90 percent of the market. With analysts based in business centers worldwide, S&P and Moodys are by far the largest. Another well-known agency, A.M. Best, specializes in rating insurance companies both their debt and financial strength, or ability to pay policy claims. Best also rates U.S. banks and bank holding companies, including small and mid-sized community banks.
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separate businesses that analyze and forecast trends and prices for various structured credit products. In 2005 Fitch acquired Algorithmics, a provider of enterprise risk management solutions. Moodys set up Moodys Analytics in 2008 to develop and market analytical tools used in credit portfolio management.
Recent Developments
The worldwide financial crisis strained ratings firms finances, business models and reputations. Besides losing business because new structured finance deals abruptly ceased, the credibility of the firms was hit hard by revelations that their analysts opinions much like those of equity analysts around the time of the tech-stock bubble in 2000 were improperly influenced by the firms efforts to curry favor with the debt issuers who pay their fees. Still, at the end of the day lawmakers and regulators opted not to tamper with the current business model in which issuers pay for their own ratings. In the last decade, ratings firms were both major beneficiaries and major enablers of the unsustainable boom in structured debt products, especially those created from sub-prime mortgages. The firms came to depend on this relatively new market for the lions share of growth and profits. But the structured finance boom soon proved to be a bubble. When home mortgages and the structured bonds theyd been blended into began defaulting at ever-rising rates, sales of new structured bonds requiring debt ratings dried up. In 2008, Moodys earned less than half the revenue from rating such deals as it did in 2007. Perceptions of impartiality also took a beating from the crisis. Evidence indicated rating firms had rubber-stamped AAA ratings on structured products built out of sub-prime mortgage loans in order to generate more business. In Congressional testimony, Moodys Chairman Ray McDaniel admitted, Maintaining our standards may conflict with maintaining market share. The Dodd-Frank Act, the new law overhauling regulation of the broad U.S. financial industry, imposes several new requirements on the ratings business. The Securities and Exchange Commission will create a new office to enforce standards for rating agencies including periodic inspections, a function the SEC has long performed for securities dealers and fund companies. Another important change Careers in Financial Markets 2010-11
All four companies issue debt rankings in a similar format, making it easy for investors to compare the ratings of one organization to another. A debt issuer rated AAA (in the format used by S&P and Fitch) or Aaa (in the Moodys version) is judged to be almost certain to repay its debts. Any bonds rated Ba or lower by Moodys and BB by Fitch and S&P are considered to be speculative grade, or junk. Due to the greater perceived risk, debt consigned to this category will have to pay higher yields to attract investors. The lowest possible ranking is D. Buyers of these bonds face the greatest prospect of not getting their money back. Over the years, the nature of debt financing has changed dramatically, and the ratings agencies have had to adapt accordingly. Wall Street has figured out ways to securitize everything from credit card debt to cosmetic surgery receivables. Gauging the risk in those deals falls to analysts on structured finance ratings teams, who are generally quantitative specialists. Moodys analysts follow the debt of more than 110 countries, 12,000 companies and 25,000 public finance issues. On top of that, it follows 106,000 structured finance deals a catch-all term covering a broad range of obligations created from pools of other obligations, including mortgages and exotic credit derivative instruments. Along with rating the default risk of thousands of issuers and securities, in recent years, ratings firms have built
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makes credit rating firms potentially liable for damages if their ratings appear in registration documents for securities that later lose value. (Until now, the firms have successfully invoked the First Amendment as a defense against liability for faulty ratings.) The law firm of Skadden, Arps, Slate, Meagher & Floms analysis of Dodd-Frank, issued in July 2010, says this about credit rating firms: Heightened corporate governance standards, new policies and procedures related to the credit rating process, and the potential for fines, penalties and increased private litigation are intended to increase the transparency and integrity of the rating process.The reforms will most likely result in higher fees charged by rating agencies to compensate them for incremental administrative, compliance and operating costs and increased exposure to third-party claims. One implication seems to be that rating firms, like other sectors of the finance industry, will need to expand their administrative and compliance staffs. Claire Mezzanotte, Managing Director, U.S. & European Structured Finance DBRS Describe your career path. While in college, during summer and winter breaks I worked for my brothers company, a boutique investment bank. After four years in Chases credit department, I moved to New York with the aspiration of finding an investment banking job. I got a job at Moodys, then was recruited by Fitch Ratings where I stayed 12 years. At Fitch I worked first in municipal structured finance, then asset-backed securities, credit policy, and later managing the consumer asset-backed securities group where I was responsible for analytics, modeling and surveillance. I was then recruited by a former colleague from Fitch to join DBRS as head of credit policy. Today, Im responsible for the asset- and residential mortgage-backed and covered bond groups for the U.S. and Europe. Describe your role at DBRS. I am responsible for the ratings groups analytics, modeling and surveillance in addition to publishing rating methodologies. I meet with investors, issuers, and bankers regularly. I also speak at industry conferences on a variety of topics. One of my most important responsibilities is chairing our rating committees where analysts present rating recommendations for proposed structured finance transactions. I ensure we are abiding by our policies, procedures and rating methodologies. I also serve as a resource for the group and provide guidance on rating issues. What advice do you have for undergraduate students or aspiring ratings professionals? We look for people who possess both strong quantitative and qualitative skill sets. In this business, you need to be able to evaluate the financial viability of proposed financial structures, read legal documents and opinions, and integrate a variety of analytical components into a ratings presentation. You need to be able to write and articulate concepts and ideas effectively. You must also stay abreast of financial markets, and currently sovereign issues, regulatory reforms and how their affects may impact the companies and structures that are rated. Its also important to network. Informational interviews are an effective way to learn about skills people need to be effective and how companies operate.
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QA
Information Providers
Delivering data to the markets
The fuel that powers the financial markets is a potent combination of real-time news and market data. Whether its the release of a companys quarterly earnings report, the actions of central banks on interest rate policies, a significant merger or acquisition or a default or bankruptcy by a major debt issuer, market participants react to news every trading day. Events like these, big and small, drive trading activity. Because news inspires action, traders ultimately rely on accurate and timely market data as a basis for their buy-sell decisions. Trillions of dollars in stocks, corporate and government bonds, futures, options and a seemingly limitless number of exotic, over-the-counter derivative instruments such as swaps or collateralized debt obligations (CDOs) are bought and sold worldwide each day. Collecting, massaging and disseminating all of this trading data is the job of the information providers - the companies in the financial information industry.
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supply prices for securities that are in their inventory. Think of those as the advertised or list prices, which can differ from actual selling prices. Brokers, on the other hand, are middlemen, and the data they provide reflect actual transaction prices. ICAP plc, a London-based, publicly traded company, is the largest inter-dealer broker. Cantor Fitzgerald was one of the first firms to report the prices for trades it brokered in the market for U.S. Treasury securities, which it still resells through its subsidiary, BGCantor Market Data. Other major suppliers of data feeds are the worlds stock, commodity and options exchanges. When the Internet first became popular, data vendors feared their role would become less important as more information became available directly to investors and bankers alike. That trend has proceeded more slowly than originally feared, although it has driven consolidation in the industry.
The principal players in this realm are Thomson Reuters, Bloomberg, News Corp.s Dow Jones subsidiary, and Standard & Poors, which is owned by McGraw-Hill Companies. Each company has extensive news operations and employs hundreds of people to gather and scrub for accuracy the data they redistribute to market professionals, corporate clients and other organizations. Another, smaller player is Interactive Data, whose various business units supply timesensitive market price data, reference data and analytical tools to institutions and individual traders the world over. Many other companies operate in specialized segments of the industry. Some are software developers building sophisticated tools and trading programs. Others focus on news or market analysis. Dow Jones, whose Dow Jones News Service has been covering the markets for more than 100 years, is one example of the latter. Its content can be delivered through distribution partners or directly to clients. Vendors like Thomson Reuters and Bloomberg not only distribute data to the financial industry, they also collect it, then consolidate and sell it back to the same institutions that initially generated it. In over-the-counter markets for bonds, foreign exchange, financial derivatives, and so on, pricing is supplied by dealers and brokers. For example, the trading desks at large investment banks like Citigroup or Goldman Sachs generally
Recent Developments
The sector has undergone high-level changes in recent years. Dow Jones & Co., the 125-year old company that publishes The Wall Street Journal and whose name is attached to the best-known U.S. stock-market index, was acquired by News Corp. in December 2007. Reuters and Thomson, two formerly separate firms with major footholds in the financial information space, merged in April 2008. And in July 2010, two private equity firms acquired Interactive Data, which had been a public company majorityowned by Pearson PLC (publisher of the Financial Times). In another important ownership change, early in 2010 Chicago-based CME Group, a public company that operates the largest futures and options trading exchanges, acquired a 90 percent stake in the famous Dow Jones family of stock indexes. Many of the Dow Jones indexes now form the basis for tradable securities. CME and its counterparts that run trading platforms for securities and derivatives make up a growing force in the information services field. A provision of the Dodd-Frank Act hands these industry-wide trading venues effective control over some types of derivatives contracts that until now have traded over-the-counter. The year 2010 also saw the birth of the first certificaCareers in Financial Markets 2010-11
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tion exam and designation for market data professionals: Financial Information Associate (FIA), administered by the Software & Information Industry Associations Financial Information Services Division (FISD). The certification requires passing an online exam that covers financial markets, data, technology, and related issues and trends. A few financial employers say it could become a differentiator among candidates for financial information jobs. Eric Frank, President, Investment & Advisory Thomson Reuters Describe your career path. I graduated from the University of Michigan in 1987 and wasnt sure what I wanted to do. After sending out some resumes and literally going to companies door to door, I landed a position at JPMorgan. I spent 10 years working in its American Depositary Receipt division. During my time there, I spent a few years in Europe and saw an opportunity to leverage the Internet to help JPMorgan assist foreign companies with ADR issues. I left JPMorgan early in the dotcom era to pursue this passion, partnering with the Carson Group. In 2001, we sold the company to Thomson Financial. After a few years at Thomson the company was reorganized and I became head of investment management, the division that provides products and services to the buy side, including portfolio managers and analysts. Describe your role at Thomson Reuters. I lead the division of the company that encompasses our off-trading floor products and services. This includes analytics, content and workflow tools for customers in corporate services, investment management, investment banking and wealth management around the world. In January, I relocated to Hong Kong to drive global growth for the business locally from the Asia Pacific region. What is a typical day like for you? As there are roughly 4,000 people in the division, a big part of my day involves communication and getting a handle on the pulse of the organization. This entails engaging with my management team to ensure were on the same page regarding our global strategic priorities. Additionally, now that I am based in Asia, I spend a lot of time learning what the opportunities are in the region and how we can grow the business around our customers needs in the market. I do this by spending time with customers, intermediaries, and regulators, amongst others. What advice do you have for undergraduate students or someone wanting a job working for an information providers? The successful people in our organization bring solid work habits and a breadth of experience that arent necessarily taught in a classroom and apply it to their job. They ask questions that revolve around customer needs and what the bigger organization at Thomson Reuters is about. Were looking for people with a passion for understanding our customers: what they need, what theyre doing on a daily basis, and what opportunities they have. They must be able to build relationships and think in terms of both the short- and long-term.
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QA
Resources
News you should use
Information moves the markets - whether its stock, bond or futures quotes, breaking news driving commodities trading, the release of a companys annual report or turnover among its executives or staff. To succeed on Wall Street, you have to keep up. Among other things, that means staying up-to-date on developments in business, politics, economics and the world in general. Thats no small task in todays media-crazed world, especially if you want to focus your career in specialized areas like hedge funds or risk management.
General and Business News Bloomberg BusinessWeek CNN Financial News The Financial Times Forbes Fortune The New York Times 92 Reuters USNews and World Report The Wall Street Journal Washington Post www.bloomberg.com www.businessweek.com www.cnn.com www.efinancialnews.com www.ft.com www.forbes.com http://money.cnn.com/magazines/fortune www.nytimes.com www.reuters.com www.usnews.com www.wsj.com www.washingtonpost.com
This list is meant as a starting point, a collection of information resources you can use to keep abreast of whats going on in business and general news around the world. In addition to these, each market sector offers a variety of trade publications that focus on narrow areas of expertise. Dont forget to read the information presented by companies themselves in their 10-Ks, 10-Qs, annual reports and press releases, which you can almost always find on their corporate Web sites.
Career Information and Career Development eFinancialCareers and its Campus Connection Association of Latino Professionals in Finance and Accounting Career Opportunities for Students with Disabilities Management Leadership for Tomorrow National Black MBA Association Sponsors for Educational Opportunity Women on Wall Street Sector News BondsOnline www.bondsonline.com www.complianceweek.com www.thedeal.com www.fundaction.com www.hedgeworld.com www.insidemarketdata.com www.onwallstreet.com www.risk.net www.wallstreetandtech.com Compliance Week The Deal Fund Action HedgeWorld Inside Market Data On Wall Street Risk Magazine Wall Street & Technology Others Securities Industry and Financial Markets Association Securities and Exchange Commission The American Institute of Certified Public Accountants The Institute of Management Accountants www.sifma.org www.sec.gov www.aicpa.org www.imanet.org www.efinancialcareers.com http://campus.efinancial careers.com www.alpfa.org www.cosdonline.org www.ml4t.org www.nbmbaa.org www.seo-usa.org wows.db.com
General Financial and Investing News Barrons CNBC FierceFinance Institutional Investor Investors Business Daily InvestmentNews MarketWatch The New York Times Dealbook TheStreet.com The Wall Street Journals Deal Journal http://online.barrons.com www.cnbc.com www.fiercefinance.com www.institutionalinvestor.com www.investors.com www.investmentnews.com www.marketwatch.com dealbook.blogs.nytimes.com www.thestreet.com blogs.wsj.com/deals
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Diversity Initiatives
Organization ALPFA www.alpfa.org (213) 243-0004 American Indian Graduate Center (AIGC) www.aigcs.org Telephone: (505) 881-4584 Toll-Free: (800) 628-1920 American Institute of Certified Public Accountants (AICPA) www.aicpa.org Telephone: (919) 402-4931 Target Hispanic/ Latino American Indian and Alaska Native Programs Scholarships, Fellowships, Career and Leadership Development, Networking Scholarships, Fellowships Organization INROADS www.inroads.org Telephone: (314) 241-7488 Management Leadership for Tomorrow (MLT) www.ml4t.org Telephone: (212) 736-3411 Toll-Free: (888) 686-1993 National Black MBA Association (NBMBAA) www.nbmbaa.org Telephone: (312) 236-BMBA (2622) Target African American, Hispanic/Latino, Native American African American, Hispanic/Latino, Native American Programs Internships, Job Posting, Mentoring MBA and Career Preparation, MLT Houston, 4XL, Career Advancement
African American, Asian/Pacific Islander, Hispanic/ Latino, Native American Asian/Pacific Islander
African American
Scholarships, Fellowships, MBA Preparatory, Job Posting, Professional Development, Networking, Coaching Scholarships
Ascend www.ascendleadership.org Telephone: 212-248-4888 Asian & Pacific Islander American Scholarship Fund (APIASF) www.apiasf.org Telephone: (202) 986-6892 Toll-Free: (877) 808-7032 Consortium for Graduate Study in Management (CGSM) www.cgsm.org Telephone: (314) 877-5500 Toll-Free: (888) 658-6814 Financial Womens Association (FWA) www.fwa.org Telephone: (212) 533-2141
Networking, Mentoring, Professional Development, Leadership Training, Conferences Scholarships, Leadership Development, Networking
National Center for American Indian Enterprise Development www.ncaied.org Telephone: (480) 545-1298 National Society of Hispanic MBAs (NSHMBA) www.nshmba.org Telephone: (214) 596-9338 Toll-Free: (877) 467-4622 Native American Finance Officers Association (NAFOA) www.nafoa.org
Asian/Pacific Islander
Hispanic/Latino
Scholarships, MBA Preparatory, Job Posting, Professional and Leadership Development, Career Fair, Executive Summit Scholarships, Summer Program
Fellowships
Native American
Scholarships, Professional Development, Networking, Mentoring; International, Financial and Entrepreneurial Events Fellowships, Networking, Corporate Programs
Point Foundation www.pointfoundation.org Telephone: (323) 933-1234 Toll-Free: (866) 33-POINT (337-6468) Rising Farmworker Dream Fund (RFDF) www.risingfarmworkers.org E-mail: [email protected] Sponsors for Educational Opportunity (SEO) www.seo-usa.org Telephone: (212) 979-2040 The PhD Project www.phdproject.org
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Women
Children and Grandchildren of U.S. Migrant and Seasonal Farm Laborers African American, Asian/Pacific Islander, Hispanic/Latino, Native American African American, Hispanic/Latino, Native American
Fellowships, miniMBA University, Online Community, Investment for Entrepreneurs College Preparatory, Internships, Philanthropy, Professional Development, Job Posting, Networking Ph.D. in Business, Networking, Mentoring, Conferences
Graduate Management Admission Council (GMAC) www.gmac.com Telephone: (703) 749-0131 Toll-Free: (866) 505-6559 HISPA (Hispanics Inspiring Students Performance and Achievement) www.hispa.org E-mail: [email protected] Hispanic Alliance for Career Enhancement (HACE) www.hace-usa.org Telephone: (312) 435-0498
Role Model Bureau, Youth Conferences, Job Posting, Employee Resource Group Consulting Scholarships, Leadership and Professional Development, Career Fair and Guidance, Mentoring, Networking
Hispanic/ Latino
Glossary
Banking terminology the top banks will expect you to know
To search the full glossary online, visit our Campus Connection Jargon Buster. www.efinancialcareers.com/campus
Derivatives
Refers to all the behind-the-scenes processes at an investment bank, which dont directly bring in revenues. Most of the work is largely IT-related or administrative.
Back Office
Block Trade
A trade that involves a large quantity of stock (e.g., 10,000 shares or more) or large dollar amount of bonds (e.g., $200,000 or more).
A financial contract whose value is based on another financial product (e.g. a stock, bond or foreign currency), or on changes in a financial index or rate (e.g. the Dow Jones index of the 30 largest U.S. companies, an interest rate, or an exchange rate). Derivatives can range in complexity from futures contracts on single commodities, which have been around for a century, to complex structured products that can be priced only with the help of sophisticated statistical models.
Dodd-Frank Act
Bonds
Unlike equities, bonds are a kind of debt. Instead of getting a bank loan, companies sell bonds and promise to pay the money back to whoever buys them in X years time. Until then, they pay the bondholder a small amount of money each year. Because the amount of money paid annually is fixed at the start, bonds are also known as fixed income products.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law July 21, 2010, overhauled U.S. banking regulation in the wake of the global financial crisis. Among other things, the 2,300-page law expands regulators power to liquidate failing financial institutions, creates a new financial consumer protection agency, and restricts banks involvement in proprietary trading, hedge funds and private equity (see Volcker Rule), as well as derivatives dealing.
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A nebulous term referring to the biggest investment banks. Five U.S.-based firms are widely viewed as bulge bracket: Bank of America (through its 2008 purchase of Merrill Lynch), Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley. Europes leading global banks, including Deutsche Bank, Credit Suisse and UBS, are considered bulge brackets as well.
Equities
Another word for company stocks or shares. The name comes from the notion that stockholders share equally in the ownership of the company (according to how many shares they own).
Buy Side
A generic name for organizations that buy financial products (securities) in an attempt to make money out of their changing value. Fund managers are buy-side firms, as are hedge funds.
Undertakes the origination, structuring, marketing and pricing of public offerings and private placements of equity and equity related securities.
Trades that a dealer makes to execute orders placed by customers. The revenue-generating areas of the bank. People in the front office interact with clients to bring in business and create profits. Front office employees include salespeople, traders and corporate financiers. Front office bankers typically earn the most money.
The activities that take place behind the scenes after a financial product has been traded. In the first part (clearing), banks add up all the trades done with one company, and look at any problems that arise. In the second part (settlements), the products traded are delivered in return for payment.
Commodities
Futures
Raw materials such as precious metals or grains whose contracts are bought and sold on commodities exchanges.
A tradable contract that transfers the risk of loss if a company or other entity defaults on its debt.
The division of a bank that solicits, structures and executes bond deals and related product businesses, including new issues of both public and private debt.
An exchange-traded contract that represents an obligation to either buy or sell a specfic amount of a financial or physical commodity on a specified date (which can be months or years in the future) for a price set today but not paid until the settlement date. Most futures contracts are offset before settlement by the buyer or seller taking an opposite position in the same contract, thereby cancelling out the obligation to trade the underlying commodity. An offsetting or closing trade may be at a different price than the initial one, resulting in a profit or loss.
www.efinancialcareers.com
IPO
Initial Public Offering, meaning the first time a company sells its shares on the open market. Privately owned companies that launch on the stock exchange float an IPO, for example, as a way to raise capital.
Securities
All financial products that can be bought and sold. These include shares, bonds, and derivatives.
Libor
An acronym for London Interbank Offered Rate, the most widely quoted short-term interest rate for international lending between banks.
The federal agency that enforces securities laws and sets standards for disclosure about publicly traded securities, including mutual funds. It was created in 1934 and consists of five commissioners appointed by the U.S. President and confirmed by the Senate.
Middle Office
Positioned between the front and back office of a bank, the middle office is concerned with risk management and the calculation of profit and loss. People who work here are, therefore, typically risk managers and accountants.
Sell Side
Refers to organizations that sell financial products to clients, including fund managers (buy side). Investment banks are sell-side organizations, for example.
Origination
Short Selling
As opposed to execution, (doing a deal), origination is the word bankers use to describe the process of winning business in the first place. Origination bankers are senior bankers with strong client relationships.
The practice of selling stock that you dont own. This can be advantageous when you borrow stock, sell it expensively, and then buy it back cheaply when prices have fallen.
Structuring Swap
Pitchbook
The process of assembling complex financial products. A contract in which two parties agree to exchange, or swap, a series of periodic payments based on different interest rates, currencies or asset returns. In a plain vanilla interest rate swap, for instance, one side agrees to pay a constant (fixed) rate on each payment date and the counterparty pays a variable (floating) rate that will change with market conditions. On each payment date, the two amounts are netted and recipient of the higher rate is paid the difference by the other party.
The research books that junior bankers (analysts) typically compile to help senior M&A bankers win business.
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Price/Earnings Ratio
A popular statistic used to analyze whether the price of a stock is reasonable. It is calculated by dividing the current price of a stock with that companys earnings per share.
Proprietary Trading
When a firm buys or sells securities for its own account. The alternative is customer or flow trading, in which a bank or securities dealer executes orders for its customers accounts, without risking its own capital.
TARP
An acronym for Troubled Asset Relief Program, a bank bailout program enacted by the U.S. Congress in 2008.
Primary Market
The financial market where investors buy brand new securities which havent been traded anywhere else previously. Shares released during an IPO are sold on the primary market.
Underwriting
The process by which banks agree to buy any leftover shares in an IPO or other share issue. Banks charge an underwriting fee to cover this risk.
Sarbanes-Oxley
A 2002 U.S. law intended to protect investors from companies and executives who issue false financial statements.
Volcker Rule
Secondary Markets
The colloquial term for a section of the Dodd-Frank Act meant to reduce banks involvement in risky activities including proprietary trading, hedge funds and private equity.
The markets in which existing financial products are exchanged between investors. The New York Stock Exchange and Nasdaq are secondary markets, for example.
A parallel set of concerns applies to the more technical aspects of finance: the use of financial models, academic theories, financial engineering, and risk management. Some would argue that the failures of models, forecasting, structured products, and risk measurement in the recent crisis imply that these skills should be drastically devalued. While some complex products that required these skills will justifiably be severely curtailed, many other products that utilize financial engineering will remain in demand. Abandoning these tools will leave us more exposed to risk, not less exposed. The next generation of financial professionals will be expected to understand both the benefits and the shortcomings of modern quantitative finance tools. The key to making sure they are used properly is clear communication. Everyone who contributes to the technical side of models, forecasts, structured products and risk management must have a thorough commitment to clearly communicating assumptions and limitations of the tools. That includes learning to communicate in a way that will be understood by those who come from different disciplines. No one should be permitted to utilize technical expertise as a way of hiding from probing questions. Hiding behind
It takes that something extra to make it in finance these days. How are you going to stand out?
A career in the financial markets is challenging in the best of times. Now, more than ever, you need focus, hard work and dedication to succeed. Before you even go on your first interview, you have to know the landscape, be well-versed in the latest trends, and prepare better than the competition. This sixth edition of Careers in Financial Markets gives you an in-depth look at the current job market and provides practical and actionable advice you cant get anywhere else.
eFinancialCareers is the leading global career site network for professionals working in the investment banking, asset management and securities industries. The website provides job opportunities, job market news and analysis, salary surveys and career advice. eFinancialCareers.com includes a student-focused Campus Connection section to provide students and recent grads with further insight into their career options.