Thursday, January 20, 2011

CFN: Inbox Follow-up

The Consortium Finance Network has encountered or addressed several issues, topics and opportunities over the past two years. There have been events, webinars, conference calls, e-mail exchanges, blog postings, discussions, and guidebooks. Some topics deserve follow-up: What are next steps? What are implications of events or discussions from the past year? What is the aftermath of an issue, problem, or question CFN may have tried to manage? In other words, where is Part 2, 3 or 4?

Microfinance: Growing Pains

CFN hosted two webinars on microfinance in 2010 to introduce members and participants to the sector and to possible opportunities. The first webinar offered a primer and history. The second was a case study of a successful, growing microfinance project in the Philippines. (See links below to blog summaries of the webinars).

Since then, there has been widespread reporting of scandals and problems in selected areas in microfinance around the globe. Reports indicate activities where micro-lenders have over-charged on loans and where borrowers have defaulted in greater numbers than expected. Some have blamed the problems on new industry participants who seek to maximize profits before achieving developmental objectives. Some argue that microfinance reaches development goals best when non-profit institutions are the predominant lenders.

The isolated problems will not likely deter efforts from some established institutions who have seen progress and success. But there may be calls to regulate or oversee certain activities to protect borrowers or discourage those who participate solely to maximize financial interests. The current issues likely mean the global microfinance model needs some tweaking.

Volcker Rule: Step Two

CFN blogged about the impact of a possible Volcker Rule in mid-2010:

This is the rule that would prohibit banks from engaging in proprietary trading and would likely have significant impact on the profits, balance sheets, and roles of many familiar institutions (JPMorgan Chase, Citi, and Bank of Amercia; but also, Goldman Sachs and Morgan Stanley, now bank holding companies).

Banks will need to revamp their trading desks, refocus trading to client-driven activities exclusively, and risk losing talented traders and entire trading desks to hedge funds and trading and dealing firms.

Since then, the rule has now become law. But the roll-out will be slow. The law gives regulators ample time to rewrite rules and present new definitions of proprietary and client-driven trading. And as expected, regulators (or whoever will be the designated group to draft specific rules) have been deliberate and cautious. Banks now have time to (a) continue some forms of prop-trading until rules change, (b) wind down some activities without having to endure sell-offs, and (c) restructure trading departments in a way they can retain talent.

The CFA: To Pursue or Not to Pursue

CFN presided over lively debates over the value of the CFA--especially for MBAs in finance, who have already been exposed to many elements of the CFA (corporate finance, investment analysis, accounting, security analysis, etc.) in business school. To help CFN members, Consortium alumni and other MBAs decide for themselves what is right, CFN hosted a webinar on the pros, cons, costs, value and time of the CFA in Oct., 2010:

All sides of the argument have validity. In the end, it is a personal decision. Many Consortium students in finance (not necessarily influenced by the viewpoints or the webinar) continue to pursue the first levels of the CFA. Some current students have pursued Levels 1 and 2 with no intention of pursuing Level 3 or the complete designation. This group won't be able to add the full CFA onto a resume', but will be able to get what they want from the effort: polished knowledge in certain finance topics and a slightly enhanced resume' without the costs and time required to get through Level 3 and further.

Mentoring: Keeping the Relationship Alive

CFN the past two years has encouraged, embraced and facilitated mentor relationships between Consortium students and alumni. Mentorships open doors for students. Mentors guide students, boost morale, introduce them to other important contacts and even tutor them to get ready for technical interviews.


Thriving, long-term relationships, however, are few, scarce. Many mentor relationships start with energy and ambitions, but drift afterward. Students get busy, preoccupied with what needs to get done that day, and may not always see the value of long-term relationships. Mentors get busy, too, or may not have the interest to do what's necessary to keep the relationship alive. CFN has tried to address these phenomena and has often assessed the role the Consortium and CFN can play to keep mentor relationships going.

The long-term value of a student or young professional in having one or more mentor relationships is critical for Consortium members and makes all efforts to help students and mentors strengthen their ties worthwhile.

Delicate Balance: Long Hours at Work

One of CFN's most popular discussions or blog postings addressed the long, near-tortuous hours involved in certain jobs in finance:

MBAs in finance know the story. The hours are unending, the schedule is unpredictable. Senior managers are demanding, often unrealistic. Weekends are seized by more work, new projects, new demands and Sunday afternoons in the office. The pace is physically draining; emotions peak and ebb. Sometimes it's debilitating.

MBAs dig deep to figure out how to cope. Most scrutinize and weigh the advantages (compensation, responsibility and finance experience) with the costs (time away from family and friends and physical and emotional costs).

The crisis of 2007-08, nonetheless, led to much soul searching for just about anybody who survived the events. It encouraged people to address the delicate work-life balance more carefully--especially if the end result from all the hours was the collapse of an employer, a job loss, or a dip in compensation.

For many, the costs exceeded the advantages, and they fled to other sectors or fields that at least permit a handsome, tolerable balance. Others didn't have a say and were victims of staff reductions. Many were in transition, and while in transition had the opportunity to decide (away from the pressures and not influenced by lucrative compensation) objectively if they wanted to return to a similar environment.

Some Consortium MBAs know the score, bear down and manage the grueling pace as well as possible--especially if they feel the experience will lead to a greater goal.

Other Consortium MBAs--in a new, post-crisis era--have courageously stepped up to put work-life balance as a top priority and have pursued opportunities that permit such. That means a few have actually rejected high-paying New York finance jobs for satisfying positions (with slightly less compensation) in other regions. And they feel good about it.

Which Way to Go? Investment Banking or Private Banking

CFN in Sept., 2009, offered advice to many Consortium students and other MBA alumni in transition on how to decide between investment banking and private banking, when presented with opportunities. The two areas offer different career paths, although activities and functions overlap in some ways. Many agree, too, that the cultures of the two differ.

Most MBAs in finance have skills and aptitude to go in either direction. But they struggle to decide which way to go. Some simply go where there is opportunity. Some of CFN's advice is summarized in

MBAs often"feel guilty" when they forego opportunities related to the relative high-paying world of investment banking. In recent years, many Consortium MBAs have comfortably decided to go the private-banking route. Part of the reason is due to the more professional, organized approach to recruiting MBAs in recent years. Private-banking units, which used to recruit MBAs on a one-off basis or in an unstructured way, now seek out MBAs in the aggressive, focused way investment banks do.

Another reason is that MBAs like the greater client responsibility that comes with many entry-level roles in private-banking. The so-called "apprenticeship" period is shorter. They get to have bottom-line accountability as soon as they are ready. Some who have opted for private banking know what they are talking about; they are former investment bankers.

Tracy Williams

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