Over my years as a technical student and now management student, I am struck by the number of people who say they want to be an entrepreneur. I am also struck by how evident it is that they don't have "entrepreneurial DNA."
Entrepreneurship is rarely a planned journey. I recently met with a b-school student in management fest who was presenting his B Plan. "I have a 10 year plan towards becoming an entrepreneur," he told me. Really? A 10-year plan to become an entrepreneur? What's that all about?
He wasn't the only person to say such things to me. Here are some of the other excuses I have heard from people when I asked them why they weren't being an entrepreneur, despite their professed love for it.
"I want to spend some years learning first, and building a base of security."
"I do not have access to the capital or resources to start."
"I know I want to be an entrepreneur, I just don't have the ideas."
These reasons all have a modicum of validity, but entrepreneurship is not something you just plan or do, it is something that you have to feel. Entrepreneurs hold an idealism and risk profile that makes them fundamentally different. They don't think about security--in fact they are often uncomfortable with it. And they have the guts to bet it over and over again. They think less about what they lack and more about what they can achieve with what they have. In a sea of ambiguity, they forge ahead with an incredible fortitude.
But just because someone is starting something or comes forward with an idea, it doesn't mean that they are entrepreneurial. What's more, there are obviously numerous people in entrepreneurial situations who should not be. It is similar to something I once read: just because someone goes to Temple, it does not necessarily make them a Hindu. True entrepreneurship goes fundamentally deeper as a belief system and as a mission. It is for this reason that when venture capitalist evaluate early stage entrepreneurs that they look for that "fire in the belly" and that "dare to be great" attitude and feeling of being an Invincible. When you've seen someone with it you know it.
Here is an analogy and question I ask people when assessing their potential for entrepreneurship: Are you a bond or an equity? I believe that most people grow up dreaming to be an equity (or at least thought of as equity), but end up working in high-yield bond situations. If not acted on early enough, these passions often become compromised as the lure of less risky alternatives and the reality of life-stage responsibilities present themselves. It is the guts to go after risk and the perseverance to stick it out that make entrepreneurs more equity-like than bond-like. Business schools are a fascinating places to watch equity people turn into bonds people, or at best to find "equity in the closet" - folks who deep down wish to start something but then decide to take bond-like jobs.
We know that this economy is increasing the number of graduating business school people who are willing to enter into start-ups and take on more risky ventures. At the Business Plan competition where I was recently partcipated, I believe that the number of plans was up some 60 percent this year over last year. If the economic uncertainty does nothing else, but pull some of that equity out of the closet and gets a few entrepreneurs realizing their full potential and creating new innovations, then it's done some good.
So... come on, which are you? Bond or an equity?
Over my years as an entrepreneur and now venture capitalist, I am struck by the number of people who say they want to be an entrepreneur. I am also struck by how evident it is that they don't have "entrepreneurial DNA."
Entrepreneurship is rarely a planned journey. I recently met with a b-school student who was interviewing at our firm. "I have a 10 year plan towards becoming an entrepreneur," he told me. Really? A 10-year plan to become an entrepreneur? What's that all about?
He wasn't the only person to say such things to me. Here are some of the other excuses I have heard from people when I asked them why they weren't being an entrepreneur, despite their professed love for it.
"I want to spend some years learning first, and building a base of security."
"I do not have access to the capital or resources to start."
"I know I want to be an entrepreneur, I just don't have the ideas."
These reasons all have a modicum of validity, but entrepreneurship is not something you just plan or do, it is something that you have to feel. Entrepreneurs hold an idealism and risk profile that makes them fundamentally different. They don't think about security--in fact they are often uncomfortable with it. And they have the guts to bet it over and over again. They think less about what they lack and more about what they can achieve with what they have. In a sea of ambiguity, they forge ahead with an incredible fortitude.
But just because someone is starting something or comes forward with an idea, it doesn't mean that they are entrepreneurial. What's more, there are obviously numerous people in entrepreneurial situations who should not be. It is similar to something I once read: just because someone goes to church, it does not necessarily make them a Christian. True entrepreneurship goes fundamentally deeper as a belief system and as a mission. It is for this reason that when we evaluate early stage entrepreneurs that we look for that "fire in the belly" and that "dare to be great" attitude. When you've seen someone with it you know it.
Here is an analogy and question I ask people when assessing their potential for entrepreneurship: Are you a bond or an equity? I believe that most people grow up dreaming to be an equity (or at least thought of as equity), but end up working in high-yield bond situations. (The proverbial post-business school career path of: "I'll work here for a few years, and then do my entrepreneurial passion."). If not acted on early enough, these passions often become compromised as the lure of less risky alternatives and the reality of life-stage responsibilities present themselves. It is the guts to go after risk and the perseverance to stick it out that make entrepreneurs more equity-like than bond-like. Business schools are a fascinating places to watch equity people turn into bonds people, or at best to find "equity in the closet" - folks who deep down wish to start something but then decide to take bond-like jobs.
I am hearing that this economy is increasing the number of graduating business school people who are willing to enter into start-ups and take on more risky ventures. At the Harvard Business School Business Plan competition where I was recently a judge, I believe that the number of plans was up some 60 percent this year over last year. If the economic uncertainty does nothing else, but pull some of that equity out of the closet and gets a few entrepreneurs realizing their full potential and creating new innovations, then it's done some good.
So... come on, which are you? Bond or an equity?
Thursday, September 24, 2009
Monday, September 21, 2009
How to Beat the Next Recession
We're in the midst of the worst decline in auto sales history — yet Toyota can't make the newest model of its hybrid gas-electric Prius fast enough. According to the New York Times, the world's largest automaker has received 80,000 pre-orders already, one-fifth of the company's Prius sales goal for the year. On the heels of the depressing GM and Chrysler bankruptcies and layoffs, Toyota has instituted overtime production in its Tsutsumi plant in Japan.
This news comes on the heels of one of Honda's latest entries in the hybrid market, the significantly revamped Insight, becoming the bestselling car in Japan in April — not the bestselling hybrid, but the bestselling vehicle — racking up over 10,000 sales at $19,000 a pop.
The era of niche eco-vehicles is over. With Toyota and Honda experiencing their first losses in decades, the vast success of the green parts of their product portfolios must be very welcome — a life boat in troubled times.
It's educational to think for a minute about when the foundations of these successes were built. Toyota started development on the first generation of Prius, not one, but two recessions ago. Sixteen years ago, on the heels of the early 90s downturn, Toyota started designing what it thought would fit the demands of the 21st Century. Early in the process — and even though oil was only $17 per barrel — the team decided that a critical focus should be "environment." And while I can't say exactly when Honda decided to completely retool their earlier Insight model, how long after the early 2000s recession could it possibly have been?
A wide range of companies seem to be making moves now to prepare for a greener future. In addition to well-publicized mega-goals for growth of green product sales from the likes of P&G, GE, and IBM, others are signaling their intentions to play in new spaces. Taiwan Semiconductor Manufacturing (TSMC), which the New York Times calls "one of the most formidable manufacturers on the planet," has indicated, strongly, that it will try its hand in renewable energy and next-generation lighting. TSMC just reorganized at the most senior levels to do so. Here's the Times on the shift:
"The company declared its new intentions with a bold gesture. It stripped Rick Tsai of his chief executive title and placed him in charge of a new unit created to look into fresh business opportunities."
In addition to shaking up these growing industries, and possibly helping to lower the costs of both solar and LED lights, the play is a smart bet on green innovation that should help keep TSMC growing for years — perhaps paying off big time during the next tech spending downturn (which may happen sooner than a global recession).
TSMC is not the only tech company making noise about looking for growth outside of traditional spaces. Applied Materials, the guys behind the machines behind semiconductors, moved strongly into solar a few years ago — it's a bright spot for the company during this brutal drop in tech spending. And Andy Grove, legendary CEO of Intel, has suggested strongly that his Alma mater should use its technological expertise to make better batteries
Innovation takes time. Building new markets that can grow into significant sources of revenue takes hard work and patience. So what's going to prop up your earnings the next time the world, or just your industry, goes into slow-down mode? What will your customers want and need 10 years from now? One core way to answer that question is to think hard about coming environmental pressures and trends.
Mega-regulation on carbon will raise the cost of carbon-intensive value chains. Water shortages could severely restrict growth in key regions or in specific product markets. Rising concerns about chemicals and toxicity will radically shift demand for some products (think about what's happened in just a few years to the baby bottles, toys, and other plastics that include phthalates or the chemical "BPA").
Think through these large trends, ask heretical questions (such as, "What if we used no water?"), and use the green lens to spot long-term trends. This process should start your innovation wheels turning. While we climb out of this downturn — and green strategy can play a critical role in helping companies do that — it's good to start thinking longer term. Believe it or not, it's time to get ready for the next slowdown now.
This news comes on the heels of one of Honda's latest entries in the hybrid market, the significantly revamped Insight, becoming the bestselling car in Japan in April — not the bestselling hybrid, but the bestselling vehicle — racking up over 10,000 sales at $19,000 a pop.
The era of niche eco-vehicles is over. With Toyota and Honda experiencing their first losses in decades, the vast success of the green parts of their product portfolios must be very welcome — a life boat in troubled times.
It's educational to think for a minute about when the foundations of these successes were built. Toyota started development on the first generation of Prius, not one, but two recessions ago. Sixteen years ago, on the heels of the early 90s downturn, Toyota started designing what it thought would fit the demands of the 21st Century. Early in the process — and even though oil was only $17 per barrel — the team decided that a critical focus should be "environment." And while I can't say exactly when Honda decided to completely retool their earlier Insight model, how long after the early 2000s recession could it possibly have been?
A wide range of companies seem to be making moves now to prepare for a greener future. In addition to well-publicized mega-goals for growth of green product sales from the likes of P&G, GE, and IBM, others are signaling their intentions to play in new spaces. Taiwan Semiconductor Manufacturing (TSMC), which the New York Times calls "one of the most formidable manufacturers on the planet," has indicated, strongly, that it will try its hand in renewable energy and next-generation lighting. TSMC just reorganized at the most senior levels to do so. Here's the Times on the shift:
"The company declared its new intentions with a bold gesture. It stripped Rick Tsai of his chief executive title and placed him in charge of a new unit created to look into fresh business opportunities."
In addition to shaking up these growing industries, and possibly helping to lower the costs of both solar and LED lights, the play is a smart bet on green innovation that should help keep TSMC growing for years — perhaps paying off big time during the next tech spending downturn (which may happen sooner than a global recession).
TSMC is not the only tech company making noise about looking for growth outside of traditional spaces. Applied Materials, the guys behind the machines behind semiconductors, moved strongly into solar a few years ago — it's a bright spot for the company during this brutal drop in tech spending. And Andy Grove, legendary CEO of Intel, has suggested strongly that his Alma mater should use its technological expertise to make better batteries
Innovation takes time. Building new markets that can grow into significant sources of revenue takes hard work and patience. So what's going to prop up your earnings the next time the world, or just your industry, goes into slow-down mode? What will your customers want and need 10 years from now? One core way to answer that question is to think hard about coming environmental pressures and trends.
Mega-regulation on carbon will raise the cost of carbon-intensive value chains. Water shortages could severely restrict growth in key regions or in specific product markets. Rising concerns about chemicals and toxicity will radically shift demand for some products (think about what's happened in just a few years to the baby bottles, toys, and other plastics that include phthalates or the chemical "BPA").
Think through these large trends, ask heretical questions (such as, "What if we used no water?"), and use the green lens to spot long-term trends. This process should start your innovation wheels turning. While we climb out of this downturn — and green strategy can play a critical role in helping companies do that — it's good to start thinking longer term. Believe it or not, it's time to get ready for the next slowdown now.
Successful People Are Drivers, Not Passengers - Become a Driver
When Donald Trump walks into his office, do you think he is a driver or a passenger? You do not even have to know what the terms means to know the answer; he's a driver. He is a successful person, do you think he got there being passive and sitting back, like a passenger, or do you think he got where he is by taking the wheel, and going where he wanted to go?
I use this analogy a lot in my material, drivers and passengers. I use it because it's accurate and it tells the right story and gives the right image. Lets add one more ingredient to the mix before we continue; our agenda. This is what we are driving, or should be driving. I refer to what we want to do each day, what we have planned to do each day as our agenda; this agenda is crucial to our success. Without an agenda set up for each day, we are at the mercy of all that is around us. And all that is around us is not beneficial to us reaching our goals and being successful.
Drivers
The very name denotes action, being in charge, taking the wheel and deciding where you are going and how to get there. These are the very traits of successful people that you want to have. Before you take charge, grab the wheel and zoom off, you need something in place first. Every plane that takes off has to have a flight plan, not only does it make sense, it's also the law. Successful people do not take off without their flight plan; I call it their agenda. That is the term I use to denote what they want to do on any given day and how they are going to do it.
Having your own agenda in place is the first step in becoming a driver. Without an agenda in place, what are you going to do when you start your day? What direction will you go in, what do you want to do when you get there, what will prevent you from going in the wrong direction? These are all questions that you need answers to before you start your day. Here is what drivers do, before they start their day:
* Have a clear idea of what they want to accomplish, before the day starts.
* Have these ideas written down, accessible to them throughout the day.
* Have these ideas Prioritized.
* These daily Priorities are part of a larger plan of action.
* The Priorities are Time Activated into time slots reserved for these specific actions.
* They invest a small amount of time prior to each day, knowing the benefits they will reap will be 10 fold greater than the small initial time already invested.
Finally, Drivers do not leave anything to chance. They know what they want to do, when they want to do it and they go about making these things happen. They accomplish this by driving their agenda. I can tell you from seeing thousands of people driving their agendas, the fact that you take the initiative and start to drive your agenda; this initiative is going to guarantee you about 95% of the time that you will be uncontested. If you are already in the driver's seat, you will not often find that you have to fight for the seat; it is very much a first come first serve situation.
Passengers
Just as the term driver denotes certain images, so does the word passenger; passive, not in control, not deciding where or when to go. It's hard to dictate the pace of things from the back seat. You may not have looked at starting your day out as a driver or a passenger. That makes sense, who would? The people who do are the ones who have been exposed to my material and are now actively looking for ways to better invest their time, be more productive and to reduce substantially their stress levels. You have a better idea of what a driver does to be successful. The passengers do the opposite. They make no attempt to organize themselves, Prioritize their activities, have a master plan laid out and they certainly do not have an agenda to drive.
Now that you have had an opportunity to see what a driver does and what a passenger does, which one would you like to be?
I use this analogy a lot in my material, drivers and passengers. I use it because it's accurate and it tells the right story and gives the right image. Lets add one more ingredient to the mix before we continue; our agenda. This is what we are driving, or should be driving. I refer to what we want to do each day, what we have planned to do each day as our agenda; this agenda is crucial to our success. Without an agenda set up for each day, we are at the mercy of all that is around us. And all that is around us is not beneficial to us reaching our goals and being successful.
Drivers
The very name denotes action, being in charge, taking the wheel and deciding where you are going and how to get there. These are the very traits of successful people that you want to have. Before you take charge, grab the wheel and zoom off, you need something in place first. Every plane that takes off has to have a flight plan, not only does it make sense, it's also the law. Successful people do not take off without their flight plan; I call it their agenda. That is the term I use to denote what they want to do on any given day and how they are going to do it.
Having your own agenda in place is the first step in becoming a driver. Without an agenda in place, what are you going to do when you start your day? What direction will you go in, what do you want to do when you get there, what will prevent you from going in the wrong direction? These are all questions that you need answers to before you start your day. Here is what drivers do, before they start their day:
* Have a clear idea of what they want to accomplish, before the day starts.
* Have these ideas written down, accessible to them throughout the day.
* Have these ideas Prioritized.
* These daily Priorities are part of a larger plan of action.
* The Priorities are Time Activated into time slots reserved for these specific actions.
* They invest a small amount of time prior to each day, knowing the benefits they will reap will be 10 fold greater than the small initial time already invested.
Finally, Drivers do not leave anything to chance. They know what they want to do, when they want to do it and they go about making these things happen. They accomplish this by driving their agenda. I can tell you from seeing thousands of people driving their agendas, the fact that you take the initiative and start to drive your agenda; this initiative is going to guarantee you about 95% of the time that you will be uncontested. If you are already in the driver's seat, you will not often find that you have to fight for the seat; it is very much a first come first serve situation.
Passengers
Just as the term driver denotes certain images, so does the word passenger; passive, not in control, not deciding where or when to go. It's hard to dictate the pace of things from the back seat. You may not have looked at starting your day out as a driver or a passenger. That makes sense, who would? The people who do are the ones who have been exposed to my material and are now actively looking for ways to better invest their time, be more productive and to reduce substantially their stress levels. You have a better idea of what a driver does to be successful. The passengers do the opposite. They make no attempt to organize themselves, Prioritize their activities, have a master plan laid out and they certainly do not have an agenda to drive.
Now that you have had an opportunity to see what a driver does and what a passenger does, which one would you like to be?
Saturday, September 12, 2009
Investment Banking: Life as an Associate
An associate is typically a recently graduated MBA or an analyst who gets promoted after three or four years. You will usually stay an associate for three years or so. An associate still has to do a lot of grunt work and may even have an analyst to call on. Your hours will still be miserable and you haven't really become a human being yet. Like a good analyst, your job is to make your boss look good and to understand what's going on. Your boss may abuse you from time to time and you aren't supposed to complain really. This is a job where you can really start to shine. If you add value to transactions or help get things done in some other meaningful way, you can expect to be paid a reasonable bonus and have a shot a promotion to AVP.
The "City" - Square Mile in London, A Major Global Financial Center Deutsche Bank Place, Sydney Australia
Associate level pay in New York firms runs roughly $90,000 in your first year (including bonus). If you are good and stay awhile, expect to go up to roughly $130,000 to $150,000 before you hop up another level. In London expect a salary of roughly 60,000 to 80,000 Pounds (all-in).
Key Skills
In investment banking / corporate finance / M&A, key associate skills include:
* the ability to do DCF valuations
* the ability to use Excel in your sleep
* the ability to arrange client meetings and get the logistics right
* the ability to deal with horrendous egos
* the ability to find comparable companies
* the ability to network within the firm and befriend key people like librarians, IT gurus, messengers, lawyers, compliance etc.
In debt and equity capital markets positions, key associate skills include:
* the ability to massage league tables
* the ability to price up new deals (e.g. bonds, convertibles, preferreds)
* pretend that you know what's going when clients call in and the boss is not around
* the ability to track past deals and pricing to sense where the market is going
* check and generate weekly newsletters (weeklies)
* the ability to fill in silences in meetings with insightful comments (while making sure your boss controls things)
* coordinate due diligence
* prepare document on debt and equity deals
* make sure analysts get burgers from the right place
* generate pitch books with your eyes closed while talking to clients and screaming at syndicate
In sales and trading positions, key associate skills include:
* the ability to watch your bosses blotter
* the ability to know where prices are
* the ability to work options pricing models
* the ability to bluff a little when needed
* the ability to eat endless fattening food without getting fat
* the ability to golf, play tennis, drink and joke around with clients
* the ability to make clients feel comfortable with you
Success Factors
Key success factors include (i) getting your job done well, (ii) getting many things done in a chaotic environment, (iii) dressing well, (iv) having a beer and a good time every once in awhile, (v) always making your boss look good, (vi) being a total whiz with computers, (vii) being able to spin bad news into ok news and (viii) network within the firm. Other good things to do include figuring out when a job could be done better and going out and doing it. For example, create a database to track the results of an equity tender offer. Initiative is key. Also, getting to know clients is very important since you will be using those relationships later on.
Assessment
As an associate you are in. Your job now is to prove you have what it takes to make in investment banking. You may not always like the environment and culture you are in, but your job is to survive and eventually excel. You are only a few years away from getting your own clients, initiating your own deals and making some good money.
Play your cards right and you'll be happy you did the time. Big time.
Recommended Books and Resources
Vault Career Guide to Investment Banking
Guide covers the basics of financial markets, including walk-throughs of equity and fixed income offerings, and M&A private placements and reorgs, and dissects career paths and job responsibilities at departments such as corporate finance, sales and trading, research, and syndicate.
Finance Spreadsheet Programs
Free from Aswath Damodaran.
Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
A classic that should be in the cube of every analyst and associate on the Street. Another fabulous valuation book is Damodaran on Valuation: Security Analysis for Investment and Corporate Finance
Applied Mergers and Acquisitions
by Robert F. Bruner and Joseph Perella
Handbook of Fixed Income, Frank Fabozzi (editor).
This is the bible for any job involving fixed income sales, trading, underwriting or derivatives. If you are headed for sales and trading you should know this material.
Job Search Success
Getting a job as an associate isn't so easy and we have put together a number of resources that should be helpful to you as you contemplate entering the market. These include:
* Surfing the Cataclysm: Finding an Investment Banking Job in 2009
* Getting in the Door
* Salaries for Bankers
* Job Listings
* Making a Trip to New York
Another important resource to have is access to specific contacts in the field. To ease this process we have assembled several lists that should be helpful to you. These lists cost $20 each and include:
* Headhunter List - very helpful to have good access to executive recruiters
* Guide to boutique investment banks and recruiting contacts - best place to look in 2009
* Guide to Healthcare Investment Bankers - hot area in 2009
* Guide to investment bankers in restructuring and bankruptcy - another hot recruiting area in 2009
The "City" - Square Mile in London, A Major Global Financial Center Deutsche Bank Place, Sydney Australia
Associate level pay in New York firms runs roughly $90,000 in your first year (including bonus). If you are good and stay awhile, expect to go up to roughly $130,000 to $150,000 before you hop up another level. In London expect a salary of roughly 60,000 to 80,000 Pounds (all-in).
Key Skills
In investment banking / corporate finance / M&A, key associate skills include:
* the ability to do DCF valuations
* the ability to use Excel in your sleep
* the ability to arrange client meetings and get the logistics right
* the ability to deal with horrendous egos
* the ability to find comparable companies
* the ability to network within the firm and befriend key people like librarians, IT gurus, messengers, lawyers, compliance etc.
In debt and equity capital markets positions, key associate skills include:
* the ability to massage league tables
* the ability to price up new deals (e.g. bonds, convertibles, preferreds)
* pretend that you know what's going when clients call in and the boss is not around
* the ability to track past deals and pricing to sense where the market is going
* check and generate weekly newsletters (weeklies)
* the ability to fill in silences in meetings with insightful comments (while making sure your boss controls things)
* coordinate due diligence
* prepare document on debt and equity deals
* make sure analysts get burgers from the right place
* generate pitch books with your eyes closed while talking to clients and screaming at syndicate
In sales and trading positions, key associate skills include:
* the ability to watch your bosses blotter
* the ability to know where prices are
* the ability to work options pricing models
* the ability to bluff a little when needed
* the ability to eat endless fattening food without getting fat
* the ability to golf, play tennis, drink and joke around with clients
* the ability to make clients feel comfortable with you
Success Factors
Key success factors include (i) getting your job done well, (ii) getting many things done in a chaotic environment, (iii) dressing well, (iv) having a beer and a good time every once in awhile, (v) always making your boss look good, (vi) being a total whiz with computers, (vii) being able to spin bad news into ok news and (viii) network within the firm. Other good things to do include figuring out when a job could be done better and going out and doing it. For example, create a database to track the results of an equity tender offer. Initiative is key. Also, getting to know clients is very important since you will be using those relationships later on.
Assessment
As an associate you are in. Your job now is to prove you have what it takes to make in investment banking. You may not always like the environment and culture you are in, but your job is to survive and eventually excel. You are only a few years away from getting your own clients, initiating your own deals and making some good money.
Play your cards right and you'll be happy you did the time. Big time.
Recommended Books and Resources
Vault Career Guide to Investment Banking
Guide covers the basics of financial markets, including walk-throughs of equity and fixed income offerings, and M&A private placements and reorgs, and dissects career paths and job responsibilities at departments such as corporate finance, sales and trading, research, and syndicate.
Finance Spreadsheet Programs
Free from Aswath Damodaran.
Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
A classic that should be in the cube of every analyst and associate on the Street. Another fabulous valuation book is Damodaran on Valuation: Security Analysis for Investment and Corporate Finance
Applied Mergers and Acquisitions
by Robert F. Bruner and Joseph Perella
Handbook of Fixed Income, Frank Fabozzi (editor).
This is the bible for any job involving fixed income sales, trading, underwriting or derivatives. If you are headed for sales and trading you should know this material.
Job Search Success
Getting a job as an associate isn't so easy and we have put together a number of resources that should be helpful to you as you contemplate entering the market. These include:
* Surfing the Cataclysm: Finding an Investment Banking Job in 2009
* Getting in the Door
* Salaries for Bankers
* Job Listings
* Making a Trip to New York
Another important resource to have is access to specific contacts in the field. To ease this process we have assembled several lists that should be helpful to you. These lists cost $20 each and include:
* Headhunter List - very helpful to have good access to executive recruiters
* Guide to boutique investment banks and recruiting contacts - best place to look in 2009
* Guide to Healthcare Investment Bankers - hot area in 2009
* Guide to investment bankers in restructuring and bankruptcy - another hot recruiting area in 2009
Investment Banking: Life as an Analyst
Analysts are typically recent undergraduates who work long hours and do a fair bit of grunt work. A good analyst helps his or her boss get their job done and done well. Analysts are not normally expected to contribute in meetings but often can. Many analysts return to the business. Others choose to try other opportunities. During recruiting out of an MBA program, former analysts will be at a significant advantage over others without experience.
Key analyst skills include:
The Amazing Wall Street Analyst
* the ability to work with Excel spreadsheets,
* write macros in VBA,
* track and generate weekly newsletters (weeklies),
* keep schedules,
* generate prospectuses,
* get burgers
* put in and retrieve pitch books from the copy center
* and answer client phone calls.
Success Factors
Key success factors include (i) getting your job done well and without friction, (ii) getting things done on time, (iii) asking for help when you need it, (iv) dressing neatly, (v) not complaining, gossiping or whining, (vi) learning to use the library and the web to do research, (vii) become a whiz-kid with Bloomberg, Excel, Word and Powerpoint, (viii) always give your boss credit, (ix) know when to cheer up your boss and (x) know when to stay out of the way.
A good analyst also networks, observes and thinks. You want to be genuine yet make it clear that you like your boss. Excessive posterior kissing is a negative. It's always good to have a little hobby as well like following stocks, playing Liars Poker or following currencies. You can do this when things get quiet in August.
Assessment
Small Sales and Trading Desk Small Trading Desk Set up
It's a tiring life but gives you a good chance to learn the investment banking field and bond with people whom you will work with later. Being an analyst is one of the best ways to break into a very good field. The return on investment from being a good analyst can be over 50 times what they actually pay you.
After two years, most analysts leave to get their MBA or pursue other positions. It all depends on the firm. Some places have a pretty strict policy of getting rid of you. Others are more mellow. It makes sense, after all, to try to keep very good people who can get a job done. If you don't go back and get an MBA you might benefit from going out and getting a CFA.
Recommended Books
Fundamentals of Corporate Finance
By Brealey, Myers and Marcus. An excellent, detailed book on topics in corporate finance. If you want to study what the field is about, this is a good book to start with. Keep this at your desk. An alternative finance reference book to use is Fundamentals of Corporate Finance by Ross Westerfield and Jordan.
The Economist.
A great source for info on what's happening in the world.
Wall Street Journal.
Should read this every day. The Financial Times is also quite informative.
85 Broad Street, NY
HQ of Goldman Sachs Goldman Sachs Headquarters
Vault Career Guide to Investment Banking
Guide covers the basics of financial markets, including walk-throughs of equity and fixed income offerings, and M&A private placements and reorgs, and dissects career paths and job responsibilities at departments such as corporate finance, sales and trading, research, and syndicate.
Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
A classic that should be in the cube of every analyst and associate on the Street. Another fabulous valuation book is Damodaran on Valuation: Security Analysis for Investment and Corporate Finance
Equity Valuation: Models from Leading Investment Banks
By Jan Viebig
This book brings together expertise from UBS, Morgan Stanley, DWS Investment GmbH and Credit Suisse, providing a unique analysis of leading equity valuation models, from the very individuals who use them. Filled with real world insights, practical examples and theoretical approaches, the book will examine the strengths and weaknesses of some of the leading valuation approaches.
Finance and Investment Handbook
Applied Mergers and Acquisitions
by Robert F. Bruner and Joseph Perella
Wall Street Lingo
Job Search Success
Getting a job as an analyst isn't so easy and we have put together a number of resources that should be helpful to you as you contemplate entering the market. These include:
* Surfing the Cataclysm: Finding an Investment Banking Job in 2009
* Getting in the Door
* Salaries for Bankers
* Facts & Advice About Investment Banking
* Job Market Outlook as of Feb 2009
* Job Listings
* Life as an Analyst
* Making a Trip to New York
Another important resource to have is access to specific contacts in the field. To ease this process we have assembled several lists that should be helpful to you. These lists cost $20 each and include:
* Headhunter List - very helpful to have good access to executive recruiters
* Guide to boutique investment banks and recruiting contacts - best place to look in 2009
* Guide to Healthcare Investment Bankers - hot area in 2009
* Guide to investment bankers in restructuring and bankruptcy - another hot recruiting area in 2009
Key analyst skills include:
The Amazing Wall Street Analyst
* the ability to work with Excel spreadsheets,
* write macros in VBA,
* track and generate weekly newsletters (weeklies),
* keep schedules,
* generate prospectuses,
* get burgers
* put in and retrieve pitch books from the copy center
* and answer client phone calls.
Success Factors
Key success factors include (i) getting your job done well and without friction, (ii) getting things done on time, (iii) asking for help when you need it, (iv) dressing neatly, (v) not complaining, gossiping or whining, (vi) learning to use the library and the web to do research, (vii) become a whiz-kid with Bloomberg, Excel, Word and Powerpoint, (viii) always give your boss credit, (ix) know when to cheer up your boss and (x) know when to stay out of the way.
A good analyst also networks, observes and thinks. You want to be genuine yet make it clear that you like your boss. Excessive posterior kissing is a negative. It's always good to have a little hobby as well like following stocks, playing Liars Poker or following currencies. You can do this when things get quiet in August.
Assessment
Small Sales and Trading Desk Small Trading Desk Set up
It's a tiring life but gives you a good chance to learn the investment banking field and bond with people whom you will work with later. Being an analyst is one of the best ways to break into a very good field. The return on investment from being a good analyst can be over 50 times what they actually pay you.
After two years, most analysts leave to get their MBA or pursue other positions. It all depends on the firm. Some places have a pretty strict policy of getting rid of you. Others are more mellow. It makes sense, after all, to try to keep very good people who can get a job done. If you don't go back and get an MBA you might benefit from going out and getting a CFA.
Recommended Books
Fundamentals of Corporate Finance
By Brealey, Myers and Marcus. An excellent, detailed book on topics in corporate finance. If you want to study what the field is about, this is a good book to start with. Keep this at your desk. An alternative finance reference book to use is Fundamentals of Corporate Finance by Ross Westerfield and Jordan.
The Economist.
A great source for info on what's happening in the world.
Wall Street Journal.
Should read this every day. The Financial Times is also quite informative.
85 Broad Street, NY
HQ of Goldman Sachs Goldman Sachs Headquarters
Vault Career Guide to Investment Banking
Guide covers the basics of financial markets, including walk-throughs of equity and fixed income offerings, and M&A private placements and reorgs, and dissects career paths and job responsibilities at departments such as corporate finance, sales and trading, research, and syndicate.
Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
A classic that should be in the cube of every analyst and associate on the Street. Another fabulous valuation book is Damodaran on Valuation: Security Analysis for Investment and Corporate Finance
Equity Valuation: Models from Leading Investment Banks
By Jan Viebig
This book brings together expertise from UBS, Morgan Stanley, DWS Investment GmbH and Credit Suisse, providing a unique analysis of leading equity valuation models, from the very individuals who use them. Filled with real world insights, practical examples and theoretical approaches, the book will examine the strengths and weaknesses of some of the leading valuation approaches.
Finance and Investment Handbook
Applied Mergers and Acquisitions
by Robert F. Bruner and Joseph Perella
Wall Street Lingo
Job Search Success
Getting a job as an analyst isn't so easy and we have put together a number of resources that should be helpful to you as you contemplate entering the market. These include:
* Surfing the Cataclysm: Finding an Investment Banking Job in 2009
* Getting in the Door
* Salaries for Bankers
* Facts & Advice About Investment Banking
* Job Market Outlook as of Feb 2009
* Job Listings
* Life as an Analyst
* Making a Trip to New York
Another important resource to have is access to specific contacts in the field. To ease this process we have assembled several lists that should be helpful to you. These lists cost $20 each and include:
* Headhunter List - very helpful to have good access to executive recruiters
* Guide to boutique investment banks and recruiting contacts - best place to look in 2009
* Guide to Healthcare Investment Bankers - hot area in 2009
* Guide to investment bankers in restructuring and bankruptcy - another hot recruiting area in 2009
Wednesday, September 9, 2009
Careers In Finance
Accounting
The accounting industry has been rocked by scandal in recent times, with one major firm, Arthur Andersen, being forced out of the picture. Before Andersen’s collapse, the top tier of the public accounting industry was known as the Big Five. Now, it’s the Big Four: Deloitte Touche Tohmatsu, Ernst & Young, KPMG, and PricewaterhouseCoopers.
Accounting concerns itself with the day-to-day operations of bookkeeping. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all of the financial data needed to issue a company's financial statements in accordance with government regulations.
Accountants are taking a step away from the ledger sheets and are becoming essential to every successful business team. They're the ones who understand the language of money and a company's complex financial situation. Consequently, accountants are increasingly being called on to offer advice and even make business decisions based on hard facts rather than on speculation or gut instinct.
Finance and accounting jobs require critical & detail-oriented thinking, a knack for using numbers to understand patterns that influence business, ability to think critically about the numbers you're working with.
Asset Management
Asset management is the business of making money with money. Asset managers manage money - other people's money, and gobs of it. Generally, they convert that money into assets - stocks, bonds, derivatives, and other types of investments - and try to make that money make more money as fast as possible. Mutual funds, for instance, hire asset managers; so do corporations with lots of money sitting around, banks, and high-net-worth individuals.
Asset managers have one simple goal: to invest other people's money wisely and profitably. Asset managers use a combination of investment theory, quantitative tools, market experience, research, and plain dumb luck to pick investments for their portfolios, ranging from high-risk stocks to commercial real estate to cash accounts.
The profession requires excellent quantitative and analytical skills, organizational skills - and nerve - to make split-second decisions with millions of dollars riding on the line.
Finance and accounting jobs require critical & detail-oriented thinking, a knack for using numbers to understand patterns that influence business, ability to think critically about the numbers you're working with.
Commercial Banking
Commercial banks are banks that are in classic business of accepting deposits and making loans. As against merchant banking where primary responsibility is to help people find money. Thus they help companies to raise capital through issue of equity or bonds etc
In few countries like US and Japan commercial banking is separate from investment banking by law. Few countries like UK we find that commercial banks carry out investment activities through a subsidiary. Only in countries like Germany where we find Universal Banks like Deutsche that is both a commercial and I-bank. The legislation that kept banks and investment banks separate—Glass Steagall—was struck down by Congress in 1999. So banks are now moving into highly visible spheres of activity, such as investment banking, mutual funds, and brokerage.
Commercial banks hold customers’ money and supply loans, in exchange for check-writing fees and interest collected from loans. The work of commercial bankers is critical—retail consumers get their credit lines extended, their checking accounts upgraded, their mortgages, cars, and home improvement loans approved.
A commercial bank can either be a retail bank or a wholesale bank or both.
Retail Banking
§ Retail banking involves high street branches, dealing with the general public, shops and very small businesses. Retail banking covers current accounts, cheque facilities, saving accounts, and loan facilities like overdraft, personal loans and mortgages.
§ The use of cheque and cheque clearance are of prime importance. Here we are talking about high volume low margin business.
Wholesale Banking
Wholesale banking covers banks lending to larger entities like corporate, governments etc It also includes activities like money markets, foreign exchange and finance for trade
Small businesses are also highly dependent on the goodwill of commercial bankers. Even as dot coms, angel investors, and VCs monopolize the news, most small businesses continue to fund their growth with commercial loans. Such loans allow them to secure new inventory, cover payroll, remodel their stores, buy registers, and manage their overseas accounts receivables.
Commercial bankers perform core financial analysis to assess risk, creditworthiness, and the likelihood a business will succeed. They play a key part in deciding the best business initiatives, expanding existing businesses, developing new markets and clients, and creating new products for e-commerce, the Internet, international markets, and consumers.
In addition, Commercial bankers have to combine business acumen with strong accounting and interpersonal skills. After all, commercial bankers are at the front lines of the banking business. Ideally, they know their clients' lives intimately and can recommend additional products and services. Commercial bankers are a key distribution point and referral source for the rest of a bank's financial services activities.
Many commercial banks are consolidating in order to branch out and provide other services such as mortgage, mutual funds, investment banking, and insurance. As other financial firms expand their services, commercial banks are diversifying to keep up, and often a merger with a peer company is the best way to do this. Since 1995, more than 200 large and small banks have merged. Consolidation usually results in layoffs and fewer job opportunities, but jobs in banks that are more diversified offer more opportunities for career development. And a growing number of non-banks are pioneering new ways of delivering financial services, providing more jobs in the finance industry.
If you like intense project work, with a good deal of financial analysis and customer contact—if you like helping new families and new businesses create brilliant futures—commercial banking might be for you. You'll just have to function in a larger organization, trying to build synergies with other product groups across different customer and product platforms.
Corporate Finance
People who work in corporate finance and accounting are responsible for managing the money-forecasting where it will come from, knowing where it is, and helping managers decide how to spend it in ways that will ensure the greatest return.
This career profile focuses on opportunities in corporate finance and accounting in private industry. Every company has a corporate-finance function. The responsibilities that fall under finance and accounting range from basic activities such as bill paying to very sophisticated ones such as forecasting the value of a potential acquisition. The stakes can amount to hundreds of millions - sometimes billions - of dollars and thousands of jobs. Careful assessment of the financial implications of particular strategic decisions can be critical to a company's success or failure.
Of course, a company's size, complexity, economic sector, and stage of development (start-up or established business) influence what tasks the corporate finance team undertakes every day. All companies need to balance their books. Some large technology companies, for example, hire financial experts to valuate potential acquisitions. Others (such as insurance companies) have hundreds of millions of dollars to invest and need financial wizards to manage it.
Corporate finance includes two key functions: accounting and finance.
Accounting concerns itself with day-to-day operations. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all the financial data needed to issue a company's financial statements in accordance with government regulations.
Finance pros analyze revenue and expenses to ensure effective use of capital. They also advise businesses about project costs, make capital investments, and structure deals to help companies grow.
In spite of their different roles, finance and accounting are joined at the hip: The higher levels of accounting (budgeting and analysis) blend in with financial functions (analysis and projections). Thus, finance and accounting are often treated as one, with different divisions undertaking particular tasks such as cash management or taxes.
Insurance
In general terms, insurance means protection. Insurance company clients pay fees (premiums) with the understanding that if specific misfortunes befall them—if a fire burns down their house, for instance, or they have an accident and need hospitalization—they can make a claim and the insurance company will pay them an amount agreed upon in the insurance policy.
Careers in insurance are varied. Actuaries, for instance, assess the relative likelihood of various types of accidents by performing a statistical analysis of anything they deem relevant to the subject. They use the resulting information to determine policy prices, as well as to whom they should sell which policy.
Agents fill a sales function, and actually sell the policies. Underwriters determine how much overall risk a buyer will add to the company's business and figure out the premium at which to insure a buyer. Money managers invest the money the insurance company takes in through premiums. Claims adjusters decide what, if anything, the company will pay on claims. Risk managers determine and help implement policies and processes to help clients avoid making claims.
Insurance companies tend to be large in terms of both employees and assets, because they need to take in a lot of premiums from a variety of customers in order to diversify and lower their risk of being put out of business by a small number of large claims.
Insurance companies also manage their risk by paying reinsurance companies to take on some of that risk. Reinsurers essentially insure insurance companies against unexpectedly large claims. By writing policies with a variety of insurance companies, reinsurers effectively take on many times the number of individual risks as primary insurance companies do. This lessens the likelihood that a small number of large claims will result in an unforeseen risk to their bottom line.
If you like sales, have a strong quantitative bent, or like to investigate mysteries, this is a very good place to consider looking for a job. It's also a great field to consider if you're looking for top-notch benefits, reasonable hours, and a sense of belonging to a large organization. There's also a place in the industry for entrepreneurs who want to run an insurance agency or work in other sales positions
Investment Banking
Traditionally, commercial banks and investment banks performed completely distinct functions. When someone needed a loan to buy a car, he visited a commercial bank. When he needed to raise cash to fund an acquisition or build its fiber-optic network, it called on its investment bank. Paychecks and lifestyles reflected this division too, with investment bankers reveling in their large bonuses and glamorous ways while commercial bankers worked nine-to-five and then went home to their families. Today, as the laws requiring the separation of investment and commercial banking are reformed, more and more firms are making sure they have a foot in both camps, thus blurring the lines and the cultures.
Investment banking isn’t one specific service or function. It is an umbrella term for a range of activities: underwriting, selling, and trading securities (stocks and bonds); providing financial advisory services, such as mergers and acquisition advice; and managing assets. Investment banks offer these services to companies, governments, non-profit institutions, and individuals.
The action and players in investment banking are still centered in New York City and a few other money centers around the world, but the list of players is getting smaller as the industry consolidates. Today, leading banks include Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup’s Corporate and Investment Bank (whose investment banking arm was until recently known as Salomon Smith Barney), Credit Suisse First Boston, and JPMorgan Chase
Wall Street is filled with high-energy, hardworking young investment bankers who spend hours hunched behind computers, poring over financial statements and churning out spreadsheets by the pound. Others are traders who keep one eye on their Bloomberg screen, a phone over each ear, and a buyer or seller on hold every minute the market’s in session. Traders work hand in hand with the institutional sales group, whose members hop from airport to airport trying to sell big institutions a piece of the new stock offering they have coming down the pipeline. Then there are the analytically minded research analysts, who read, write, live, and breathe whichever industry they follow, 24/7.
To survive in investment banking, much less to do well, you’ll need to like the work itself. And, quite honestly, even if you love the work, an investment banking career can still be a tough road. But, if you like fast-paced, deal-oriented work, are at ease with numbers and analysis, have a tolerance for risk, and don’t mind putting your personal life on hold for the sake of your job, then investment banking may be a great career choice.
Securities Sales and Trading
An investment bank relies on its sales department to sell bonds or shares of stock in companies it underwrites. Investors who want to buy or sell a certain stock or bond will place an order with a broker or sales representative, who writes the ticket for the order. The trader makes the trade.
Securities sales and trading are high-profile, high-pressure roles in the investment banking industry. Unlike other i-banking careers, such as corporate finance, public finance, and M&A, where the emphasis is on the team, securities salespeople and traders are independent, working on commission to bring to market the financial products that others create.
In the United States, the securities business revolves around markets (also known as "exchanges") such as the New York Stock Exchange, the Chicago Board of Trade, and Nasdaq, where debt, futures, options, stocks, and other financial instruments are bought and sold. Salespeople and traders are independent agents working under a simple contract: The firm provides a place to do business in return for a percentage of the business that salespeople and traders generate.
Salespeople are called brokers or dealers. As one of them, you're expected to build a "book" of clients. No matter how long you've been working, and no matter how many clients you have, you're expected to cold call. New brokers make as many as 600 cold calls a day. Most of the work takes place over the telephone: soliciting clients or selling a particular stock or bond issue. You'll use analyst research and every sales trick in the book to push your securities to investors.
Traders make money by trading securities. Although they're the ones who transact trades for the brokers and their clients, traders are primarily responsible for taking a position in a security issue, and buying or selling large amounts of stocks or bonds using an employer's (or their own) capital. When they bet right, they win big; when they bet wrong, they lose big.
Securities sales and trading is a high-pressure career. You're responsible for the financial fortunes of your clients—or yourself, if you're a lone trader. Every day you're making $100,000 (or more) decisions under severe time constraints. The daily fluctuations of stock prices can make you rich one day and break you the next. Brokers eat a lot of antacid.
Securities salespeople and traders work independently, usually with little supervision and very little interaction with management—provided they succeed. If they don't, they're quickly out of a job. To do well, you need a good head for numbers and a hidebound determination to make money. If you're on the sales side, you'll need exceptional customer service skills; if you're a trader, you'll need to be able to handle huge risk—and stomach huge losses. The upside of these careers is the money brokers can make.
The accounting industry has been rocked by scandal in recent times, with one major firm, Arthur Andersen, being forced out of the picture. Before Andersen’s collapse, the top tier of the public accounting industry was known as the Big Five. Now, it’s the Big Four: Deloitte Touche Tohmatsu, Ernst & Young, KPMG, and PricewaterhouseCoopers.
Accounting concerns itself with the day-to-day operations of bookkeeping. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all of the financial data needed to issue a company's financial statements in accordance with government regulations.
Accountants are taking a step away from the ledger sheets and are becoming essential to every successful business team. They're the ones who understand the language of money and a company's complex financial situation. Consequently, accountants are increasingly being called on to offer advice and even make business decisions based on hard facts rather than on speculation or gut instinct.
Finance and accounting jobs require critical & detail-oriented thinking, a knack for using numbers to understand patterns that influence business, ability to think critically about the numbers you're working with.
Asset Management
Asset management is the business of making money with money. Asset managers manage money - other people's money, and gobs of it. Generally, they convert that money into assets - stocks, bonds, derivatives, and other types of investments - and try to make that money make more money as fast as possible. Mutual funds, for instance, hire asset managers; so do corporations with lots of money sitting around, banks, and high-net-worth individuals.
Asset managers have one simple goal: to invest other people's money wisely and profitably. Asset managers use a combination of investment theory, quantitative tools, market experience, research, and plain dumb luck to pick investments for their portfolios, ranging from high-risk stocks to commercial real estate to cash accounts.
The profession requires excellent quantitative and analytical skills, organizational skills - and nerve - to make split-second decisions with millions of dollars riding on the line.
Finance and accounting jobs require critical & detail-oriented thinking, a knack for using numbers to understand patterns that influence business, ability to think critically about the numbers you're working with.
Commercial Banking
Commercial banks are banks that are in classic business of accepting deposits and making loans. As against merchant banking where primary responsibility is to help people find money. Thus they help companies to raise capital through issue of equity or bonds etc
In few countries like US and Japan commercial banking is separate from investment banking by law. Few countries like UK we find that commercial banks carry out investment activities through a subsidiary. Only in countries like Germany where we find Universal Banks like Deutsche that is both a commercial and I-bank. The legislation that kept banks and investment banks separate—Glass Steagall—was struck down by Congress in 1999. So banks are now moving into highly visible spheres of activity, such as investment banking, mutual funds, and brokerage.
Commercial banks hold customers’ money and supply loans, in exchange for check-writing fees and interest collected from loans. The work of commercial bankers is critical—retail consumers get their credit lines extended, their checking accounts upgraded, their mortgages, cars, and home improvement loans approved.
A commercial bank can either be a retail bank or a wholesale bank or both.
Retail Banking
§ Retail banking involves high street branches, dealing with the general public, shops and very small businesses. Retail banking covers current accounts, cheque facilities, saving accounts, and loan facilities like overdraft, personal loans and mortgages.
§ The use of cheque and cheque clearance are of prime importance. Here we are talking about high volume low margin business.
Wholesale Banking
Wholesale banking covers banks lending to larger entities like corporate, governments etc It also includes activities like money markets, foreign exchange and finance for trade
Small businesses are also highly dependent on the goodwill of commercial bankers. Even as dot coms, angel investors, and VCs monopolize the news, most small businesses continue to fund their growth with commercial loans. Such loans allow them to secure new inventory, cover payroll, remodel their stores, buy registers, and manage their overseas accounts receivables.
Commercial bankers perform core financial analysis to assess risk, creditworthiness, and the likelihood a business will succeed. They play a key part in deciding the best business initiatives, expanding existing businesses, developing new markets and clients, and creating new products for e-commerce, the Internet, international markets, and consumers.
In addition, Commercial bankers have to combine business acumen with strong accounting and interpersonal skills. After all, commercial bankers are at the front lines of the banking business. Ideally, they know their clients' lives intimately and can recommend additional products and services. Commercial bankers are a key distribution point and referral source for the rest of a bank's financial services activities.
Many commercial banks are consolidating in order to branch out and provide other services such as mortgage, mutual funds, investment banking, and insurance. As other financial firms expand their services, commercial banks are diversifying to keep up, and often a merger with a peer company is the best way to do this. Since 1995, more than 200 large and small banks have merged. Consolidation usually results in layoffs and fewer job opportunities, but jobs in banks that are more diversified offer more opportunities for career development. And a growing number of non-banks are pioneering new ways of delivering financial services, providing more jobs in the finance industry.
If you like intense project work, with a good deal of financial analysis and customer contact—if you like helping new families and new businesses create brilliant futures—commercial banking might be for you. You'll just have to function in a larger organization, trying to build synergies with other product groups across different customer and product platforms.
Corporate Finance
People who work in corporate finance and accounting are responsible for managing the money-forecasting where it will come from, knowing where it is, and helping managers decide how to spend it in ways that will ensure the greatest return.
This career profile focuses on opportunities in corporate finance and accounting in private industry. Every company has a corporate-finance function. The responsibilities that fall under finance and accounting range from basic activities such as bill paying to very sophisticated ones such as forecasting the value of a potential acquisition. The stakes can amount to hundreds of millions - sometimes billions - of dollars and thousands of jobs. Careful assessment of the financial implications of particular strategic decisions can be critical to a company's success or failure.
Of course, a company's size, complexity, economic sector, and stage of development (start-up or established business) influence what tasks the corporate finance team undertakes every day. All companies need to balance their books. Some large technology companies, for example, hire financial experts to valuate potential acquisitions. Others (such as insurance companies) have hundreds of millions of dollars to invest and need financial wizards to manage it.
Corporate finance includes two key functions: accounting and finance.
Accounting concerns itself with day-to-day operations. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all the financial data needed to issue a company's financial statements in accordance with government regulations.
Finance pros analyze revenue and expenses to ensure effective use of capital. They also advise businesses about project costs, make capital investments, and structure deals to help companies grow.
In spite of their different roles, finance and accounting are joined at the hip: The higher levels of accounting (budgeting and analysis) blend in with financial functions (analysis and projections). Thus, finance and accounting are often treated as one, with different divisions undertaking particular tasks such as cash management or taxes.
Insurance
In general terms, insurance means protection. Insurance company clients pay fees (premiums) with the understanding that if specific misfortunes befall them—if a fire burns down their house, for instance, or they have an accident and need hospitalization—they can make a claim and the insurance company will pay them an amount agreed upon in the insurance policy.
Careers in insurance are varied. Actuaries, for instance, assess the relative likelihood of various types of accidents by performing a statistical analysis of anything they deem relevant to the subject. They use the resulting information to determine policy prices, as well as to whom they should sell which policy.
Agents fill a sales function, and actually sell the policies. Underwriters determine how much overall risk a buyer will add to the company's business and figure out the premium at which to insure a buyer. Money managers invest the money the insurance company takes in through premiums. Claims adjusters decide what, if anything, the company will pay on claims. Risk managers determine and help implement policies and processes to help clients avoid making claims.
Insurance companies tend to be large in terms of both employees and assets, because they need to take in a lot of premiums from a variety of customers in order to diversify and lower their risk of being put out of business by a small number of large claims.
Insurance companies also manage their risk by paying reinsurance companies to take on some of that risk. Reinsurers essentially insure insurance companies against unexpectedly large claims. By writing policies with a variety of insurance companies, reinsurers effectively take on many times the number of individual risks as primary insurance companies do. This lessens the likelihood that a small number of large claims will result in an unforeseen risk to their bottom line.
If you like sales, have a strong quantitative bent, or like to investigate mysteries, this is a very good place to consider looking for a job. It's also a great field to consider if you're looking for top-notch benefits, reasonable hours, and a sense of belonging to a large organization. There's also a place in the industry for entrepreneurs who want to run an insurance agency or work in other sales positions
Investment Banking
Traditionally, commercial banks and investment banks performed completely distinct functions. When someone needed a loan to buy a car, he visited a commercial bank. When he needed to raise cash to fund an acquisition or build its fiber-optic network, it called on its investment bank. Paychecks and lifestyles reflected this division too, with investment bankers reveling in their large bonuses and glamorous ways while commercial bankers worked nine-to-five and then went home to their families. Today, as the laws requiring the separation of investment and commercial banking are reformed, more and more firms are making sure they have a foot in both camps, thus blurring the lines and the cultures.
Investment banking isn’t one specific service or function. It is an umbrella term for a range of activities: underwriting, selling, and trading securities (stocks and bonds); providing financial advisory services, such as mergers and acquisition advice; and managing assets. Investment banks offer these services to companies, governments, non-profit institutions, and individuals.
The action and players in investment banking are still centered in New York City and a few other money centers around the world, but the list of players is getting smaller as the industry consolidates. Today, leading banks include Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup’s Corporate and Investment Bank (whose investment banking arm was until recently known as Salomon Smith Barney), Credit Suisse First Boston, and JPMorgan Chase
Wall Street is filled with high-energy, hardworking young investment bankers who spend hours hunched behind computers, poring over financial statements and churning out spreadsheets by the pound. Others are traders who keep one eye on their Bloomberg screen, a phone over each ear, and a buyer or seller on hold every minute the market’s in session. Traders work hand in hand with the institutional sales group, whose members hop from airport to airport trying to sell big institutions a piece of the new stock offering they have coming down the pipeline. Then there are the analytically minded research analysts, who read, write, live, and breathe whichever industry they follow, 24/7.
To survive in investment banking, much less to do well, you’ll need to like the work itself. And, quite honestly, even if you love the work, an investment banking career can still be a tough road. But, if you like fast-paced, deal-oriented work, are at ease with numbers and analysis, have a tolerance for risk, and don’t mind putting your personal life on hold for the sake of your job, then investment banking may be a great career choice.
Securities Sales and Trading
An investment bank relies on its sales department to sell bonds or shares of stock in companies it underwrites. Investors who want to buy or sell a certain stock or bond will place an order with a broker or sales representative, who writes the ticket for the order. The trader makes the trade.
Securities sales and trading are high-profile, high-pressure roles in the investment banking industry. Unlike other i-banking careers, such as corporate finance, public finance, and M&A, where the emphasis is on the team, securities salespeople and traders are independent, working on commission to bring to market the financial products that others create.
In the United States, the securities business revolves around markets (also known as "exchanges") such as the New York Stock Exchange, the Chicago Board of Trade, and Nasdaq, where debt, futures, options, stocks, and other financial instruments are bought and sold. Salespeople and traders are independent agents working under a simple contract: The firm provides a place to do business in return for a percentage of the business that salespeople and traders generate.
Salespeople are called brokers or dealers. As one of them, you're expected to build a "book" of clients. No matter how long you've been working, and no matter how many clients you have, you're expected to cold call. New brokers make as many as 600 cold calls a day. Most of the work takes place over the telephone: soliciting clients or selling a particular stock or bond issue. You'll use analyst research and every sales trick in the book to push your securities to investors.
Traders make money by trading securities. Although they're the ones who transact trades for the brokers and their clients, traders are primarily responsible for taking a position in a security issue, and buying or selling large amounts of stocks or bonds using an employer's (or their own) capital. When they bet right, they win big; when they bet wrong, they lose big.
Securities sales and trading is a high-pressure career. You're responsible for the financial fortunes of your clients—or yourself, if you're a lone trader. Every day you're making $100,000 (or more) decisions under severe time constraints. The daily fluctuations of stock prices can make you rich one day and break you the next. Brokers eat a lot of antacid.
Securities salespeople and traders work independently, usually with little supervision and very little interaction with management—provided they succeed. If they don't, they're quickly out of a job. To do well, you need a good head for numbers and a hidebound determination to make money. If you're on the sales side, you'll need exceptional customer service skills; if you're a trader, you'll need to be able to handle huge risk—and stomach huge losses. The upside of these careers is the money brokers can make.
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