1.2 Careers within Finance

In the sense of Careers-in-Finance, commercial banking includes consumer banks. The possible careers at commercial and consumer banks are very similar, with the main difference being the clientele of the bank.

Perhaps the lowest entry job in the banking sector is a tellerAn entry-level bank position.. The teller is the employee we all deal with when we go to the drive-through window or step up to the bank's front desk. Typically, the qualifications for teller are not that rigorous. Tellers are often hired without a four-year college degree.

Above the level of teller are credit analysts. Credit analysts are in the business of determining if loans should be extended to loan-seeking potential bank clients. For example, when you apply for an auto loan to buy your dream car upon graduating from college, a credit analyst will examine your file to determine if you should receive the loan.

Often at commercial banks, a large part of a credit analyst's responsibility is to find clients and extend loans to them. For example, we have had several students go to work for Comerica bank in California after graduating. Approximately half of their job at Comerica was to find clients in need of loans and the other half was crunching numbers to see if these loans should be granted. This type of job takes both number and people skills. Being able to play a round of golf or have a social lunch with a potential client is critical in recruiting firms to apply for loans. After the application is made, a very careful numerical analysis must be performed to make sure the client is a justifiable risk. This type of career path takes a certain personality. You cannot be a shy hermit in this line of work. You have to be outgoing enough to drum-up business.

Many banking professionals desire to move into management, whether it is managing a local branch or moving up to the corporate level. In the banking sector, it is typical that these executives have moved up through the ranks of the bank. Usually high ranking executives started as tellers many years before. If your goal is to become a banking executive, you should seek classes in financial analysis and financial institutions. Most business schools offer a class specifically designed for bank management.

As the name implies, most people who specialize in corporate finance desire to work in a corporate setting. Examples of corporate finance are graduates who go to work for Dell, Microsoft, or Ford. Within a firm, financial analysts can have any number of responsibilities. Some include the investing and financing decisions discussed earlier as well as cash managementManaging the day-to-day finance operations of a firm., tax strategiesMinimizing the taxes a business pays., and financial policy implementationIncorporating new finance ideas within a firm.. The highest ranking officer in corporate finance is typically the CFO, or chief financial officer, of a company. The CFO is responsible for all of the financial decisions made by the firm. He/she serves as the CEO's right-hand-person in all money matters.

Professional financial planners work with individuals to help them achieve their financial goals. Financial planners often help clients create budgets to live on. They also help direct the investments of their clients. It is typical for financial planners to help with tax planning, such as setting up trustsLegal structures used in estate planning., estatesLegal structures used in estate planning., and willsLegal documents used in estate planning.. With today's one-stop financial shopping, financial planners can be found from your local bank branch all the way up to the largest investment banks in the world that offer financial planning services. (Don't count on the huge investment banks helping you though, unless you're worth at least seven digits.) Often, companies hire or outsource financial planning as a benefit to their employees. For example, our university has several professional planners who will work with university employees free of charge.

If you decide to pursue a career in financial planning, it is important to qualify for the professional designation of Certified Financial Planner (CFP). The publisher Wiley puts out a review for the CFP that serves as a great overview: Rattiner's Review for the CFP Certification Examination, by Jeffrey H. Rattiner. Although this one book will not be enough to prepare you for the actual exam, it will give you a feel for both the depth and breadth of the exam. To find out more about the CFP designation, check out http://www.cfp.net.

The breakdown for the CFP exam is:

You may ask, "Why would someone want to be a hedge fund manager?" Here is a quote from Careers-in-Finance at the time of this writing: "The compensation for working in a hedge fund can be unusually high. It is not uncommon to see a person in their late 20s or early 30s pull down $5 million a year or more in one of the right positions at the big funds." OK, now you are no longer wondering.

So what do hedge fund managers do? Think of a traditional mutual fund; they are fairly similar. In a mutual fund, the managers buy stocks or bonds with investor money. The managers attempt to find under-valued or growth stocks (or bonds) and buy low, sell high. Hedge fund managers have a similar goal—earn a strong return for their investors. However, hedge fund managers are not restricted to buy (long) positions only. Hedge fund managers can also sell stocks and bonds (short) and can buy and sell financial derivatives (stock options, for example). Hedge fund management is almost always very quantitative.

Due to the down economy of 2009–2010, accompanied by the down stock market, many hedge funds went out of business. The bad news is there aren't as many around to hire graduating college students. The good news is that the survival of the fittest has made it so most of the bad ones failed and quality firms now survive.

There are several different branches of insurance. Because we all have to insure our cars, we're pretty familiar with property/casualty auto insurance. When one thinks of consumer insurance, he'll think of life insurance or property insurance. Along with consumer insurance, the area of corporate insurance rounds out the insurance discipline. Corporate insurance, also known as risk management, involves helping firms protect themselves from unforeseen risks. In many universities, the business school has a department known as the RMI department. RMI stands for "risk management and insurance."

We have placed students with Aon, a large insurance company that specializes in providing insurance plans for other large companies. In the corporate insurance career path, professionals use their financial analytical skills constantly. These companies often offer reinsurance, which is insurance for those providing insurance.

On the consumer side, entrepreneurial-minded graduates can "buy their own set of books." With many baby-boomers retiring from the insurance field, more and more books are becoming available to buy. For example, one of our friends bought an Allstate branch from a retiring insurance man several years ago. Our friend, Big R, hired the former owner to stay with the company for six months until the clients were comfortable with Big R. Once the transition was made from the former owner to Big R, the former owner fully retired. Big R has now done this twice (once by himself and once with a partner). He is doing very well for himself. As a book owner, Big R is his own boss. He is responsible for client contact. Allstate also has requested all of its owners pass the CFP exam. As such, Big R is working on the credit hours and studying for the exam (a several year adventure). Allstate is moving strongly into the financial planning arena. They now offer brokerage services and financial planning services along with their traditional insurance services. Other insurance companies are similarly moving in the same direction. Having a major in finance is becoming more and more important for those desiring to buy an insurance book.

Because of the historical financial meltdown of 2008, stand-alone investment banks like the big-named Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley were dissolved, bought out, or converted to traditional banks. With the demise of traditional investment banks, it is important to know that the functions performed by these investment banks are still required by the financial markets. As such, in this section we describe the functions of investment bankers.

Most students studying business have heard of I-banker's hours. The idea is that most I-bankers work 80–100 hours a week, grinding the axe every day. With the long hours, I-bankers also command huge salaries and bonuses. I-bankers have six primary roles:

1. company/industry analysis,

2. mergers and acquisitions,

3. raising capital via corporate offerings,

4. sales and trading,

5. private client services, and

6. back office support.

These responsibilities are not the only jobs the I-bankers have, but they are the main ones. (I-banks also have brokerage wings for example, consisting of employees who work primarily in sales.)

Company/Industry Analysis

Mergers and Acquisitions

Raising Capital via Corporate Offerings

Sales and Trading

Private Client Services

Back Office Support

Asset managers make a living investing other people's money (OPM), typically as fund managers. Examples of funds include mutual funds, pension funds, and insurance funds. Asset managers can invest in stocks, bonds, real estate, or any other type of asset for that matter. A professional designation that is very valuable in the asset manager field is the Chartered Financial Analyst (CFA) designation. This series of examinations is extremely rigorous with typically only 35% or so of the candidates passing. After passing the exam, candidates must obtain relevant work experience. Many funds and investment banks require their analysts to become CFA charter-holders.

Private equity (PE) is a general term which includes angel financing, venture capitalists, and take-over firms. In the context of Careers-in-Finance, they talk mostly about buyout firms and leveraged buyouts (LBOs). Similar to hedge funds, PE offers the potential of very high compensation. Analysts who work in PE spend most of their time determining which deals to fund and then monitoring their portfolio firms. Briefly, angel investors and VCs typically invest in start-up or new firms that hope to grow quickly and then have a "harvest." A harvest event is typically an initial public offering (IPO) or a buy-out (acquisition). PE buyout firms invest in entire companies, typically taking on large amounts of debt to buy floundering firms and then turning them around for a profit.

When most people think of careers in real estate, they think of real estate salespeople working for Coldwell Banker or a similar firm. Most university real estate finance programs do not train students for such a track. Real estate finance is more concerned with investing in and managing real property.

A great resource for students interested in Real Estate careers is the "Vault Guide to Real Estate Careers." The Vault Real Estate guide lists the following career areas within real estate:

1. Residential Real Estate Agents/Brokers

2. Commercial Real Estate Brokerage: Tenant Representation

3. Commercial Real Estate Brokerage: Leasing Agent

4. Investment Sales Broker

5. Mortgage Backed Securities Rating Agencies

6. Real Estate Appraisal

7. Property Management

8. Real Estate Advisory

9. Real Estate Investment Banking

10. Development

Having worked with our Construction Management Department in the College of Engineering, we would also add construction management to the list of real estate careers. Traditionally, construction management has been a successful major. If you have interest in real estate, we encourage you to download the Vault Guide and learn more about the various job opportunities.