Diversity: Staying in the Front Seat

Are diversity initiatives taking a back seat in the face of the past year's financial turmoil--especially at financial institutions?

Banks, insurance companies, investment managers and other financial institutions made important, noticeable advances on the diversity front in the past decade. You could see that in many circles. More and more women and people of color began to populate trading desks and entry-level corporate-finance programs. More became fluent in exotic derivatives, valuation models, and optimal asset allocation. And more began to take lead roles in deals in corporate or municipal finance.

They became interested in venture capital and private equity. Those who started out years ago progressed to vice president, branch manager, and senior research analyst. Some had started their own brokerages or funds.

In business schools across the country, blacks and Latinos plotted careers as bankers, as traders, as financial consultants, as financial engineers, and M&A advisers. Many could envision the day they would become heads of trading desks, managing directors, sector heads, or top-ranking researchers or salespersons.

Watching mentors and prominent examples, they grew confident in a finance career path. They wanted to be the next generation of CFO's, deal-doers, star analysts, creators of new financial products, or prominent fund mangers. They watched as African-Americans led Merrill Lynch and American Express. African-Americans had become top bankers at Morgan Stanley and Bank of America. Women had become CFO's at Lehman Brothers and Citigroup and "All-American" equity-research analysts.

But have all the progress and sense of urgency slowed down?

Financial institutions last year found themselves with backs against walls, fighting for their lives--scrambling to avert loan and trading losses, reduce and rationalize staff, cut expenses, boost capital, and respond to regulators and the general public. Many understandably worried about panic among depositors and runs on their banks.

Did diversity and the special passion to ensure all aspects of financial services were inclusive and reflected all faces of the general population get pushed to the bottom of corporate agenda?

Most institutions will contend that throughout it all diversity remained high in importance. But keeping it there was a daunting challenge. Last summer, Lehman Brothers, a Wall Street firm that had made admirable progress on the diversity front the last decade, was hustling to maintain its existence. Reducing its balance sheet, shifting top management, confronting a frightened public, avoiding comparisons to Bear Stearns and injecting more capital were an all-consuming preoccupation. Diversity initiatives were likely shoved aside.

Lehman wasn't alone. In a severe crisis, firms' diversity council meetings with senior management are postponed. Diversity follow-up programs, initiatives and scorecards draw less attention. Firmwide enthusiasm and celebration of inclusiveness dwindle. A culture that had been one where minorities finally felt happy and felt belonged turns fierce, mean and Darwinian. Funding for diversity-pipeline programs (SEO, Inroads, Toigo, and Consortium) gets cut or rationalized away. Recruiting budgets are sliced, and recruiting itself becomes erratic or inconsistent.

As the crisis last year ballooned, financial institutions swiftly reduced staff. Those in under-represented groups suffered from "LIFO" staff reduction: last hired, first eliminated--especially at entry-level positions. Just like that, a half-generation of progress was at risk of being dismantled. The next generation of top minority deal-doers, senior analysts, senior vice presidents and managing directors got tripped up right at the starting gate.

Worse, there was the risk that those who followed might get discouraged. They could get disenchanted if they saw few women and minorities ahead of them and could ask themselves, "Why?" or "Why bother?"

The best firms kept the passion in good times and bad. As the world of finance pondered bailouts, new capital, and trading losses, the best firms--faced with the same--reaffirmed their commitment. It wasn't easy, but they did.

They are the ones, who while fighting for existence, still managed to keep diversity high on the agenda, convened diversity-council meetings, and ensured there was a significant pipeline of diverse talent headed their way. And they did so eagerly--while distracted, anxious, and burdened. They had a long-term perspective on inclusiveness.

Top business schools had an important role, too, in helping to keep diversity on the agenda. They reminded corporate recruiters they don't need to go far to find diverse talent. Talent is in their backyards. They made sure the next generation of talent was well-prepared, ready to contribute. And they helped convinced under-represented groups a career in finance is still worth the effort.

Fortunately markets have stabilized and anxieties eased, but the challenge remains. It took decades to get the spirit of inclusion near the top of the agenda. It took just a few months for it to slip and take a back seat. It will take everybody to get it back to where it needs to be and make sure it stays there.

Tracy Williams

Darden's Response to the Crisis

It was inevitable that top business schools wouldn't stand still after witnessing a succession of threats to the financial system the past two years. Several schools announced earlier this year how they intended to respond to the financial crisis, change curriculum, provide analyses, or produce case studies of specific events.


A team of NYU-Stern professors just published a detailed, comprehensive analysis of the events before, during and after crisis. Restoring Financial Stability: How to Repair a Failed System (Wiley Finance) is the result of contributions from the team and offers a chronicle of what happened, detailed analyses of what happened, and solutions for how a bursting of the financial bubble can be avoided in the future. The book takes an academic approach and could be an anchor text for future b-school students who want to understand 2008 more thoroughly.


Meanwhile, Virginia-Darden has shown how a top school can respond not just with useful texts and new case studies, but how it can "exploit" the crisis by teaching it to students and strategically injecting all aspects of the b-school experience with analysis, solutions, lessons, and even reflection.


For example, it has hosted panels featuring top professors, alumni and other business leaders--all discussing the crisis and proposing next-step solution. Some of them are available on YouTube.

It has introduced courses that address the crisis in specific ways. A course "Hot Topics in Finance" invited alumni from banks to describe their experiences the past two years. A course in securitization showed how a flood of mortgage securitization contributed to the crisis and explained how liquid markets can become illiquid overnight.


Even such courses as "First-Year Ethics" and "Responsible Decision-Making" are covering crisis-related topics and highlighting where management at certain institutions might have misunderstood risks they took or have been misguided by compensation programs that rewarded excessive risk-taking.


The demise of Bear Stearns and Lehman, the collapse of AIG, and the Government's takeover of Fannie Mae and Freddie Mac provide ample opportunities for professors to prepare case studies and let students dissect events and second-guess decision-makers at those firms. Darden professors have written several related cases.


"Bear Stearns and the Seeds of Its Demise" (by Susan Chaplinsky) presents the series of events that led to Bear's collapse. And it plants students in the middle by posing them as a hedge fund interacting with Bear two months before JPMorgan acquires it over a weekend in March, 2008. The case challenges students to decide what they would do, based on the facts at hand and the rumors engulfing Bear's management.


Darden's career-services office has also stepped up by assisting students in interview preparation at financial institutions and by holding workshops for alumni in financial services.


Darden isn't the only top school to have responded in a focused, purposeful way. Other top schools, too, are tweaking courses in ethics, finance and business policy and preparing new cases or introducing crisis-specific subjects. Darden's response is an example of how top schools can turn an upheaval in markets and the economy into learning opportunities for students. And it shows how b-schools are already scrambling to present solutions to help avoid this kind of collapse in the future.

(For more information about Darden's response to the crisis, see http://www.darden.virginia.edu/ or contact its communications director Juliet Daum at daumj@darden.virginia.edu.)

Tracy Williams

List of Investment Banks

In this difficult economic environment, summer internships seekers must be willing to reach out to every potential employer. Below is a comprehensive list of firms linked to their home pages. If you are looking for an internship, I recommend you begin reaching out to your network early in the fall by setting up as many informational interviews as possible with alums (Read more on Informational Interviews)

Complete List of Investment Banks from Wikipedia:
http://en.wikipedia.org/wiki/List_of_investment_banks

* Allen & Company
* AllianceBernstein
* Allianz
* Ambrian
* Bank of America Merrill Lynch
* Barclays
* BMO
* BNP Paribas
* Boenning & Scattergood
* Brown Brothers Harriman
* Brown, Shipley & Co.
* C.E. Unterberg, Towbin
* Calyon
* Canaccord Adams
* Cantor Fitzgerald
* Cazenove
* CIBC
* Citigroup
* Close Brothers Group
* Cowen Group, Inc.
* Credit Suisse
* D.A. Davidson & Co.
* Deka Bank
* Deutsche Bank
* Dresner Partners
* Evercore Partners
* Financo, Inc.
* Fox-Pitt, Kelton
* Friedman Billings Ramsey
* G.H. Walker & Co.
* Genuity Capital Markets
* Goldman Sachs
* Grace Matthews
* Greenhill & Company
* Greif & Co.
* Grupo Santander
* Hambrecht & Quist
* Hambros Bank
* Harris Williams & Company
* Hilco Corporate Finance, LLC
* Houlihan Lokey Howard & Zukin
* HSBC
* Imperial Capital, LLC
* ING Group
* Investment Technology Group
* J. & W. Seligman & Co.
* Janney Montgomery Scott
* Jefferies & Co.
* Jordan, Knauff & Company
* JPMorgan Chase
* KBC Bank
* Keefe, Bruyette & Woods
* KeyCorp
* Kleinwort Benson
* Ladenburg Thalmann
* Lazard
* Lazard Capital Markets
* Legg Mason
* Macquarie Bank
* Miller Buckfire
* Mizuho Financial Group
* Monte dei Paschi di Siena* Montgomery & Co.
* Morgan Stanley
* N M Rothschild & Sons
* Needham & Company
* Neuberger Berman, LLC
* Newbury Piret
* Newsouth Capital Management inc.
* NIBC
* Noble Bank
* Nomura
* Oppenheimer
* Park Lane - Investment Banking Services
* Perella Weinberg Partners
* Peter J. Solomon Company
* Piper Jaffray
* Prudential Securities
* Putnam Lovell
* Rabobank
* Raymond James
* Robert W. Baird & Company
* Robertson, Stephens
* Royal Bank of Scotland
* Rutberg & Co.
* Sagent Advisors
* Salman Partners Inc.
* Sandler O'Neill + Partners
* Schroders
* Societe General
* Stephens Inc.
* Stifel Nicolaus
* SVB Alliant
* T. Rowe Price
* ThinkEquity Partners, LLC
* Thomas Weisel Partners
* Toronto-Dominion Bank
* TSG Partners, LLC
* UBS AG
* Unicredit
* Wells Fargo
* William Blair & Company

* Federal Reserve Bank of New York
* List of Banks World Wide
* FDIC
* OCC

I hope this list is helpful in your efforts to land a summer internship.
- Camilo

Credentials beyond the MBA

Does a CPA, CFA or MA in finance, financial engineering or computational finance make sense when you already have an MBA?

Many MBA graduates have asked themselves the same--especially in the current environment when they look to gain an edge, set themselves apart or prove they bring something special to the table.

It's fair to ask the question; it's harder to answer it. Weighing the costs vs. benefits is complex. For experienced MBA graduates, time is another variable. Is it worth the time away from a defined career path or time away from family?

Some executive coaches and recruiters say it can make a difference. It can be a meaningful advantage--particularly in the first rounds of recruiting new candidates. Employers, they say, in the initial-screening stages look carefully for credentials--experiences, degrees, certifications, responsibilities, titles, etc. Having a CFA designation certainly doesn't hurt among a stack of MBA resumes'. The same credential, however, may count for less in final rounds of interviewing.

For finance positions requiring special technical prowess, the designations wouldn't hurt. Employers looking for competence in, say, equity or investment research, mergers/acquisitions, or structured finance (i.e., post-crisis structured finance) tend to look for those who can shine with well-honed technical skills. Having the MBA proves technical skills, but having the CFA (on top of the MBA) or more might prove exceptional ability.

In the post-crisis periods, the study of finance (including accounting, capital markets, and investment analysis) will likely evolve. It will include some lessons from the past year and will emphasize topics it neglected in previous years: risk management, financial systems, asset valuations, etc.

Some finance experts even say finance needs a new approach or needs to be re-taught differently. (Old models--for example, "Black Scholes" or "capital-asset pricing" or "efficient markets"--will be taught, but will be challenged or not always accepted as gospel.)

No doubt, pursuing that extra credential will introduce you to novel or updated approaches to finance. You would be in the middle of something new.

In finance, the MBA alone is still a strong degree--having covered important financial topics and issues, having introduced graduates to all aspects of financial theory, and having provided a foundation to pursue other topics in depth. The CFA, CPA or MA is icing on the cake.

So as with many career-oriented subjects, for those already armed with an MBA in finance from a strong program, the answer to the above question comes down to you--your goals, your interests in specific topics, your long-term objectives, and of course your time and budget.

Tracy Williams

CFN School Champions

The CFN Network this month invited several Consortium students to act as "school champions." They'll be the eyes and ears for CFN on campus. During the year, they will provide feedback, ideas, insight and trends on what's going on in finance and in opportunities from their respective b-schools.

What companies are recruiting eagerly on campus? What are career strategies of students in this environment? What sectors of finance (banking, investing, trading, asset mgt., etc.) are students most interested in these days? How can alumni and experienced professionals best help students? How are students juggling the tough demands of coursework and recruiting? School champions will help answer these kinds of questions and more.

We'll learn more about how b-schools are "teaching" the financial crisis or restructuring finance courses to include the events of the past year or focus more on risk management. We may learn more about how schools approach the study of finance differently and how schools are preparing students for opportunities in financial institutions.

We'll see where, say, a bank recruited aggressively at one campus, but avoided another. Or where a firm is on campus, but making only a token effort to recruit. Or where one school introduces new courses that study how to strengthen the financial system or measure the impact of planned regulatory changes. We'll watch trends across all campuses to see where students are leaning, seeing opportunities or getting offers.

On campus, the school champions will also promote CFN events, projects and membership. During the year, we'll share valuable information, ideas, and tidbits from one campus with another and with CFN members.

Tracy Williams

Diversity: BE's 40 Best

Black Enterprise magazine this week announced its top 40 best companies for diversity. Of the 40, 11 were financial institutions or insurance companies. In a financial crisis and severe recession, companies that continue to promote diversity initiatives as rigorously and eagerly as ever ought to be applauded for keeping them a priority.


Especially financial institutions. They have not only had to fight for survival, but are in the middle of an expected long, arduous recovery period to clean up the rubble. Financial institutions have to focus on restructuring, getting new capital, deleveraging, making themselves lean and efficient, managing massive reduction in staff, and dealing with TARP and new regulation.


Yet some have managed to keep diversity near the top of the agenda. Give them a hand. They realize best that diversity programs are effective when they aren't cyclical, when they thrive in tough times. And they realize constituent groups (employees, customers and shareholders) expect consistency and continuity in diversity. Not a part-time effort or in periodic fluctuations.


BE's list is not a ranking of the 40, but an announcement of members of a club that met its criteria even in a downturn. (See http://http://www.blackenterprise.com/.)


Citigroup and Bank of America, two large banks in the middle of the turmoil and in financial headlines daily, still managed to make the list. Citi, whose co-head of investment banking includes Ray McGuire, was cited for having under-represented groups on its board of directors and in senior management. BofA was recognized for its diverse employee base and diverse group of suppliers. (Both, by the way, are important, long-time Consortium sponsors.)


BE evaluated companies based on four criteria: senior management, board of directors, suppliers, and employees.


Other notable financial institutions that made the list include the embattled mortgage agencies Fannie Mae and Freddie Mac. American Express--with Kenneth Cheneault still its CEO--was recognized for senior management and board of directors.


Regional banks Comerica and Northern Trust are on the list. Insurance companies included Aflac, Aetna and State Farm. TIAA-Cref, headed by Roger Ferguson, also made the list.


BE said its used a quantitative, objective analysis to determine its "club" with heavier weights for senior management and employees.

Tracy Williams

Financial Regulation: What's Next?

In 88 pages, the Obama Administration last week unveiled its plans to revamp financial regulation--to remold the U.S. financial system, so to speak. The plan tweaks the system; it doesn't rebuild it anew. It targets the obvious problems, but doesn't present a radical, different structure. So what does all this mean to finance professionals in the short- and long-term?

If and when new regulation is executed or enacted, finance professionals may not see revolutionary changes in the way financial business is conducted. They could see, nonetheless, subtle changes in how financial business is conducted, how transactions to get done, what activities will be limited, or how long it takes for new products to be distributed to the public.

Changes might occur in a variety of ways:

1. The Federal Reserve--with its more visible role and greater powers--will continue to seek to recruit top talent--not just in the short-term, but for long careers. In the current environment, it is taking advantage of available, displaced talent and doing an admirable job to convince that talent how rewarding a longer-term career with it can be. Its recruiting strategies will be for the long haul.

The same applies to the FDIC, which has been at the main table of crisis-related issues and making its views known about top management at banks and whose powers, too, have been strengthened in the proposals.

2. Because regulators in this environment have been able to attract talent, there will be more who will have career paths that transition them back and forth between public and private sectors--from, say, the OCC, SEC or Fed to Wall Street and back. And they will do so with little stigma and lots of significant know-how and contacts.

3. Financial institutions will continue to beef up in areas of compliance, legal, and systems. With new requirements, as the Fed, OCC and FDIC (as well as the SEC and CFTC) watch as closely as ever, institutions will need to ensure they are adequately staffed.

Compliance doesn't necessarily mean hiring more lawyers and accountants, but also requires more systems and analytics to value and account for financial assets and ensure sufficient capital is set aside for the same--no easy task for institutions with tens of billions in trading assets, loans, mortgages, derivatives, and other securities.

More than ever before, institutions will seek to hire experienced people who had senior roles at regulatory agencies to help them interpret the rules and institute proper procedures.

4. Financial innovation won't disappear, but will slow down. New products, whether for institutions or consumers, will be reviewed and assessed more carefully than ever--similar to time-consuming FDA scrutiny of new drugs. Some financial products may never make out of the laboratory. They will be analyzed extensively for profitability, capital support, regulatory approval, public blessing (possibly), and potential to cause devastating losses.

In the past, competitive pressures forced institutions to get products out promptly, especially because in finance, profit margins are highest in a product's early stage. Now no institution wants to be the one that spawns the next generation of CDO-like products that could cause havoc in the global system.

5. "Clearinghouses" will become more important and more visible. The proposals encourage the formation of third-party institutions to act as settlement or processing agents in derivatives transations. The role of processing and settlement of securities and derivatives transactions--especially for new products, always unsung and unglamorous, won't be taken for granted.

6. Any institution that interfaces with consumers (whether selling products or orginating mortgages or doing basic transactions) will need to staff up to manage the requirements from the new Consumer Financial Protection Agency.

Many large institutions already have basic infrastructure in place to handle new requirements, so they can't complain about how onerous they will be. There will be new staff. And there will be incremental costs to comply (with possibly negligible impact on shareholders). However, the new staff and new costs will be nowhere near the losses they all incurred because of mishaps in the risk management or regulatory oversight over the past few years.

Tracy Williams