Tuesday, February 23, 2010
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.