Finance Career Guide


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Finance Career Guide

  1. 1. Finance Career Guide Congratulations on getting into Notre Dame and choosing to join us for your MBA education. Finance is one of the most exciting areas of business – typically the business news of the day, week, and even year revolves around the topics of finance and the men and women who have chosen careers in that field. Finance is a big area, covering everything from the various roles in Corporate Finance to the rough and tumble world of Wall Street. This guide attempts to bring you through the different options of careers in finance and gives you some ideas of where to start your research. This is not an exhaustive guide. There are many different opportunities out there and we’ve attempted to cover some of the main ones, but even these have many other flavors. So – this guide is really just a starting point in your research! While several sources have been used in the creation of this guide, Careers-in- provided significant material. Sections 1. Corporate Finance 2. Investment Banking 3. Commercial Banking 4. Real Estate 5. Investment Management 1
  2. 2. Corporate Finance: Overview A career in corporate finance means you would work for a company to help it find money to run the business, grow the business, make acquisitions, plan for its financial future and manage any cash on hand. You might work for a large multinational company or a smaller player with high growth prospects. Responsibility can come quickly and your problem-solving skills will get put to work quickly in corporate finance. Jobs in corporate finance are relatively stable, while performance in these jobs counts. But it's not like your job is going to depend on whether you're selling enough this week or getting good deals finished this quarter. Rather, the key to performing well in corporate finance is to work with a long view of what’s going to make your company successful. Many would argue that corporate finance jobs are the most desirable in the entire field of finance. Some of the benefits of working in corporate finance are: 1. You generally work in teams, which helps you work with people. 2. It's a lot of fun to tackle business problems that really matter. 3. You'll have many opportunities to travel and meet people. 4. The pay in corporate finance is generally quite good. Corporate Finance: Skills and Talents Different jobs and companies call on different skills from the corporate finance professional. A typical job in corporate finance would call for the following skills: Puzzle-Lovers Wanted Most corporate finance jobs involve solving problems using a combination of intuition and analytics. If you are good at problem-solving, this may well be the job area for you. Are You a Forrest Gump Type? Many of us imagine working in a corporation as a boring, routine experience designed for dim-witted, persnickety pencil-pushers in short-sleeved pastel plaid shirts. Not so, pal. Rather, you need to be comfortable with ambiguity and a rapidly changing environment where tasks change from day to day, maybe hour to hour. Geek of the Week? Not Really, But . . . Let’s not avoid the obvious. In corporate finance you have to be comfortable with spreadsheets, word processors, presentation packages and computer systems. This is especially true for entry-level positions where you will need to crunch numbers as you get involved in the details of corporate financial planning, accounting and capital-raising. Execs love to talk about strategy, quality and vision. When they interview you, expect to be asked, "Have you ever written a VBA macro in Excel?" or "Have you used a Reuters or Bloomberg station before?" Are You An Impatient, Entrepreneurial Type? One of the most common complaints among new entrants in corporate finance jobs is that they are surprised by the low level of the work. "I didn't go to school to do this . . ." is a common refrain. Keep in mind that corporate environments reward longevity and loyalty. Be patient, learn from mentors and invest in yourself along the way. If you complain early on you may never get the break you want that comes from doing a minor task particularly well. Why Do Nice People Get the Good Jobs? 2
  3. 3. The movies portray "killer" operators in corporate environments, getting ahead by manipulation and chicanery. This isn't exactly how it works. People who like people, can communicate their ideas, build deep networks, and are passionate about their work get ahead. Leader or Follower? The number one attribute most corporate employers are looking for is initiative. If you can give examples in interviews of situations where you did something plain useful even though no one asked you to, you will be a hot commodity. Have you ever started a business? Or put together a social event that brought people together? Or started a new organization? Speak a Foreign Language? Large corporations in the U.S., Europe and Asia are more globalized than ever and jobs will often take you across borders. You will obviously be more desirable to a company if you have a command of at least one foreign language and knowledge of international corporate finance. Would you be comfortable managing a bank relationship for your company in Argentina? Or costing new plants in China? Risky Business The last decade has seen a dramatic increase in the sophistication of corporate risk management strategies. How are we going to hedge against fluctuations in the cost of our inputs? And what should we do to protect against foreign currency fluctuations? If you are familiar with models, techniques and derivatives which can be used to manage risk, you will be in high demand. Did You Ever Build Something? Manufacturing firms often hire corporate finance types with a background in engineering. Ford, for example, wants people in the factory who can understand complex manufacturing processes, communicate well with engineers, and enjoy complex costing work. Jerome York, the former Chrysler CFO, did a stint running Dodge, and once worked designing engine parts for GM. How Are You With People? The best financial professionals are good with people. According to Fortune (11/18/95): "Their biggest weakness is a lack of people skills," says John Dasburg, CEO of Northwest Airlines. "Finance types are often curt and colorless. By contrast, the best CFOs are master persuaders with a streak of the sales person. They read people as surely as balance sheets." Corporate Finance: Job Options Treasurer Duties involve supervision of the Treasury department which is involved in financial planning, raising funds, cash management and acquiring and disposing of assets. This is an upper management job which requires both analytical skill and the ability to manage and motivate people. Financial Analyst Duties involve determining financing needs, analyzing capital budgeting projects, long-range financial planning, analyzing possible acquisitions and asset sales, visiting credit agencies to explain the firm's position, working on budgets, analyzing competitors, implementing financial plans, monitoring the market price of your firm's securities, analyzing leasing agreements and determining needs and methods of dealing with derivatives. Often you will be assigned to a specific area such as revenue, planning, capital budgeting or project finance. This challenging job requires good analytical skills, computer skills and a broad understanding of finance. Credit Manager 3
  4. 4. Duties include establishing policies for granting credit to suppliers, setting guidelines for collecting on credit and considering whether to securitize receivables. This job requires knowledge of the customer and ability to analyze accounting statements. Cash Manager Duties involve establishing relationships with banks, managing short-term credit needs, ensuring that sufficient cash is on hand to meet daily needs, putting excess cash into a concentration account bearing interest and handling international transfers of funds. This job is detail-oriented and requires good negotiating skills. Benefits Officer Duties involve managing pension fund assets, setting up employee 401(k) plans, determining health care benefits policies and working with human resources to set up cost-effective employee benefits. This job requires a combination of finance knowledge, knowledge of human resources management, and an understanding of organizational behavior. Real Estate Officer This job involves finding real estate locations for a company, negotiation of lease agreements, acquisition of real estate and valuation of properties. This job requires a thorough understanding of finance and real estate. Investor Relations Officer Duties involve dealing with the investing public by disseminating financial information, responding to queries from institutional investors, issuing press releases to explain corporate events and organizing teleconferences with investors. This challenging job involves contacts with top-level executives and requires understanding of finance and public relations. Many who hold this job have backgrounds in PR or advertising. Controller Duties involve financial planning, accounting, financial reporting and cost analysis. You will get involved in property, revenue, benefits, derivatives, lease and joint interest accounting. You may need to develop forecasting models to project revenues and costs and may be called on to implement or work with a complex costing system, efforts at financial reengineering, transfer pricing issues or interfacing with auditors. This job requires good accounting skills. Holders of this position often enter a company from a Big Four accounting firm. Corporate Finance: Links and Resources About Corporate Finance Careers The leading job site for finance professionals. Careers in Finance By Trudy Ring and Mina Noll (VGM Career Horizons, Lincolnwood, IL, 1999). This book has an extensive section which talks about what work in corporate finance is like. Recommended and a good value. Business and Finance Career Directory A slightly dated resource listing hundreds of employers and resources in finance. Also has articles about various career areas. Careers in Finance Published by the Financial Management Association / Jack Rader (University of South Florida, College of Business Administration, Tampa, FL 33620 (813) 974-2084). This 100-page book does a great job of describing duties and task areas in corporate finance. A very good resource for general info on business careers with a focus on corporate jobs. 4
  5. 5. Finance '02 Harvard Business School Finance Career Guide. Lists job descriptions at major companies, internship programs and contact names in human resources. Mainly Fortune 500-type firms. A super resource! Financial Job Network Lists job openings in finance. On the Internet. Hoovers Provides you with company info, industry research and contact details. Much of it is free. How to Get Ahead in Accounting, Finance and Banking Robert Half International. Get your free copy of this informative brochure from the website. I Went to College for This? The world's first guide to the strange life on the "Planet Business." This irreverent book offers solid advice on starting your career on the right foot. Learn the language that you will need to make it in corporate finance. Opportunities in Financial Careers By Michael Sumichrast and Frederick Burkhardt (VGM Career Horizons). Covers the gamut of finance careers with a nice discussion of why corporate finance is an interesting area. Peterson's Opportunities for Business Majors Covers the many ways to put your degree to work. Power Interviews: Job-Winning Tactics from Fortune 500 Recruiters By Neil Yeager and Lee Hough (JobQuest). Interviewing secrets with answers to give to 50 common questions. Learn the seven key evaluation factors interviewers use to make decisions. Resumes for Banking and Financial Careers Step-by-step advice on getting your resume together for a corporate job. However, this guide concentrates mainly on people with job experience. Organizations and Certification Opportunities Financial Executives International Probably the leading organization for corporate finance professionals. Their conferences are quite popular. Financial Management Association The FMA is well-known for sponsoring student chapters at universities around the world. Association of Finance Professionals Very strong in the area of cash management and treasury, but covers other areas of corporate finance. Certified Treasury Professional This designation administered by the AFP has been developed to define standards and measure mastery of cash management and related treasury services. Magazines and Newspapers (Online and Off) CFO Magazine Magazine addressed to senior financial executives covers a wide variety of issues in corporate finance. Good place to start learning about this career area. Gtnews is a free website providing relevant reading for the world's finance and treasury professionals. The library of over 2000 articles, interviews, guides, special reports, directories and rating changes is updated with about ten new features weekly. Wall Street Journal If you are not reading the Wall Street Journal you shouldn’t be in Business School. Financial Times The international counterpart to the WSJ – excellent coverage of corporations around the world. Barron’s Occasionally irreverent, but always informative, the financial weekly that makes Saturday mornings fun. 5
  6. 6. Economist Widely read weekly covers world of investment banking, politics and art quite well. You have to read this if you plan to go into the field. Financial Management This periodical is issued by the Financial Management Association International and carries many articles about current issues in corporate finance. You can receive this and other items including Financial Management Collection by joining a student chapter of the FMA. There is also a finance leaders conference each spring which allows students to meet key financial officers from around the US. Ideas and Know-How Applied Corporate Finance: A User's Manual By Aswath Damodaran. Walks you through how to do corporate finance in detail with extensive examples. Barbarians at the Gate: The Fall of RJR Nabisco By Bryan Burrough and John Helyar (Harper Collins Books, 1993). Describes the rather crazy life of one corporate executive. Lots of juicy personality conflict. If you liked the movie you will definitely enjoy the book. Corporate Finance and the Capital Markets A compilation of the best articles on corporate finance from the Harvard Business Review. Corporate Financial Management By Douglas Emery and John Finnerty (Prentice-Hall). An excellent, detailed book on topics in corporate finance. If you want to study what the field is about, this is a good book to start with. More "real world" than Brealey & Myers and Ross. The New Corporate Finance: Where Theory Meets Practice Edited by Don Chew of Stern Stewart. This book is a collection of papers by famous and not-so-famous authors, exploring capital structure, investment policy, risk management, corporate financial restructuring and other nice details on the new thoughts of corporate finance. It is indispensable for those dealing with the subject as a means to refresh the concepts. Finance Site List An online compendium of websites of interest to students and those who follow finance. Courtesy of the Journal of Finance. Corporate Finance: Facts and Trends The Job Outlook in Corporate Finance is Bright Recent surveys by Arthur Andersen and Robert Half have found a very strong occupational outlook in this field. Shortages in a variety of job categories are taking place. Hot job categories include international and operationally oriented positions. Hot industries include financial services, manufacturing, high technology, environmental management services and distribution. Strategic and Global Thinkers Wanted "Asked to name the qualities that finance executives should have, CEOs top their list with strategic thinking, fresh perspective, and candor. The demand for finance executives who can formulate strategies and foment change on a global scale will only increase in a world where trade barriers are crumbling." CFO Magazine. Team Players Thrive It is crucial that a financial officer be a team player, whether at the bottom or the top of a company. At the top, relationships are especially important. For a CEO, the chief financial officer is financial whiz, strategist and partner. The relationship needs to be tight. Consider the role played by Marcus Bennett at Lockheed Martin, the largest defense firm in the world: "As a key member of [CEO] Augustine's inner circle, [Bennett] is intimately involved in hashing out the company's strategic plans. And when the group decides on a major acquisition or merger, such as 6
  7. 7. the recent linkup with Lockheed, Bennett serves as the primary negotiator. Once a deal is done, he oversees the melding of the balance sheets of the two companies, the combining of employee benefits programs, the squeezing out of cost savings and the overall financial operation of the five current major operating units -- aeronautics, electronics, energy and environment, and space and strategic missiles." ("Stealth CFO", Institutional Investor) Make a Difference A good financial officer can create enormous value. For example, when Jerome York switched from being the CFO of IBM to being the CFO of Chrysler, Chrysler's stock gained $1.3 billion the next day, while IBM's stock fell sharply. Door Wide Open to Women While still largely a male world, women are making rapid inroads in corporate finance positions around the United States. According to the Detroit News: "Finance has become the first field of opportunity for women because promotions are based on merit -- not the old-boy network. Experts say accounting and its natural offspring -- finance, treasury, budgeting -- are less obstructed by the macho cultures more prevalent in manufacturing and engineering, other traditional paths to the corporate pinnacle." There is a wide variety of examples of women who have succeeded in corporate finance. For example, Heidi Kunz engineered General Motor's turnaround plan in 1992 and jumped to become CFO of a new ITT spin-off in 1995. And Judy Lewent is widely credited with creating large amounts of value at Merck as a thinking CFO and strong leader. Mina Brown, CFO at Aviall, notes that it is very important for women who want to rise far to get management positions in line divisions. Value-Based Management is a Huge Trend Corporate finance professionals are increasingly getting involved in value based management -- the practice of figuring out if shareholder value is being created in each of a company's activities. Look for this practice to get hotter and hotter over time. Some of the most innovative companies in the world are now using value management. Integrated Risk Management Growing in Importance There is growing interest in integrated methods of risk and liability management. Many companies have decentralized risk management activities where each division or plant can hedge away price and interest rate risk. Companies are increasingly permitting this, but aggregating positions into a book at the corporate level and adding controls. Quantitative Skills Trade at a Premium Many corporations are looking for quantitative analysts in their finance group. Merck now employs dozens of rigorous finance professionals who use techniques like Monte Carlo simulation to assess new R&D projects. There will be more and more firms who quantitatively make financial and operating choices -- for example, choosing a capital structure by balancing off the expected costs and benefits of debt. Pay is Rising Pay throughout corporate finance areas is up. In particular, Chief Financial Officer (CFO) pay is rising. Average annual pay of 200 CFOs from about 1,500 of the largest revenue-producing companies in the U.S. surveyed by Investors' Fiduciary Services was close to $1 million. The compensation includes salary, bonus, “other” income, stock options exercised, and restricted stock. Superstars like Stephen Bollenbach, CFO of Disney, have especially high salaries. Bollenbach was hired at Disney with a package worth more than $20 million. Carry the Torch for Shareholder Value A company's finance group is the bridge between the investment community and the shop floor. In a day and age when institutional investors are increasingly active, it's crucial that managers get the message that their job is to create shareholder value. The job of the finance group is to make sure that happens. A Benefits Focus Can Help 7
  8. 8. Twenty to forty percent of employee costs now come in the form of benefits. Managing benefits cost-effectively has now become a major challenge for financial officers. Be Sure to Develop Negotiation Skills A key skill for financial professionals is negotiating ability. Persons who can put the other side at ease at the negotiating table, while still getting a good price, are invaluable. Many firms are actively engaged in acquisitions strategies and require employees who can evaluate possible partners and then negotiate transactions. Get Ready for Challenge Being a financial officer can sometimes be more challenging than usual. For example, Barry Weintrob, CFO of the Port Authority of New York and New Jersey, had to deal with the aftermath of the World Trade Center bombing on February 26, 1993. From a World Trade Center command center Weintrob and others put together an immediate cost estimate for rebuilding, made sure insurance carriers were notified, and kept on paying all bills despite a massive disruption. Leadership Skills are Highly Valued Companies want more and more leadership ability in their financial officers. The financial leader of the future will have more experience with the dynamics of the financial markets and be an innovator in that market as well. She must be a strategic planner, a problem solver, and a creative leader. Some Companies are Centralizing Corporate Finance Functions Leading-edge companies such as General Electric are centralizing their finance functions under a system known as shared services. Instead of each business unit having its own CFO and accounting operations, the businesses become customers of a centralized finance function. Corporate Finance Isn't Bean Counting The oftentimes derogatory view of finance professionals as "bean counters" is changing fast. Technology means the computers count the beans. This frees up time of executives to interpret the results of bean counting. In the words of Roberto Goizueta, the late CEO of Coca-Cola: "The secret isn't counting the beans. It's growing more beans." Ultimately, this means that the demand for smart, communicative and thoughtful people in finance positions will increase even more in the future. Sample companies that have interviewed/hired Notre Dame MBA Graduates for Corporate Finance AAR Corporation E&J Gallo Office Max ABC News EMBARQ P&M Corporate Finance Aegon Emerson Pace Global Energy Services Alcoa ExxonMobil Corporation PPG Industries, Inc. Allstate Ford Motor Company PricewaterhouseCoopers LLP Fox Entertainment Group The Procter & Gamble American Airlines General Electric Company Company AT&T Hewitt Associates LLC Sears Holdings Corporation Baxter Hewlett-Packard Company Sprint Best Buy IBM Stryker Bons Secours Intel Corporation Toyota Chase Education Finance Kaplan Higher Education United Airlines CIGNA KPMG LLP Walt Disney Cisco Systems Kraft Foods Whirlpool Corporation Coca Cola Limited Brands Western & Southern Countrywide Nationwide Mutual Insurance Zimmer Delta Company 8
  9. 9. Investment Banking: Overview Investment Banks help companies and governments issue securities, help investors purchase securities, manage financial assets, trade securities and provide financial advice. The leading investment banks including Merrill Lynch, Citi, Morgan Stanley, Goldman Sachs, and Lehman Brothers are said to be in the bulge bracket. Other investment banks are regionally oriented or situated in the middle market (e.g. Piper Jaffray). Others are small, specialized firms called boutiques which might be oriented toward bond-trading, M&A advisory, technical analysis or program trading. Firms have lots of different areas and groups within them. In most firms, there is sales and trading which works with owners of securities, investment banking which works with issuers of securities (firms and governments), and capital markets which goes in between the other two. To get an idea of how a firm is organized, check out the products and services groups at Goldman Sachs. Best Resources The Harvard Business School Guide to Careers in Finance 2002 Lists job descriptions in various departments of major investment banks, commercial banks and Fortune 500 firms including contact persons, addresses and phone numbers. An invaluable resource. Monkey Business: Swinging through the Wall Street Jungle. By John Rolfe and Peter Troob. Many a starry-eyed megalomaniac has followed the siren song of Wall Street. Money, prestige, and power await them as they waltz off into the promised land . . . or so they think. They soon discover that the seductive sirens are actually a band of bow-legged sea hags. The promised land, it turns out, is always one more twenty-hour workday and another lap dance away. Monkey Business is the hilarious confession of two young investment bankers, John Rolfe and Peter Troob. Highly recommended. Careers in Investment Banking, 2008. The Wet Feet career guides are outstanding. You will also find a series of firm profiles at their website. Bloomberg A financial information station that is increasingly appearing in good business schools. Check out the jobs section to obtain listings of hundreds of current jobs in finance (mostly investment banking). A great and current resource. Beat The Street I: Investment Banking Interviews An essential resource on doing well in notoriously tough investing banking interviews. Ignore this resource at your own peril. Beat The Street II: I-banking Interview Practice Guide More detailed explanations of the types of questions you’re likely to encounter, along with a list of recruiters’ all- time favorite questions in each category. Heard on the Street: Quantitative Questions from Wall Street Job Interviews By Timothy Falcon Crack. If you are interviewing for a job in derivatives or other relatively quantitative areas you should get this book. Amazing! Do not underestimate the challenging technical interviews that will come your way even for standard investment banking jobs. Firm Profiles from WetFeet.Com • Deutsche Bank: The Insider Guide • Goldman, Sachs & Co.: The Insider Guide • J.P. Morgan: The Insider Guide • Merrill Lynch: The Insider Guide • Morgan Stanley: The Insider Guide • UBS: The Insider Guide 9
  10. 10. Investment Banking: Skill and Talent Requirements Investment banks want employees with a combination of strong analytical and interpersonal skills. Some jobs lean more towards one skill set than another (e.g., brokers need to be mainly sales people). A typical job of an equities analyst requires both analytic and interpersonal skills. The skills involved include: Key Skill Area Requirement People skills: High Sales skills: Medium Communication skills: High Analytical skills: High Ability to synthesize: High Creative ability: High Initiative: Medium Work hours: 50-120/week Hard Work Expected and Respected Investment banking is a high work, high risk, high reward profession. When you start your hours will typically be long but the work can be exciting. Be prepared for moments of frustration where you are stretched too thin and moments of exhilaration where everything clicks. Tough to Break In It's relatively hard to break into investment banking. You need to be prepared to pursue firms on your own after you have thoroughly prepared yourself. Believe it or Not, Bankers Have Social Value Investment bankers are often the subject of social scorn in movies like Bonfire of the Vanities. Are investment bankers really greedy narcissistic scum? Some probably are. But keep in mind that they play a crucial social role of helping to direct capital to companies with great ideas that make people better off. Associate Jobs Are the Best Entry Point Many MBA graduates start in investment banking in an associate position (the exception is in research, where the MBA entry-level position is called an analyst). To succeed in these positions you need to be extremely dedicated, have good spreadsheet skills, and be analytically fluent. Communication and Completion Abilities Key In mid-career, your success usually will depend on your ability to communicate with clients and get deals done. At this level it is also important to have a good understanding of market trends, the political and macroeconomic environment, and deal mechanics. Math Skills Can Help Some jobs in investment banking call for very strong mathematical ability. If you are good at math think about applying to a research department on Wall Street. Accounting Skills Valuable The ability to analyze accounting numbers critically is important in most analyst positions. Ultimately, you should aim for the CFA designation if you would like to be a securities analyst. The CFA helps you become much more 10
  11. 11. mobile over time. If you have ambitions to "bail out" some day and become a corporate financial analyst you might also want to consider the CMA (Certified Management Accountant) designation. Traders are Multi-Talented It's hard to define what makes a good trader. A good understanding of the market, quick reactions, analytical skills and the ability to bluff help. Read Liar’s Poker by Michael Lewis to learn more about sales and trading. Get Used to New York Most large firms operate out of New York. Even if you are interested in working in another location, your general interviewing activities are likely to be centered there. Other places you should look at include London, Hong Kong, Tokyo, Moscow and Singapore. In the U.S. other major centers are San Francisco and Chicago – though there are smaller firms across the country. If you go looking for a job in investment banking using informational interviews in the U.S., it is crucial that you make several trips to New York (see section on this below). Teamwork Crucial A crucial success factor in investment banking is teamwork. Being able to pull together persons with large egos to get a presentation together for a client is a challenge and is likely to be highly rewarded. Scientists and Lawyers Wanted There's definitely an interest in people with backgrounds in science and law. Scientist types can work on everything from derivatives algorithms to biotech banking. Lawyers can help design new securities, sell leasing business and use their analytical prowess to talk to clients. This said, you have to sell yourself. Contacts are Everything The key to breaking into investment banking is a good network of contacts. You may already be blessed with such a network, but if you don't have one, you can start to develop one by going on informational interviews, attending industry conferences, finding alumni from Notre Dame or your undergraduate institution in the business, etc. Keep in mind that your network might not really "pay off" for some time. Some people have had to network with up to 200 people before landing their summer internship. Getting Things Done is Important Starting off in an investment bank, you are usually responsible for getting projects done well and on time, whether it be writing reports, running spreadsheets, trading, doing research or coding programs. Later, once you get involved with clients and ideas for generating revenue, you will be rewarded greatly if you can bring in business. At higher levels (usually Director, Managing Director and up) you are exposed to much greater risk. At this level, people are often fired for non-performance, whereas at lower levels you may not be scrutinized as closely. Investment Banking: Job Options Corporate Finance In a corporate finance position you would work to help companies raise capital needed for new projects and ongoing operations. You would work to determine the amount and structure of fund needs of a client through equity, debt, convertibles, preferred, asset-backs, or derivative securities. As a starting associate in corporate finance you would usually work on a client team and would have responsibilities preparing registration statements, attending road shows where investors are sold on securities, etc. Merrill Lynch, Goldman Sachs and Citi are acknowledged powers in corporate finance. Sometimes jobs in corporate finance are referred to as investment banking positions. When you hear phrases such as IBD or IBK, people are referring to corporate finance. Mergers and Acquisitions Setting up deals where one company buys another is an important source of fee income for many investment banks. This has been a hot area on Wall Street since the 1990s and is likely to continue hopping for the foreseeable future. 11
  12. 12. If you go to work in this area you would help out with a team which acts as an advisor to a client, values transactions, creatively structures deals and negotiates favorable terms. Worldwide, Goldman Sachs, Citi and Morgan Stanley are the recognized leaders in M&A advisory. Investment banks have increasingly participated directly in LBOs, spin-offs and bridge loans, often by taking their own investment stake (known as merchant banking). Your duties could involve analyzing the appropriate form of participation. Expect to start running lots of valuation models on spreadsheets and gradually get more client focus as you progress. Project Finance The field of project finance is booming. Typically project finance involves funding infrastructure and oil capital projects off of a company or government's main balance sheet. Banks like Credit Suisse and Deutsche Bank are active in this area. Project-financed deals have been some of the first significant conduits of foreign capital into countries such as China, Yemen and Indonesia. When other sources of borrowing dry up, project finance is generally still there. Trading Some of the most desirable jobs in investment banking are in sales and trading. Your responsibilities would involve undertaking transactions in equities, bonds, currencies (referred to as Forex or FX), options or futures with traders at commercial banks, investment banks and large institutional investors. Trading can be tumultuous and requires a thorough knowledge of markets and financial instruments, and an intuition for human psychology. Equities trading positions often involve "telling a story" to other traders about why they should purchase your stock. Fixed income trading positions call for strong analytical know-how and the wherewithal to manage large amounts of inventory in an often thin market. Derivatives traders need very strong analytical know-how (perhaps even an engineering degree). Foreign exchange trading is based more on your instincts about markets, politics and macroeconomics. There are a variety of other types of trading jobs in agency securities, commercial paper, repos, commodities, etc. Equities trading has gone through a significant decrease in job opportunities through the move on the exchanges to electronic trading and commission-sharing agreements. Only the largest firms have significant equities trading desks. Structured Finance Positions in structured finance involve the creation of financing vehicles to redirect cash flows to investors (known as asset-backed securities). Typical asset-backs securitize credit card receivables, auto loan receivables or mortgages. This market was red-hot but has significantly contracted during the 2007-08 credit crunch. Other growth areas include asset-backed commercial paper, collateralized bond obligations (CBOs), and repackaged asset vehicles. It would be beneficial to have a solid combination of spreadsheet, accounting and legal skills. Most students coming out of school know very little about this area; you can get an edge by educating yourself by reading articles in the area from publications like Standard and Poors CreditWeek and picking up lingo like "early-am risk" from talking to market participants on informational interviews. Derivatives Derivatives derive their value from another primitive security. Options, swaps and futures are examples of derivatives. The market for derivatives is gigantic and subject to increasing scrutiny. The derivatives business is highly profitable and the demand on Wall Street for skilled derivatives practitioners has been very high. This market is likely to see further innovation in the forms which swaps take and in the area of exotic options. This will create further specialized job areas. If this area interests you, start studying math (especially stochastic differential equations and derivation of common models like Black-Scholes). Questions about models are likely to come up in interviews. Sales skills are also important in this area. Another related phrase you will hear is "structured notes." A structured note might be a foreign exchange loan, or a forward or futures contract with built-in options structured to a client's need. For example, a client that will no longer be worried about their position once the yen falls below 85 to the dollar could buy a "knock-out" option on a forward that will not be active once the yen/dollar rate falls below a floor. A related and popular area is credit derivatives, which might involve selling an option which pays off when a company defaults on one of its debt obligations. 12
  13. 13. Advisory Advisory services are often provided by investment banks to public and private clients involved in M&A and financings. The area of risk management advisory has been popular at many investment banks. Often work will be done to determine a client's value, options for creating value, or on a client's industry conditions. Equity and Fixed Income Research Security analysts are usually assigned to an industry or region. You could be responsible for making buy or sell recommendations to investors about a stock or bond. Your duties would involve visiting companies and heavy telephone contact with institutional investors. Investment banks often like to hire people with industry experience into analyst positions (as opposed to fresh MBAs or undergrads). For example, if you were a restaurant executive you could probably get hired as a restaurant industry analyst with a healthy pay raise. Knowing the business, being able to talk to clients well and having good forecasts are key in this position. You want to help your firm avoid the dreaded Worst Analysts list. Analysts are often referred to as either quants or fundamentalists. Fundamentalists make recommendations based on what's going on at a company -- how's the CEO, what are the earnings etc? In contrast, quants look at computer programs that identify undervalued securities, markets or even whole countries. There are fewer quant jobs, but they often pay more because the required skills are greater. The CFA is the required credential for research. International Sales/Emerging Markets A rapidly growing area is in international sales. Investor demand for securities issued in emerging markets is strong. Firms are meeting this demand by providing sales personnel and analysts specializing in these markets. Another area of high demand is in emerging markets such as China and India. Firms are looking for people with specific language skills, willingness to travel, and knowledge of these emerging markets. You can often rise very quickly in this area, even if you are quite young. A great place to track goings-on is through Bloomberg's website. Public Finance The market for municipal bonds is very large and calls for analysts, municipal advisors and traders. Positions in public finance are usually difficult to obtain but offer high rewards. Persons with previous experience in public administration would be attractive to investment banks in this capacity. Municipals really exploded in the 1990s. A major area in municipals is in the project finance area. For example, the Senior VP of public finance at Tucker Anthony stated in August 1995 that his area has moved from 15% public finance before to 60%. (Bond Buyer, 8/15/95). Retail Brokerage (Stock Broker)/Private Wealth Management Stock brokers are in the business of selling stocks, bonds, insurance and other investments to individuals. Some brokers specialize in high net worth individuals while others span a variety of clients. Brokers specializing in high net worth individuals fall under the category of Private Wealth Management. This is a booming area, and all large firms have a Private Wealth Management business. This is a tough business to get started in (especially if you are much younger than your clients), but the rewards are high for a good people person with great sales skills. The Securities Industry Association reports that the average retail broker earned $317,000 in 2005, and many brokers earn upwards of $500,000. Institutional Sales In institutional sales you would be responsible for conveying information about particular securities to institutional investors. You would be likely to have heavy contact with portfolio managers and your own firm's analysts and traders. Sales skills and product knowledge are crucial in this area, as is the ability to get through to busy institutional investors. Working in sales for an investment bank (on the sell side) is often good preparation for moving over to the buy side (insurance companies and mutual funds). Both types of jobs can be brutal and subject you to abuse. A common Wall Street Joke: What's the difference between a sell side and a buy side player? Answer: On the sell side they curse you only after they hang up the telephone. Taking abuse can be lucrative. The average salaries in institutional sales exceed $300,000 according to the Securities Industry Association. 13
  14. 14. Computer Guru Some of the best jobs in computers and information systems are on Wall Street. A firm with good trading software, pricing software, or back office software can get a strong competitive advantage. Big headhunters and firms on the Street have been scouring the country for people who can develop workstation software and financial mainframe applications. Six-figure salaries are not uncommon for really good systems people. Ratings Analyst One way to break into investment banking is to start as a ratings agency analyst. The pay is relatively low and advancement opportunities aren't great, and the investment banks know it and use the agencies as hunting grounds for new analysts. Moody's rates $5 trillion worth of securities and has 560 analysts. Standard and Poors rates $2 trillion worth of securities and has 800 analysts. These agencies are highly profitable and grade the credit quality of companies and sovereign entities accessing the markets. Most revenue comes from issuer fees. There is high demand for persons who can intelligently rate structured finance and corporate bonds. "We are not auditors and we don't use lie detectors, so it's up to our analysts to be smart enough to ask the right questions," says Edward Emmer, executive managing director and head of S&P's corporate ratings department. Investment Banking: Links and Resources Career Resources and Books The Fast Track: The Insider's Guide to Winning Jobs in Management Consulting, Investment Banking, and Securities Trading By Miriam Naficy. A former employee of Goldman Sachs provides a highly practical overview of what it takes to get a good finance job. Highly recommended. The Business of Investment Banking By K. Thomas Liaw (John Wiley, 1999). A complete guide to all major investment banking activities in today's global capital marketplace. The book provides a comprehensive analysis of the current market practices in all relevant business segments. The book goes beyond traditional banking topics of underwriting and M&As and includes extensive coverage of rarely written-about subjects that are integral to investment banking such as proprietary trading, repurchase transactions, financial engineering, money management, clearing and settlement, London and Euro markets and securities regulation. Careers for Financial Mavens & Other Money Movers By Marjorie Eberts and Margaret Gisler (NTC Publishing Group, October 1998). A good overview of career possibilities for those with an interest in investing and Wall Street. Deutsche Bank Careers site Deutsche Bank has an excellent selection of video, audio and documents that you can either download or look at right on their site. A great way to see the actual people in the business talking about what they do and what they expect. The Financial Jobs Marketplace, includes job postings, career management, news and advice. Offers job leads in investment banking and a valuable set of finance resources. Investment Banking Diversity Programs Vault's Diversity Snapshots contain demographics, retention, recruiting and other information about the firm's diversity initiatives. Will prepare you for an upcoming Wall Street interview. They do charge, though! New York Society of Security Analysts NYSSA promotes awareness and understanding of securities analysis, investing, and the operation of the securities markets. Their website includes an entire Career Development section. 14
  15. 15. Comprehensive guide to investment banks, including descriptions directly from the firms. Organizations CFA Institute Offers programs leading to the Chartered Financial Analyst (CFA) designation which is increasingly important in establishing yourself as an equities analyst. SIFMA: Securities Industry and Financial Markets Association An advocate for the securities industry representing over 650 different firms. Trends and research across the industry are available here. New York Society of Security Analysts Has good career information. You don't have to live in New York to join. Entertaining and Informative Tales Barbarians at the Gate By Bryan Burrough and John Helyar. You saw the movie. Well, the book is better. The story of investment bankers clambering over each other to get a piece of the action on the 1988 RJR/Nabisco LBO is well worth reading. Bonfire of the Vanities By Tom Wolfe.Tom Wolfe’s first spellbinding novel revealed his uncanny knack for capturing the excessive personalities and ethnicities of 1980s New York. The classic tale of the Wall Street trader and a culture of excess. Bombardiers By Po Bronson (Random House, 1995). This is arguably the best-written book on investment banking in existence. According to Business Week: "Perhaps the most entertaining depiction of greed and dishonesty on Wall Street ever to see print." Presents a sometimes surreal, slightly fictionalized account of the fixed income sales floor at CS First Boston's San Francisco office. Start by reading the first chapter, Filth, for free on the net now. If you are thinking about investment banking be sure to read this book. And don't forget the rest of Po Bronson's Cool Home Page. Fiasco: Blood in the Water on Wall Street By Frank Partnoy (W. W. Norton, 1997). A recent alumnus of Morgan Stanley relates his amazing experiences at the firm prior to the Mexico crisis in 1994. Entertaining, although not quite as good as Liar’s Poker. Tends to suggest that derivatives are bad without delineating a position. Investment Biker Jim Rogers, a former hedge fund manager who started in Demopolis, Alabama, travels 65,000 miles around the world on a motorcycle, offers great commentary on emerging economies, international finance and adventure. A great read especially if you are interested in investing in foreign markets. Liar’s Poker: Rising Through the Wreckage on Wall Street By Michael Lewis (Norton Books, 1989). A lucidly written, humorous account of the bizarre life of a Salomon Brothers bond salesman. Essential reading. Raises ethical and management questions about practices at Salomon. Also look at The Money Culture by Michael Lewis. Contains well-written vignettes about pay, culture and wacko things that happen in investment banking. Reminiscences of a Stock Operator By Edwin Lefevre (John Wiley & Sons. Reprinted: 1994). This is probably the best book on this list. It's engrossing, very well-written and 75 years old. If you are interested in investment banking or investing, you should read this book. It talks about the life of Jesse Livermore, who started investing in bucket shops as a kid. He went on to gain and lose several fortunes. The lessons learned and stories told are enduring. Riding the Bull: My Year in the Madness at Merrill Lynch By Paul Stiles (Times Books, 1998). One of those first-person, tell-all books like FIASCO and Liar’s Poker. Good story, but Stiles isn't a born writer. You definitely feel for him and are glad he got out. Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World…And Then Nearly Lost It All 15
  16. 16. By Monica Langley (Wall Street Journal Books, 2003). A well researched biography of Sandy Weill, one of the most successful financiers of the current era. The Velocity of Money: A Novel of Wall Street A thriller that also explains a lot about trading and the Street. Don't open it unless you have time to finish it. When Genius Failed: The Rise and Fall of Long-Term Capital Management By Roger Lowenstein. A quick read, this book captures the roller-coaster ride of Long-Term Capital Management and how it almost led to the collapse of the American financial system. An excellent book. Where are the Customers' Yachts?: A Good Hard Look at Wall Street A visitor was being shown around Manhattan. "There," said the guide, pointing at the East River, "are the Wall Street brokers' yachts." "Where are the customers' yachts?" was the naive reply. This amusing story of Wall Street written in 1940 by Fred Schwed tells you how the game is really played. Applies today better than ever. Bernard Baruch: The Adventures of a Wall Street Legend By James Grant (John Wiley, 1997). An inspiring story of a savvy, hare-brained investor who went on to serve his country. The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance By Ron Chernow. This is an exceptionally good book. Well-written, detailed and full of lessons for anyone with an interest in financing and investment banking. A must-read for anyone looking to work at JPMorgan or Morgan Stanley. Ideas and Know-How Applied Corporate Finance: A User's Manual By Aswath Damodaran. Walks you through how to do corporate finance in detail with extensive examples. Read this for an investment banking job. Big Deal: The Battle for the Control of America's Leading Corporations By Bruce Wasserstein (Warner Books, 1988). The principal of Wassterstein-Perella talks about the techniques of the M&A business. A great read if you are interested in the field. Serious stuff. Capital Ideas By Peter Bernstein. Vaishno Rajesh, MBA at the University of Michigan Business School, writes: "I found this book extremely rich in providing background in all the modern financial theory in a lucid fashion. I think anyone who wants to consider a career in finance will find it useful." The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor By Ron Chernow. A thought-provoking book that explains why the world of investment banking works the way it does today. If you want to sound smart this would be a good book to read in the week before an interview. Handbook of Fixed Income, Frank Fabozzi (editor). This is the bible for any job involving fixed income sales, trading, underwriting or derivatives. Should be required reading in every MBA program. Market Wizards: Interviews with Top Traders by Jack Schwager (also New Market Wizards). This book is a classic which features viewpoints from a variety of Wall Street superstars like Bruce Kovner and Michael Steinhardt. Valuation: Measuring and Managing the Value of Companies By Tom Copeland, Tim Koller and Jack Murrin. Valuation delivers more potent strategies for measuring and enhancing the bottom-line value of any company. Also walks you through how to do a valuation. The diskette is also quite valuable given that you get a ton of spreadsheets to play with. Great background for any job involving M&A or investment banking. The Wall Street Journal Guide to Understanding Money and Investing This handy fact-filled book initiates you into the mysteries of the financial pages -- buying stocks, bonds, mutual funds, futures and options, spotting trends and evaluating companies. An excellent, well-illustrated overview of the markets. Good prep for an interview if you haven't had a bunch of finance courses yet. Finance Site List 16
  17. 17. An online compendium of websites of interest to students and those who follow finance. Courtesy of the Journal of Finance. Magazines and Newspapers (Online and Off) The This online site covers what's going on in the world of M&A and investment banking. It's a rich source of info on breaking news stories, profiles, institutional rankings, fine print, structures and personalities. Highly recommended. Dow Jones Financial News Website focusing on securities and investment banking. Economist Widely read weekly covers world of investment banking, politics and art quite well. You have to read this if you plan to go into the field. Euromoney Covers investment banking well and focuses on happenings in the bond market. Has a strong international flair. Widely read on the Street. Financial Technology Network Covers what's going on in technology on Wall Street and the financial sector. Finance news site that focuses on the technology side of banking – good info for trading. FT Alphaville The Financial Times market update site, with good international coverage. Quite informative The Hedge Fund Implode-o-Meter Entertaining site detailing some of the victims and soon-to-be victims of the credit crunch! Who said finance types don’t have a sense of humor? Here is the City British website focusing on the financial industry. Good news articles with a lot of focus on careers. Institutional Investor Newsletters BondWeek, Corporate Financing Week, Derivatives Week, Emerging Markets Week and others are widely read on the Street. You can catch much of the action online. The Invest FAQ Website that answers FAQ on investments and personal finance. The Forbes website for any and everything financial. Good reviews of various topics in finance. New York Times Sunday classified section in New York edition is renowned for listing ads by investment banks looking for talent. Cost: $1.25 at newsstands. Also look at the Financial Times and CareerPath. New York Times Dealbook Excellent website covering all areas of investment banking. A must-read on a regular basis. Red Herring Covers technology industry finance. Good if you are interested in investment banking in this area. Good informative website focusing on buy-side trading. Also – check out the UK version of this website: The Trade. The magazine for securities industry professionals. VIX and more Financial blog – good commentary on a variety of topics. Wall Street & Technology As the name implies, website that focuses on the technology side of Wall Street, especially trading. Wall Street Journal 17
  18. 18. The most widely read business periodical in the world. And it's on the net! You must register for the net version. Great way to keep up with what's going on in the markets and the world. Following tombstones and ads is also a good way to see which banks are involved in what types of activity this year. You may also be interested in The two most important columns in the WSJ are “Heard on the Street” and the review of the previous day’s market activity, i.e., “Monday’s Markets.” Read them first! Finally, there are two websites that are much more about the culture of Wall Street, which covers most of the rumors on the street and which is written by a trader at Citi in their 390 Greenwich building. Be warned, TakeAReport is not a family friendly site. Investment Banking: Facts and Advice A good time to send your resume to an investment bank for summer internships is in October and November. Hires are usually made around January and February, but can happen in November and December. But don't stop in February just because you haven't hit your target. According to an analyst at Citi, "It's really crucial to be persistent. It's basically a numbers game. Contact lots of people. But at the same time, customize your approach to each person and bank. That means it's going to be pretty much a full-time job." Don't forget to check back. Traditional full-time recruiting is done by October. The majority of jobs are filled by summer interns receiving full- time offers. Lots of people in existing positions also change jobs in the March to July period. This means that many banks are scrambling for personnel in July, long after the resumes have been thrown away. Somewhat surprisingly, the best time to find a full-time job is by screening your contacts in late Spring and Summer. Investment banking is one of the most global businesses on earth. Investment bankers spend plenty of time tracking down corporations in Peoria and Seattle. But they are just as likely to be working with investors and issuers on the other side of the world -- perhaps Hong Kong, Bulgaria or even Africa. Electronic investment banking is emerging in a serious way. Companies like E-Trade offer online stock trading. Other organizations like Deutsche Bank are offering electronic trading of stocks and bonds. Electronic origination of securities is being led by W.R. Hambrecht and Wit Capital. There are tremendous opportunities for growth in this area. Investment banking is seeing massive consolidation. Today, firms merge at unprecedented speed. The mid-1990s saw mergers of Citibank, Smith Barney and Salomon, Bankers Trust and Deutsche, Dean Witter and Morgan Stanley, Bank of America and Montgomery Securities and SBC, UBS, Warburg and Dillon Read, JPMorgan and Chase. Expect this to continue. The big players are not done yet. Investment banks had a series of good years leading up to 2007. Unfortunately, the credit crunch has crimped hiring lately, though not too much at the MBA level. Areas that are worth looking into in tough environments include investment grade debt, firm risk control and certain types of M&A, especially restructuring. Also keep in mind that if you can't find a job due to the lousy environment, investment banks often hire from corporate treasuries when times improve. Thus, pursuing a corporate finance job isn't such a bad alternative. It beats driving a taxi. Investment banks have experienced rapid salary escalation as firms fight to try to keep good people. According to a recent McKinsey study, the average salary at a top-ten U.S. investment bank in 1980 was a little over $50,000. By 1998 it had more than tripled. 18
  19. 19. Sometimes you will find yourself working for an egotistical jerk. What do you do? First, don't take the job in the first place. If someone mistreats you in an interview, get up and walk out (funny . . . you may actually get offered the job). Second, be sure to communicate your needs very clearly when it matters when dealing with an ego-creep. It might just be that someone is so busy and overwhelmed that they get abusive. Laying it out in a nice way may help. Finally, if you find yourself in a truly pathological environment working with dysfunctional people, bail out. Life is too short and the money isn't worth it. Pick the first firm you work for carefully. People who jump from firm to firm too much are less likely to get hired into a great job because your loyalty will be in doubt. One leading global investment bank has a practice of minimizing hiring from outside to avoid "career jumpers." Investment banking is generally transaction-driven. In this environment a single individual with good client contacts can make an enormous difference for a firm. This is part of the reason that star investment bankers ("rainmakers") take home high bonuses. Investment Banking: Top Firms Commonly, the following firms are considered the bulge bracket firms (in alphabetical order): Citi Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Chase Lehman Brothers Merrill Lynch Morgan Stanley UBS The current league table standing, including the middle market investment banks, can be viewed on the Thomson Financial website. Investment Banking: Life as an Associate An associate is typically a recently graduated MBA or an analyst who gets promoted after three or four years. You will usually stay an associate for three years or so. An associate still has to do a lot of grunt work and may even have an analyst to call on. Your hours will still be miserable and you haven't really become a human being yet. Like a good analyst, your job is to make your boss look good and to understand what's going on. Your boss may abuse you from time to time and you aren't supposed to complain really. This is a job where you can really start to shine. If you add value to transactions or help get things done in some other meaningful way, you can expect to be paid a reasonable bonus and have a shot at promotion to AVP. Associate level pay in New York firms runs roughly $95,000 in your first year (not including bonus). If you are good and stay awhile, expect to go up to roughly $130,000 to $150,000 before you hop up another level. Key Skills 19
  20. 20. In investment banking / corporate finance / M&A, key associate skills include: • the ability to do DCF valuations • the ability to use Excel in your sleep • the ability to arrange client meetings and get the logistics right • the ability to deal with horrendous egos • the ability to find comparable companies • the ability to network within the firm and befriend key people like librarians, IT gurus, messengers, lawyers, compliance, etc. In debt and equity capital markets positions, key associate skills include: • the ability to massage league tables • the ability to price up new deals (e.g., bonds, convertibles, preferreds) • pretend that you know what's going on when clients call in and the boss is not around • the ability to track past deals and pricing to sense where the market is going • check and generate weekly newsletters (weeklies) • the ability to fill in silences in meetings with insightful comments (while making sure your boss controls things) • coordinate due diligence • prepare documents on debt and equity deals • make sure analysts get burgers from the right place • generate pitch books with your eyes closed while talking to clients and screaming at syndicate In sales and trading positions, key associate skills include: • the ability to watch your boss’s blotter • the ability to know where prices are • the ability to work options pricing models • the ability to bluff a little when needed • the ability to eat endless fattening food without getting fat • the ability to golf, play tennis, drink and joke around with clients • the ability to make clients feel comfortable with you Success Factors Key success factors include (i) getting your job done well, (ii) getting many things done in a chaotic environment, (iii) dressing well, (iv) having a beer and a good time every once in awhile, (v) always making your boss look good, (vi) being a total whiz with computers, (vii) being able to spin bad news into okay news, and (viii) networking within the firm. Other good things to do include figuring out when a job could be done better and going out and doing it. For example, create a database to track the results of an equity tender offer. Initiative is key. Also, getting to know clients is very important since you will be using those relationships later on. Assessment As an associate you are in. Your job now is to prove you have what it takes to make it in investment banking. You may not always like the environment and culture you are in, but your job is to survive and eventually excel. You are only a few years away from getting your own clients, initiating your own deals and making some good money. 20
  21. 21. Play your cards right and you'll be happy you did the time. Big time. Investment Banking: Trip to New York Let's face it. Most resumes end up on recruiters’ shelves in neat resume books, a handsome file cabinet or, worse yet, the dreaded round file. Unless you have investment banks lining up at your front door begging you for your services, it's time to try something different. What Should I Do?: The time-honored approach is to visit New York on your own or with a small group of people and camp out for a week or two while going on informational/job interviews. The Finance Club trip to New York on October break is just one of the trips you will have to make. Do not underestimate this requirement – the repeated trips will cost you in airfare and hotel rooms – so plan and budget accordingly. Most students do not go out to New York enough, but should. You have to market yourself. Get face time. Get mindshare. You will significantly raise your chances of getting a job. Does it Work? This is one of the few ways to be reasonably sure about landing a decent Wall Street job, if you don’t have a relative who is already managing director of a large bank. Even then it can help a lot. What Steps Should I Take?: All it takes is the following three easy steps: (1) make plane and hotel reservations well ahead of time, (2) send out tons of letters and make lots of phone calls ahead of time to set up informational interviews, and (3) go on the interviews (and continuously try to set up new ones on the trip). A trip to the Big Apple with the Finance Club is probably not a good substitute. How Much Will This Cost?: Between $1000 and $1500 ($200-900 for hotel, $150-700 for plane ticket, $100-300 for food, $100-200 for cabs and subway fare). If you can't afford this much, go for less time or stay with a relative. Where Should I Stay?: If you stay in Manhattan, you’ll have less commute time, but pay more. An internet connection (if you don’t have a Blackberry) will be crucial. New York hotels are packed year-round and quite expensive (over $200 a night). What Should I Bring? Bring resumes and your business cards, a couple of suits, a ton of shirts and a sense of humor. Buy a subway map. Others also recommend Aspirin/Tylenol/Ibuprofen and other cures for body problems, though NYC has plenty of 24-hour drug stores, so there is always a place nearby to buy remedies. What Should I Eat? You can get all sorts of things in NYC like great ethnic food, corned beef sandwiches and bagels. Go for it! Should I Have Fun? Of course you should have some fun – you’re in New York City! Make sure you take a break to do something, whether it be a nice meal, a walk in the park, or taking advantage of one of the amazing cultural opportunities in the city. If you are heading out at night to partake of some of the myriad of bars and clubs, don’t stay out too late if you are meeting firms the next day. How Should I Get Contacts for Interviews? (1) Relatives and friends. (2) Alumni of Notre Dame and your undergraduate institution. (3) Corporate Finance Sourcebook: The Guide to Major Capital Investment Sources. (4) The Harvard Business School Career Guide to Finance. (5) Names who show up in news stories and promotion rosters in the Wall Street Journal Investing Section. (6) Call up 1-212-555-1212 and give bank name to get a number then call the bank and ask for recruiting. 21
  22. 22. How Should I Contact People? First, send a letter/email expressing your interest with a resume. Call two weeks later. Leave specific and kind voice mail messages. Your messages may not be returned. Keep calling. If your messages still aren't returned, call after 5pm when secretaries go home and people pick up their phones. Generally, be very persistent and don't be afraid of being a pain in the neck. You will get through eventually. Politely explain what you want. If you don't know the person and they are not a recruiting person, ask for a half-hour informational interview (to learn what they do). Offer to take the person to lunch. If someone says they aren't interested or aren't hiring, ask if they could refer you to someone who might help. Have a strategy about the type of job you want whether it be quantitative, MIS-oriented, emerging markets, etc. Be prepared to show your knowledge of an area and explain why you would like to get into it. Sample companies that have interviewed/hired Notre Dame MBA Graduates for Investment Banking Alphametrix FTI Consulting Merrill Lynch Bank of America Goldman Sachs Morgan Stanley Barclays Capital Houlihan Lokey Piper Jaffray Babcock & Brown Houlihan Smith RSM Equico BMO Capital Markets JPMorgan Chase RW Baird Citi KeyBank Sandler O’Neill Credit Suisse Lazard Middle Market UBS Deutsche Bank Lehman Brothers 22
  23. 23. Commercial Banking: Overview Commercial banks are in the business of providing banking services to individuals, small businesses, large organizations and governments. While the banking sector has been consolidating, it is worth noting that far more people are employed in the commercial banking sector than any other part of the financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business, interact with people and build up a clientele. Today's commercial banks are more diverse than ever. You'll find a tremendous range of opportunities in commercial banking, such as commercial lending, leasing, credit card banking, international finance and trade credit. If you are well-prepared and enthusiastic about entering the field, you are likely to find a wide variety of opportunities open to you. Carefully, read through the material below as you decide whether you've got what it takes to pursue a career in commercial banking. Commercial Banking: Skills & Talents Broad Business Understanding and People Skills Needed To be good in banking you need a broad understanding of business, because your job will most likely involve interacting with businesses. People skills are essential because you will be helping people get the loans and investments that they want. Accounting and Writing Skills are Crucial The most common jobs in commercial banking are as a credit analyst and as a lending officer. These jobs require a strong understanding of accounting. Because banking often requires that you document loans and justify credit analyses you've written, communication skills are extremely important. High Grades Less Important Than Work Ethic Banking attracts a diverse group of people. You don't have to be a superstar student with a phenomenal GPA to make it. You do have to be detail oriented, unafraid to sell, and conscientious. International Talent is in High Demand at Money-Center Banks According to Hoyle Jones, head of recruiting at Citi: The firm is aggressively in the hiring market. "We're looking for U.S.-educated Asians and Latin Americans to go back home and grow businesses." Marketing Types Wanted A new business model which is spreading into banking is that of the marketing-oriented consumer products company. Banks are trying to build valuable brand images with consumer-oriented advertising and distinct product lines. According to Richard Kovacevich, CEO of Norwest: "I believe we all must be salespeople; and we should be proud of it. . . . We can no longer be order takers, which is still the characteristic of the old banking industry. In fact, we must be great as salespeople. We must be customer-oriented, we must be needs-based, and we must be aggressive." In light of this demand, if you have good marketing skills and have taken a number of marketing courses, you will be well-suited to this new environment. Because of the increasing marketing orientation, many banks have also been paying big bucks to lure product managers away from consumer products companies. Pros with skills in product design and market segmentation wanted. (American Banker, January 5, 1995) Wall Street Types Will Find a Home 23
  24. 24. Because commercial banks remain profitable and are more involved than ever in the financial markets, they are competing with Wall Street for "high-tech finance jocks" involved in foreign exchange derivatives and financial engineering. Corporate Investment Products in High Demand There is also high demand for finance professionals who can develop products for the corporate market. According to Windle Priem of Korn/Ferry International, a top recruiter in banking: "Half of the [recruiting activity in banking] has been in the capital markets and corporate finance arena of these banks. The other part of the commercial banking practice that's booming is investment products and mutual funds. That's been very, very strong. . . . Most of those people have been hired from other investment firms, other mutual fund companies. The traditional corporate lending people continue to be downsized and terminated." (American Banker, 1/5/95) Days of Easy Hours Long Gone Banking is reputed to be a low hours/workload position. This is possible, especially in smaller markets, but increasingly bankers are working longer hours as their jobs become more oriented towards general marketing of financial services. A typical job in banking in the lending or branch management area would require the following skills: Key Skill Area Requirement People skills: High Sales skills: High Communication skills: High Analytical skills: Medium Ability to synthesize: Medium Creative ability: Medium Initiative: Medium Work hours: 40-60/week Commercial Banking: Job Options Credit Analyst This is a common entry-level job which requires that you evaluate business and consumer loan applications made to your bank. Your duties include projecting a company's future cash flow, evaluating its current financial soundness, visiting and interacting with financial people at businesses, and dealing with lenders. You will learn a lot about business in this job. Your success in this job will depend on how detail-oriented you are, your knowledge of accounting and your ability to communicate. Loan Officer This is a highly desirable job in banking which involves making loans to businesses and consumers. Being a loan officer requires that you have good selling skills, an ability to understand a business and a solid understanding of how banking works. Most people in upper management at banks were once loan officers. Branch Manager You would be responsible for overseeing all activities at your branch including opening new accounts, loan origination, solving customer problems, foreign exchange and safe deposit boxes. Most importantly, you are responsible for establishing relations with customers. This job can be very satisfying, is never boring and requires you to be hands-on. Many bank managers start as tellers or customer service representatives. Key qualities to have 24
  25. 25. for this position are customer service skills, empathy, quantitative ability, strong work ethic, organizational skills, and a solid understanding of banking. Can move up to be a market manager and oversee branches in a market. Transaction Services This is a growing area, especially at the largest banks. The businesses are cash management, trade finance and securities custody and clearing. These are scale businesses; the technology costs are high and therefore only the largest banks can afford to be in the business. Corporations and financial institutions are dependent on the banks for these services. Competition among banks for the business is fierce and therefore jobs in product management, sales and relationship management are challenging and rewarding. A solid knowledge of treasury and foreign exchange as well as the securities markets is extremely helpful for careers in this area. Trust Officer In this job you would deliver trust services, financial products and advice to bank customers (often more upscale ones). This work will give you knowledge of business, investing, estate planning, taxes, and probate law and will involve a lot of counseling. Mortgage Banker Your job will be to make mortgage loans to home buyers and businesses. This involves heavy contact with real estate professionals, credit checks, and dealing with new buyers. Today, many loans are sold to other investors in the mortgage-backed securities market. This job has a good future because an increasing fraction of the population is likely to buy a house in the future. Other jobs in banking involve accounting, marketing and advertising, commercial card operations, securities transfer, wire operations, private banking, installment loans, loan servicing, personnel, operations and communications. Commercial Banking: Links and Resources Career Information, Company Profiles and Contacts Careers for Financial Mavens & Other Money Movers By Marjorie Eberts and Margaret Gisler (NTC Publishing Group, October 1998). A good overview of career possibilities for those with an interest in banking. ABA Directory American Bankers Association. Lists banks around the country. Careers in Banking and Finance: How to Achieve Your Professional Goals American Institute of Banking-California. Describes many jobs in banking and their prerequisites. Careers in Finance By Trudy Ring (VGM Career Horizons, Lincolnwood, IL, 1999). This book has an extensive section which talks about what work in banking is like and what types of people enjoy banking. DDJ Myers Executive search consultants in banking with a focus on asset-liability management, risk, investment analytics and portfolio management. Resumes for Banking and Financial Careers By the Editors of VGM Career Horizons (Lincolnwood, IL, 1994). Has sample cover letters and resumes appropriate for applying for a job in banking. Organizations American Banking Association 25
  26. 26. Largest association of bankers in the United States. Holds a cool conference in Hawaii or some exotic place every year. A powerhouse on Capitol Hill and a publisher of a variety of career materials. Association of Finance Professionals Very strong in the area of cash management and treasury, but covers other areas of corporate finance. Bank Administration Institute The BAI is a leading sponsor of professional education in banking. Check out their website to catch up with current issues and questions in banking. You might also look into their widely read magazine called Banking Strategies. Certified Treasury Professional This designation administered by the AFP has been developed to define standards and measure mastery of cash management and related treasury services. Risk Management Association RMA is also the only financial services trade association that specializes in lending and credit risk information, research, and training. More than 3,000 commercial banks, thrifts, and other financial firms are members of RMA, represented in the Association by some 18,000 financial professionals (called Associates) in 50 states, Puerto Rico, Canada, and numerous foreign cities including Hong Kong and Singapore. Ideas and Know-How The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor By Ron Chernow. A thought-provoking book that explains why the world of banking works the way it does today. Power has migrated from the bankers to the customers. Commercial Bank Management By Peter S. Rose (1998). A classic text on banking. Covers the business, legal issues, asset-liability management and the future. First Manhattan Consulting Group This consulting organization shares a lot of their ideas about banking online. A good resource and not a bad place to look for a job either! Risk & Other Four-Letter Words By Walter B. Wriston The retired chairman of Citibank, Wriston's basic tenet is that risk is the key to progress, bureaucracy its enemy. He lauds the current tendency to combine science and finance in order to create one worldwide financial marketplace, tracing as an example a transaction involving a dozen countries with millions of dollars flashed anywhere in the world within seconds. Walter Wriston, Citibank and the Rise and Fall of American Financial Supremacy By Philip L. Zweig. The story of the rise of Walter Wriston to the top of Citibank, its role in the world economy and major events of the latter half of the 20th century, and the meteoric career of John Reed. Virtual Library: Finance An online compendium of websites of interest to students and those who follow finance. Magazines and Newspapers (Online and Off) American Banker This magazine carries lists of the largest banks, thrifts, etc. in the United States. Good coverage of the industry as well. Economist Widely read weekly covers world of banking, politics and art quite well. You have to read this if you plan to go into the field. Finance news site that focuses on the technology side of banking – good info on different areas of banking. 26
  27. 27. Gtnews is a free website providing relevant reading for the world's finance and treasury professionals. The library of over 2000 articles, interviews, guides, special reports, directories and rating changes is updated with about ten new features weekly. New York Times Sunday classified section in New York edition is renowned for listing ads by investment banks looking for talent. Cost: $1.25 at newsstands. Also look at the Financial Times and CareerPath. Wall Street Journal The most widely read business periodical in the world. And it's on the net! You must register for the net version. Great way to keep up with what's going on in the markets and the world. Following tombstones and ads is also a good way to see which banks are involved in what types of activity this year. You may also be interested in Commercial Banking: Facts and Trends The Credit Crunch is Actually Good for Commercial Banks Commercial Banks are seeing an upswing in deposits and lending activity from corporations, as the capital markets normally used for issuing debt are not functioning as efficiently. This has led to increased business and margins for commercial banks. This will continue for the foreseeable future. Banking is Still in a Period of Consolidation Banking is going through a period of tremendous consolidation with frequent mergers and layoffs. Mergers abound such as those of Citibank and Travelers into Citigroup or NationsBank and Bank of America. Customers don't go to branches like they used to, and increasingly rely on ATMs and electronic transactions. And many now direct their savings into mutual funds like Vanguard and Fidelity. At the same time, businesses increasingly raise money using commercial paper and medium-term notes instead of bank loans. This means jobs are getting tighter. Fortune, 10/30/95, p. 45: "Few industries have experienced as intense a spasm of consolidation and corporate restructuring as has banking in the past decade. New mergers -- and job cuts -- are announced practically every week . . . ." Don't Forget Government Job Opportunities in Banking State governments and the U.S. government actively recruit banking regulators. Interesting places to look include The Office of Thrift Supervision, the Federal Financial Institutions Examination Council, and the Federal Reserve Banking System. Banks are Getting Aggressive The easy times are over for bank earnings. Banks have posted record profits for the past several years, thanks to low interest rates and their efforts to slash costs. But interest rates aren't falling anymore, loan demand has slowed and bankers can't cost-cut their way to continued prosperity. They must grow and sell their services aggressively in new markets to keep earnings up and investors happy. The Future is in New Areas Because traditional banking is in decline, the future of the industry lies in services and new areas. Many commercial banks are now starting to compete against investment banks, for example. One in five banks owns a full-service brokerage firm today. Half of banks own a discount broker. Expect these numbers to rise. Specialized Banks are Doing Best Banks which specialize in a niche such a retail lending, credit card operations, cash management or global retail appear to be doing better than more diversified banks. Expect focused banks to continue to succeed and create more jobs. Middle-Managers Are In Demand 27
  28. 28. The shake-up in banking has left a shortage of good middle-managers, especially at smaller banks which find it more difficult to hire well-trained managers away from well-staffed larger banks. Other hot areas include loan review officers, technology specialists and auditors. Sample companies that have interviewed/hired Notre Dame MBA Graduates for Commercial Banking 1st Source Bank Fifth Third Bank Wells Fargo Bank of America PNC Bank Citi JPMorgan Chase 28
  29. 29. Real Estate: Overview As you read this, there are more than five million people in the United States employed in identifiable real estate fields such as title insurance, construction, mortgage banking, property management, real estate appraisals, brokerage and leasing, and real estate development. In addition, many were engaged in corporate real estate and in real estate lending in commercial banks, and insurance companies where their jobs are not included in the real estate sector. Over a third of the world's wealth is tied up in real estate. Real estate is collateral for mortgages and a large amount of financial assets. As important as the field of real estate might be, it is also worth recognizing how interesting the work in this field is. Real estate professionals are tied to the development of our society in a very direct way and participate in decisions that will shape the way we live for centuries. Work in real estate is personally rewarding, ever-changing and challenging. Take some time and consider your potential in the field of real estate. Real Estate: Skills and Talents Real estate employers are looking for people with a combination of strong deal-making and interpersonal skills. The skills involved include: Key Skill Area Requirement People skills: High Sales skills: Very High Communication skills: High Analytical skills: Medium Ability to synthesize: Low Creative ability: Medium Initiative: High Work hours: 20-70/week Excellent Job Opportunities The field of real estate involves the sale, management and analysis of land and properties. This is one of the largest parts of the economy and offers excellent job opportunities. Currently, the commercial and residential real estate markets are in recession. Due to the credit crunch and issues around residential mortgages, the job market will be tough through May 2009 – so, while there are good jobs, you will really have to fight for them. Tough to Break In It's relatively hard to break into real estate. You need to be prepared to pursue firms on your own after you have thoroughly prepared yourself. These firms do not do large scale on-campus MBA recruiting – you are really working the network yourself. The Field is Highly Entrepreneurial Real estate jobs tend to be more entrepreneurial and create opportunities to become wealthy if you have the right mix of analytical skills and entrepreneurial drive. There are Many Ways to Play the Field One of the exciting things about real estate is that it can be approached from so many different ways. You can be a white-collar worker projecting and analyzing cash flows from new developments with spreadsheets; an agent in the 29
  30. 30. field with heavy customer contact on a day–to-day basis; or an entrepreneurial property owner/manager looking for undervalued real estate buys and strategies for creating value. Multiple Entry Points Available There are a variety of ways to break into real estate. If you are interested in the sales side you need to get licensed and should go to work for a commercial or residential broker – this is not typically an MBA role. If you would like to get involved in property acquisition and analysis you should go to work for a major property management company. There are also many other ways to enter including through corporate site selection departments, governmental entities and banks. Real Estate: Job Options Residential Real Estate Agent/Broker Real estate agents and brokers are usually independent sales professionals who contract their services to real estate brokers in exchanges for a commission-sharing agreement (normally six percent). There are over 400,000 real estate brokers and agents in the United States. To become a broker you must be at least 18 years old, a high school graduate, and have passed a written test on property laws and real estate transactions. Most states also require 30-90 hours of classroom training. You can visit the National Association of Realtors web page at to find out more about this career area. This is not typically a role for immediate graduates from MBA programs. Commercial Real Estate Sales Commercial property brokerage offices use sales associates who market office buildings, hotels and many other types of commercial real estate for brokers. Commercial real estate sales people usually specialize in a particular property type such as apartments, retail, office, hospitality, shopping centers and industrial plants. Most of the large commercial brokerage companies in the United States provide a great deal of local market data and research in order to be able to service a cadre of sophisticated clients who are making multi-million dollar investment decisions. Several trade organizations represent the various commercial real estate subspecialties including the AIR Commercial Real Estate Association, the National Association of Industrial and Office Properties, the International Council of Shopping Centers, and the Society of Industrial and Office Realtors. Additionally, the CCIM Institute, through its education program, has been conferring the Certified Commercial Investment Member (CCIM) designation since 1969. Real Estate Appraisal Real estate appraisers provide unbiased estimates of a property's value and quality. Appraisers usually work for banks or for appraiser firms and will normally value properties by finding comparable sales in an area or by estimating the discounted value of cash flows expected from a property. This profession is less cyclical than real estate brokerage because appraisers are required when homes are refinanced -- a time historically when the real estate market has been slow. You can learn more about this area from the Appraisal Foundation. Property Management Leading real estate owners require professional property managers. Managers are responsible for negotiating leases, ensuring that tenants are satisfied, that rent is paid and that rents reflect market conditions. The career of property manager requires good interpersonal and analytical skills and a fair amount of negotiating prowess. This job is personally rewarding and allows you to really learn the real estate markets should you wish to embark in business on your own. The Institute of Real Estate Management (IREM) is the trade association representing property managers. Their training programs include the Certified Property Manager (CPM) and Accredited Residential Manager (ARM) designations. Real Estate Advisory 30