Finance Careers: Decisions, Decisions

How do you decide what sector of finance is best for you?

A career in finance and banking might entail anything from a financial counselor to business analyst, CFO or treasurer; from an advisor in mergers and acquisitions to a venture capitalist or manager of bank branches in a big region; from being an equity-derivatives trader to a private banker or a salesperson of money-transfer services.

Whether you are a current MBA finance student, one who's contemplating returning to business school, or a finance professional five years out of school trying to decide a next step--how do you decide what's right for you?

First, ask yourself a few questions. What motivates and drives you? People, numbers, risk, selling, analyzing, managing, clients, decision-making, organizations, systems, deals, or, yes, compensation?

Decide what you like to do do, what subjects in finance you find appealing, and what activities you prefer to be involved in. In business school, what stimulated you the most--finance theory, financial accounting, managerial accounting, investments, structured finance, derivatives, capital markets, global finance, money and capital flows, central banking, firm valuation, securities analysis, or real estate?

Do you prefer research, modeling, and quantitative anlysis, the intrigue of dozens of pages of Excel spreadsheets to help determine whether to make an investment or not, to acquire a firm or not, to issue new equity or debt or not?

Do you like client interaction, client negotiation, marketing, pitching, sales, the satisfaction of closing a transaction after a long effort to present your firm's credentials and agree on terms? Do you like trying to understand what makes a client tick?

Do you like to take risks or get excited by market movement or, even more, market volatility? Do you feel a jolt of energy when market indices soar or take a nose-dive? Are you amused by the complexities and profit opportunties of exotic trading instruments?

Do you like to do deals, projects and transactions? Or do you like to manage teams, groups and businesses?

Do you like to analyze and value large companies--or value parts, divisions and subsidiaries of large enterprises? Are you interested in foreign markets, international business, and foreign currencies--those heavily traded and those rarely so?

Do you enjoy developing young talent and teaching others about models, markets, deals, products and services? Do you like to advise individual clients on how to prepare for a financial future?

Are you attracted to systems and technology? Do you have ideas about how systems can be used to exploit trading inefficiencies or capture and analyze massive amounts of financial data, or be used to provide financial services for clients?

Note your areas of comfort and expertise. They may all involve finance: a financial product, service, instrument or idea, or quantitative models and analysis. But that comfort area might involve people: marketing, sales, projects, business management, business development, and expansion.

While asking yourself questions and pinpointing your comfort and expert areas, at the same time, decide where there are opportunities, today and tomorrow.

Responding to these questions will help you outline a path toward a sector (or sectors) of finance where you can excel. The probability of success soars when you combine your comfort areas, your special expertise, and current and future opportunities. Match your preferences with opportunities and choose sectors where you have realistic chances to grow and do well.

The sectors of finance to choose from are numerous and broad. And they change over time, as the industry evolves, grows, and self-reflects after the recent crisis. They include private banking, equity research, credit analysis, risk management, investment banking, community banking, microfinance, bond trading, retail banking, securities brokerage, insurance, hedge-fund trading, prime brokerage, private equity, corporate treasury, collateral management, currency hedging, cash management, mutual funds, financial management, and on and on.

What if you are competent in sales and marketing and have contacts within an industry or from business school, have a thirst for generating new business, and enjoy the ongoing dialogue with dozens of clients? And what if you have strong technical skills in corporate finance, equity valuation, or debt financing? Then you might find appealing the role of investment- or corporate-banking client management.

What if you enjoy immersing yourself into the depths of one industry and are continually fascinated by its prospects, it business model, its company participants, its growth potential, its challenges, its regulation, and its leaders? And what if you're just as fascinated by its financial numbers (the balance sheets, the footnotes, off-balance-sheet risks, the P&L, the cash-flow statements, and projections going 10 years out)? Then you might like the role of an equity-research analyst or an investment manager.

At the same time, you'll need to have a special knack for written presentations and an ability to get company CFO's and CEO's to provide details, forecasts, and explanations on how a new product will be unveiled.

What if you like being the trusted advisor to high-net-worth individuals and enjoy working closely with them to assess investment portfolios or long-term cash needs? Or enjoy outlining a plan for them for a generation ahead? Or helping them decide what to do if they have major stakes in small companies? Then you might be attracted to private banking.

What if you think you can stomach the challenge of big risks and the potential for daily losses from huge trading positions? What if you think you can confront unforeseen market movements and can think quickly to determine how macro-factors will affect trading portfolios? What if you can make decisions fast and with conviction, recover quickly from setbacks, or figure out to how hedge risks or reduce losses when markets knock you down? Then sales & trading might be your preferred gig.

If the art of the deal thrills you, then you might consider corporate finance. You would be one who excels in project management, teamwork, tight timetables, client presentations, tough negotiations, and being able to draw polished, precise conclusions from long, detailed financial models.

You dare to go in front of a company's board to explain why it should sell itself. You would thrive under pressure and be energized by the possibility of getting the deal done, beating out a competing firm, or helping another company make a bid to acquire another firm.

Comfort zones, expertise, and opportunities. Ask yourself questions of motivation and drive. Determine your special expertise. And comb through opportunities. Together, useful tools to help you decide where in that financial spectrum you might want to belong.

Tracy Williams

CFN: What are People Doing Post-Crisis?

With the financial debacle of 2007-09 slowly, slowly receding, did those interested in or working in finance take detours elsewhere? Did they shift from one sector of finance to another? Did they take positions in government and not-for-profit enterprises? Did they start their own businesses, consulting firms, or investment funds? Did they withdraw from this world altogether?

The financial crisis forced many to take seismic shifts in their careers. Some went back to school. Others left finance altogether and took on second careers in an entirely different endeavor. Many were fortunate to stay in finance by remaining in the same position. Or they moved from one financial arena to another--by going to another institution or by assuming a different task (say, moving from banking to corporate treasury, or moving from fixed-income sales to cash management, or moving from equity trading to retail banking).

An unscientific overview of the Consortium Finance Network (CFN) shows members tended to remain in the field. They continued to have keen interests in finance. For the most part, CFN members, now 350 in number, prepared for long careers in finance in school and continue to work in or pursue financial positions.

CFN today includes large numbers of current MBA students at Consortium schools and Consortium alumni from around the country. Alumni work in a wide distribution of positions. CFN also includes sponsors, friends, and others interested in finance (and interested in the overall Consortium mission). It includes MBA graduates from Consortium schools, who may not have been Consortium students, or MBA graduates from non-Consortium schools.

CFN alumni members are involved in almost every aspect of finance. They work for large, known financial institutions (BoA, Morgan Stanley, Citi, UBS, RBS, Goldman Sachs, etc.). They work for corporations, community banks, insurance companies, accounting firms, and consulting firms. Many work for themselves. There is no significant concentration.

Among alumni, while real estate and equity-trading took big hits during the crisis, there are still many who are involved in those areas--although probably not as many doing so at major financial institutions. Many alumni, however, continue to have interests in real-estate development, real-estate investing, equity-trading, equity-underwriting, and equity research.

Prime brokerage (providing trading, clearing and financing services for hedge funds and small broker/dealers) continues to be a growing field at large institutions. Some alumni in finance have roles in this area.

Another growing area is risk management, where large banks manage risks of all kinds--credit, market, counterparty, and operations risks from doing business, financing, or trading with other large companies and institutions. While the sector grows, there aren't many CFN alumni in the field, likely because banks have not recruited formally or methodically for these roles. They haven't also explained these roles clearly to students in business school.

Alumni are involved across the country in corporate treasury and financial-management roles in large numbers. They tend to be financial analysts, financial managers, strategic planners, or business analysts for large Fortune 500 companies, where there are defined career paths and much opportunity to learn, travel and advance. (It's also probably not coincidental that many tend to work for long-time Consortium sponsors: Eli Lily, Pepsico, et. al.)

Retail banking has not necessarily been a popular career path for CFN alumni, but some big banks (BoA, most notably) have Consortium alumni in significant roles in this area.

Alumni, post-crisis, continue to be well-represented in conventional MBA roles--asset management, consulting, private banking, derivatives-trading, corporate finance, and M&A at both big firms and at boutiques.

As expected during the crisis, many alumni grew attracted to or took positions in a comparable role at the U.S. Treasury, Federal Reserve Bank, and other places. The experiences have been invaluable, as they get to immerse themselves in many activities and in many hot issues of these times and get to travel around the country.

While alumni are involved in many areas of finance, CFN members who are sponsors and friends are involved in just about everything finace-related--from recruiting to private investing.

This group, too, is currently working in conventional finance roles: investment mangement, corporate treasury, and corporate finance. (Corporate treasury, business management, and financial analysis are popular areas.) But more than CFN alumni, this group includes many who are working in financial brokerage (and financial planning), diversity recruiting, cash-management sales (at banks), and accounting.

There are many in this group who, after long careers elsewhere, decided to set up their own shops to take advantage of special expertise and be their own bosses. They have become private consultants, private investors, or advisors to individuals and corporations. One advises small corporations on strategic acquisitions. One advises others on managing risks via derivatives. One advises on foreign currencies. Another advises on personal investments.

Overall there are few notable trends. People interested in banking and finance continue to find ways to deploy their talents. In this environment, people must follow opportunities, but they are willing to try something different--smaller firms, less-rigid career paths, positions outside of financial centers (like New York and Chicago), or positions in government.

Current MBA students, meanwhile, are now watching for opportunities closely. They look for trends, they talk to professionals and professors and strategize among themselves.

Many still prefer investment banking (corporate finance and M&A), investment research and sales/trading. But over the past year, a number larger than usual have turned toward paths of private banking and wealth management. That is likely because big firms are doing a better job recruiting MBA talent in these areas, and students themselves like the long-term prospects here.


Tracy Williams

How Does Goldman Do It?

Goldman Sachs, one of the best-performing and most reputable financial institutions of our times, has been in the news quite a bit lately. The firm eked out profits during the tough times of the crisis. And it had another banner year in 2009. The entire financial community has watched how it has managed compensation for all employees--from its CEO to analysts right out of college--and how it has dealt with TARP bailouts and impending regulation.


In recent weeks, news stories inquired how and why it may have been an indirect recipient of bailout payments from AIG. Its CEO Lloyd Blankstein announced it was setting aside substantial amounts of earnings for charity and it would be reasonable and fair in the bonus payouts. (During the crisis, for regulatory purposes, Goldman elected to change from being a consolidated securities firm to being a regulated bank-holding company--like Citigroup and Bank of America. It is still, in a sense, regarded as a top major investment bank.)



As most financial institutions struggled to dig out of the crisis, Goldman bounced back from a dip in 2008 to report an astounding $13 billion in earnings in 2009. Its equity capital reached $71 billion. The firm generated an impressive 22% return for shareholders--a return most companies in any industry would covet in even the best of times.





Through it all, Goldman continues to be a top-notch attraction for talent in all its businesses--for BA graduates at elite schools, who want to get inside its doors for 2-3 years, and for MBA's, who aim for a prized offer and a long-term career.




How does Goldman do it? The Goldman mystique, an entrenched and established way of doing business, and an uncanny ability to attract top talent might explain it. But there are many factors:



It's the culture, most say. It's all about capital, past performance, smarts, an obsession with teamwork, a relentless demand on the lives of employees, and a carefully crafted culture that dates back decades ago.
The culture people perceive today goes back to the days when Goldman was led by bankers such as Weinberg (father and son), Levy, and Whitehead, all of whom obsessed over their own insecurity of Goldman being a mere marginalized, commercial-paper firm. They wanted to go beyond that and created a firm that revolved around a true partnership, intellectual prowess, and a near-maniacal focus on clients.
Goldman today now has the advantage of having been one firm through those years, a private partnership that is now a public firm. It has acquired smaller firms (J.Aron, Spear Leeds). Yet it has never had to "merge" or combine or compromise the culture that was created and then came to be.
Over the years, as the firm evolved and changed itself (even going so far as to "compete" with clients), it tweaked the culture, while trying to preserve what made it special and what helped it generate substantial earnings year after year:
1. Partnership. Goldman was until the late 1990's a premier partnership. All of Wall Street coveted the award of a Goldman Sachs partnership, which brought long-term riches, although to become a partner typically required giving up an outside life. Goldman then (and some say Goldman now) demands 24/7 attention to Goldman business interests and objectives--clients, deals, investments, and risks. There was always a golden carrot at the end (the partnership); hence, people were willing to invest their lives.
2. No Stars Allowed. More than other investment banks, Goldman squelched the star system and discouraged it. It promoted pure teamwork. People were evaluated and rewarded based on contributions to team activity. For years and even today, few beyond its CEO and CFO get regular media attention. Most Goldman people become better known in their second and third careers, when they leave to take positions in government (Paulson, Rubin, Corzine, Whitehead) or take lead roles at other firms (Thain).

3. Fast-follower. Some say Goldman succeeds by not being the first out of the box, but by following others after they have made the first mistakes. Goldman watches and subsequently dives in full force. Goldman was not the first big investment firm to go public, to build a leading M&A business, to develop derivatives products, to engage in substantial proprietary trading, to expand into private banking, private equity and asset management or to spread itself across the globe. Yet in just about all those sectors, Goldman roams near the top today.
4. Clients first and foremost. Goldman's history revolves around steadfast loyalty to clients--advising them, financing them, and trading for them or with them--in all products and in all parts of the world. Clients are attended to, nurtured, and put on a pedestal. For big banks, it likely set the standard for how they advise them, assess their relationships with them or pitch services.
There have been challenges, however, in the past decade. Goldman also has businesses (proprietary trading and private equity) that compete with clients. Carefully and tenderly, Goldman has tried to do both, knowing that now and then, it might step on a toe.
5. Extraordinary talent. Recruiting talent is a top priority. For years, some banks would say they seek talent, but didn't devote resources to hiring and retaining it or couldn't get senior bankers interested in the process. The Goldman of the past decades has had an unusual resolve and special ability to attract talent from top schools. Everybody--from senior managing director to analyst--is involved. Out of this resolve to hire people who had intellectual depth and who had smarts to tackle any subject at hand came the widely known rounds of excruciating interviews. Goldman devised a long filtering process to decide who could work well within its culture.
As it expanded into new businesses, Goldman wanted people who could think, learn, and push themselves mentally. It wanted people who would bow to the goals of a team. It tested and picked smart, team-oriented people during these sessions.
In turn, it promised significant responsibility early. It promised it would focus on retaining and developing people. It also promised to share the wealth of success. In return, it demanded a lot. A Goldman career wouldn't be a walk in the park.
Through the years, as it faced challenges of new geographies, new products, and new risks, it had people smart and diligent enough to embrace them, people who also knew they would be rewarded for giving so much of themselves to the firm.
6. Managing risks. Goldman the firm takes big risks--client, market, business and investment risks. In its history, it learned not to avoid them, but to manage them quickly, systematically, and intelligently. Like all large firms, it has its occasional hiccups and losses, but seldom has it made mistakes or taken on out-sized risks that jeopardized the existence of the firm.
7. Discipline. As a fast-follower type, its culture promoted a disciplined, near-agonizing approach to getting into lines of businesses that are big profit contributors today. It didn't leap into, say, asset management, private banking or Europe operations. It watched, and it waited for the right time. With its partnership roots, it sought consensual agreement from many when it decided to launch businesses, to acquire, say, a commodities business (J.Aron), to deploy capital and talent into something new.
The Goldman culture emanates from its history and is reaffirmed by successful performance. It redefines and reshapes itself through time. Still, there are challenges.
1. Goldman, like all big banks, must continue to manage conflicts of interest in its businesses: The private-equity group might bid for a company that is also the target of one of its clients. The prop-trading group may compete with hedge funds that also process their trades through Goldman. The culture permits it to discuss and address these conflicts all the time.
2. It is not used to the headlines and publicity post-crisis. Years ago, it wasn't a household name. Today, it is. It is managing more than it ever did before how the public perceives it and how outsiders can understand its role in banking and capital markets.
3. Its way of doing business could be affected by impending financial regulation, especially any rules that attempt to separate some banking activities from proprietary trading as much as possible. It would be un-Goldman-like if it were not already assessing all possible scenarios and devising a game plan for any new regulation.

On the diversity front, give the firm credit for strides it as made in recent years. Goldman was seldom at the top of lists of companies with standout diversity programs. And through its long history of being run by partners (now managing directors), there is only a sprinkling of minorities and women among those ranks. (It was Goldman Sachs women and alumni who formed the expansive networking group, "85 Broads.")
In recent years, it seems to have confronted diversity with the same focus and discipline it has for other businesses. The firm has implemented several programs to attract top under-represented talent across all its businesses.
It is a significant sponsor to the Consortium, Toigo, MLT, and Inroads. It sponsors MBA fellowships for minorities, special networking programs for women in business, and the highly regarded "bootcamp" for MBA students in finance. The firm has worked wonders to get women and minorities excited about it before they get to b-school campuses. To its credit, it pushes them to reach for the visible, prestigious roles in investment banking, private banking and trading. At the Consortium's annual career fair, it attracts a long line of students around its booth.
In the year and years to come, all eyes will remain on Goldman Sachs.
Tracy Williams

Microfinance II: On the Ground in the Philippines

In 2007, Clint Wilson, a San Francisco-based entrepreneur, spent time in the Philippines exploring Internet cafes and the region 60 miles north of Manila. He studied the area, the markets, the population, the risks and challenges and decided to embark on his idea.

His idea was to launch an Internet cafe and use that as the basis for his microcredit business model. Soon he and his wife Cristy, a native of the Philippines, launched CnC Partners, a microfinance business with operations in the Philippines and in San Francisco. His wife's family would assist in the getting the business off the ground in Bamban, a small, under-developed city north of Manila.



Wilson presented his business model Feb-4 in Part II of a microfinance webinar series sponsored by the Consortium Finance Network. (Part I in January focused on the history and basics of microfinance.)

During the session, he explained how he cultivated the idea with help and inspiration from his wife and her family in the Philippines and how he painstakingly researched the marketplace and the potential customer base. He had many goals:

(a) to be competitive and profitable in offering Internet services via a newly built cafe in Bamban,

(b) to reinvest profits directly back into the business to grow it and permit him to expand into microcredit activities,

(c) to provide employment for locals, and

(d) to help the regions where CnC operates in social and economic ways.



A staff of 10, including members of his wife's family, operates the new Bamban (Luzon) cafe. But this wasn't supposed to be just another cafe offering access to computers or just another one of the many such businesses that fail in the Philippines. Clint wanted to be unique, creative in ways to spur traffic and to give people an exciting, rewarding and interesting reason to go to the cafe.

He would charge for time on the Internet at the cafe (about 20 pesos/hr), but CnC would offer an array of other services, products, and enticements--games, English lessons, courses for adults, prizes and other products (even access to rental apartments, on its property).

Clint highlighted how kids today come to the cafe, hang out, establish Facebook accounts and learn by diving into Cyberspace. CnC provides an environment conducive for learning, he boasted. The fee is not necessarily prohibitive, because CnC offers discounts, permits bartering, and has a points system for access for high-volume users.

Clint said this is part of a long-time dream, which started in the 1990's, he said, "when he was on a 60-mile bike trip in China" and explored the countryside and economic development. This led to a graduate-school thesis on a similar topic and ultimately led years later to the formation of CnC--whose objectives are both financial and social.

In the presentation, he used a photograph of an improverished neighborhood alley in Bamban and told how it has inspired him to use his business to do his part to develop the area and to improve the fortunes of the inhabitants in the area.

With the Bamban cafe, CnC intends to reinvest profits to (a) build other smaller cafes with similar attractions and (b) build a viable, broad-based microcredit organization. Hence, one business will create profits and capital to be used to invest in and build the microlending organization.

CnC is growing the microcredit side in various ways. It is involved in a "rice project" in the southern Philippines, where it makes large loans (50,000 pesos) to farmers, who lend to other farmers and build a lending hierarchy based on business trust and relationships. Profits from this endeavor would, yes, be reinvested to support expansion of the Internet-cafe business.

CnC will also explore (and exploit) other existing microfinance models--e.g, Kiva, Riskebiz, etc., all ways to funnel microloans from those who want to support to those who have specific 30-day needs.

CnC is also growing the microcredit side in another way--via Facebook. It has built a Facebook page, "CnC Cafe' Microcredit Alley" with over 1,500 fans. "Fans" (or clients, borrowers, participants, and/or sponsors) can meet via the page and apply for loans or help facilitate lending. And similarly to the cafe', CnC will offer attractions to boost business--discounts, airline tickets, etc.

Some participants in the webinar were interested in opportunities in microfinance in the long term, but also for this summer. Or more specifically, "Are there opportunities for MBA's to work as interns for CnC?"

Clint was encouraging, because an organization like CnC can use MBA talent and energy. CnC will hire interns this summer and hopes to have at least one intern from the U.S. thereafter every three months. His firm offers not only on-the-ground business and financial experience, but a cultural experience with social action.

CFN will post Clint's presentation for more people to review. If you have specific questions or comments about his experiences, his business model, and opportunities, reach out to him via http://www.linkedin.com,/ through the CFN group in Linkedin, or by contacting Rachel Delcau (delcaur@cgsm.org) at the Consortium.

Tracy Williams