Let's get real. As we turn the corner and head toward an uncertain 2012, where are the real opportunities for MBA finance professionals?
What's the real scoop? In an environment where some tip-toe when they project better scenarios next year, but where every other day large banks announce lay-offs by the thousands, what's the real story?
Who's hiring? Who's promoting solid performers? Who's luring those interested in finance and promising long-term career paths? Where are the sectors or institutions that will harbor finance pros and allow them to grow, contribute and thrive over the the next few years?
Let's take a glance and gauge vibes and signals across the sectors.
1. Investment banking, corporate finance. From now until about mid-2012, you know banks won't commit. Uncertainty forces them to be hesitant. They'll want to see sustained trends in an economic recovery. Until then, banks will resort to old-time habits of firing rashly and excessively, but hiring too aggressively when signs point to more deal flow. Some banking sectors (Asia, financial institutions, e.g.) are thriving more than others. But even those change from quarter to quarter.
But old habits mean when the tide picks up (or when deals rush through the door), the doors of banks open, and they welcome new contributors at all levels.
2. Investment banking: equities, fixed-income. Who knows? Groupon, Facebook, Zynga, and Linkedin IPOs or projected IPOs were supposed to kick-start the equities sector. Low interest rates were supposed to encourage companies to refinance and get comfortable with debt levels. But regulation (especially from the new Dodd Frank rules) is forcing banks to restructure their trading desks and the complementary role investment banking plays.
Some analysts project fixed-income sectors will diminish in importance because of the lingering damage from the mortgage castastrophe and banks not being able to offset declines in fixed-income revenues with fixed-income banking fees. Some project equities units will soar and thrive, when markets improve, because of higher fees from deals.
2. Investment banking, mergers & acquisitions. Read between the lines or current deals. All depends on the industry sector. Many industries wait for entrenched signs of growth before they acquire companies or merge with a peer. Other industries, because of business conditions, must consolidate, restructure, or sell off divisions to survive. M&A groups stand ready to advise on any kind of corporate reorganization that exists.
New regulation won't tarnish this business too much, since it's fee-based and doesn't often require banks to use too much of their balance sheets. Opportunities for M&A pros in selected areas will always exist, as long as they're comfortable with a lifestyle of few holidays and weekends and arduous travel.
3. Bank sales & trading. Expect few opportunities. Profit opportunities are disappearing. Regulation, compliance, and market volatility have combined to become an avalanche. And banks, after careful analysis, are choosing to get out of the way. Expect gradual reductions in staff across the board. Some are deciding that trading requires too much effort, pain and compliance just to squeak out a few basis points of revenues or tiny profit margins.
Banks are restructuring their trading desks, because they must. Some will depart from all trading activity, except from bare-bones customer-flow transactions. Many (J.P. Morgan, e.g.) have already reduced staff in commodities substantially. The new Volcker Rules will change the game, guidelines and profit dynamics. Some will rationalize maintaining a presence in certain trading areas if they can offset declines with gains in business elsewhere, if that's possible.
They know their best traders will flee for hedge funds and take entire desks with them, and there's not much they can do about it.
4. Risk management. Right after the financial crisis, this was the "growth area" in most financial institutions. Banks, firms, and funds hurried to ensure they had experienced, wise risk managers in place. They reviewed governance policies and rewrote them to give risk managers sufficient authority to confront the next crisis.
They even re-branded risk units to attract and keep talent. Risk management would be a destination unit, not a temporary stop-off between corporate finance assignments. Since then, the rush to reorganize and re-emphasize risk management has slowed down, but few institutions will want to be seen as reducing risk staff or risk support during challenging times.
At many firms, you seldom hear about drastic cuts in risk staff. Risk management, you can argue, is the glue that keeps Goldman Sachs in order. The lack of a strong risk organization, some argue, is why MF Global failed.
5. Corporate banking. Corporate banking, or old-fashioned relationship banking and corporate lending, regained prominence in recent years. Big banks, fatigue from the ups and downs of investment banking, rediscovered the benefits of corporate banking: a stable revenue base from lower-risk products and a loyal, committed client base that rewards banks for service, not for dramatic board-room pitches.
Many banks continue their renewed emphasis on corporate banking and project hiring experienced bankers. They are also designing new paths for new MBAs, especially for those who never contemplated such a career while in business school.
6. Bank treasury services, funds transfer, custody and cash management. The other half of nuts, bolts, blocking and tackling of service banking. Big firms re-emphasizing corporate banking must also have superior service products, too. Banks in the past were often careless in their efforts to attract strong product managers or marketing experts from the outside or from within.
Lately, however, some (J.P. Morgan, e.g.) have successfully convinced former investment bankers to transfer into these areas to energize mature (and sometimes moribund) business units. Banks, nonetheless, haven't yet rationalized a comparable compensation program for those ex-investment bankers and may not be able to.
7. Corporate treasury, financial management, financial analysis. Ah, breaths of fresh air. Amid all the market turmoil and difficulties at financial institutions, blue-chip companies are quietly reporting strong earnings, investing in new markets, and projecting reasonable growth. The finance units in these companies continue to recruit aggressively at business schools; some have convinced top graduates to by-pass Wall Street.
They promise more stability, opportunities to work in foreign countries, and worthwhile management experience. A financial analyst job at Ford or General Motors (popular destinations for many Consortium graduates) might have become fashionable again. Or a position in corporate strategy at Eli Lily or Pepsico is a desirable first job.
8. Private wealth management. Almost every bank in the country has decided to devote capital and attention to this sector. Almost every bank is attracted to a business model of aggressive accumulation and gathering of client assets, which lead to stable revenues, steady growth, and fewer headaches from market risks, regulatory threats, and an uncertain corporate clientele.
At least for now, before too many banks chase too few clients or too little in assets (or clients get too frustrated with market performance), everybody agrees this is the hot hiring growth spot in the year or two to come.
9. Community banking and development, retail banking. Some institutions see long-term growth in brick-and-mortar banking. Some don't. J.P. Morgan Chase and Bank of America have seen it. Citi sees it overseas. HSBC or BNY Mellon didn't see it.
Those that do will continue to acquire branches, hire more managers and staff, and provide more face-to-face banking services, even if it's not always easy to justify the efficiencies of such expansion. As long as they attract more and more customers (especially those who prefer a personal touch) and as long as those customers bring their deposits and their ongoing personal needs (mortgages, car loans, credit cards, e.g.), they can justify it.
Not many MBAs from top schools (including many from Consortium schools) have conventionally expressed interest in retail or community banking, but many with experience have eventually turned toward these sectors when opportunities arise.
10. Hedge funds. Hedge funds stumbled through a tough 2011. They have admitted to their investors they were caught off guard with troubles in Europe and U.S. budget-deficit fuss. But funds tend to forget the past. Or at least they try to.
Others close up shop and reopen in a different incarnation. They move on and start anew. They know, too, they'll benefit from banks being forced to downsize proprietary trading. There will be opportunities, but the industry, as always, will still be difficult to break into. Hedge-fund managers hire cronies, classmates, former colleagues from other trading experiences, graduates from the schools they attended, and sons and daughters of classmates.
11. Venture capital and private equity (financial sponsors). This is the industry of home-runs and American-dream stories of earning millions inside the proverbial five-year window. Opportunities for firms and funds to make money exist in good times (new markets and mature markets) and in bad times (distressed assets, bargain-basement prices, and restructurings). There are some (KKR, e.g.) who have even discovered ways to make investments in battered Europe. But the doors to get inside this industry are difficult to penetrate. Now, next year, and for years to come.
Some (Blackstone comes to mind) have tried to be open-minded about opening their doors to a wider array of talent and backgrounds, partly because a few have become public institutions or have been contemplating going public.
12. Asia, Europe, South America, China. Of course, Europe is in turmoil, and experts project the likelihood of continued problems. Banks there are besieged with issues and capital challenges. Few European institutions (UBS, RBS, Deutsche Bank, HSBC, e.g.) are heralding opportunities while the continent tries to right itself.
Meanwhile, financial institutions everywhere continue to have expansion eyes on parts of Asia, South America (especially Brazil), and China.
13. Diversity initiatives. When institutions struggled to remain alive after the Lehman collapse, many initiatives and much enthusiasm for diversity slipped. You could hardly get a CEO or sector head to discuss the topic, much less attend a meeting or conference call on the topic.
Some enthusiasm has revived since then, partly because some institutions see the long-term benefits and genuinely believe it's a way to hire top talent.
We've reached the corner and are headed toward the new year. Uncertainty prevails, but the mood isn't one of hopelessness or disenchantment. It's about caution and picking the right spots, the right places, and the most optimistic and resourceful institutions.