Tuesday, January 31, 2012

How do I get a job in finance?

On occasion, I get asked by students, "How do I get a job in finance?"

My answer, which is in the form of a question, is, "What's your motivation?"

For most, it's about the money. Theibanker.com has an interesting article about why most people go into investment banking [emphasis added]:
Let there be no doubt that chief amongst the reasons is the motivation to earn a lot of money. See, for many bankers, and banker-wannabes, it’s a given that the entrepreneurial route is the path which ultimately leads to the greatest riches. However, entrepreneurship is beset with pitfalls and risks. Therefore, given the very calculating nature of bankers, the optimal choice is a career which is less risky than entrepreneurship yet at the same time relatively more lucrative than other roles.
I tell the students that you have to love it more than just the money. The Guardian is publishing an interesting series called Voices of Finance. Here's a quote from a former girlfriend of a banker detailing the personal sacrifices and the kinds of personal choices a banker has to make:
This is what wrecked our relationship in the end. He was married to his work, not to me. He was working for a big investment firm, running a kind of a hedge fund. I'd tell him, just quit. You have made enough for us to live on for years to come. What's stopping you? We can travel. You are destroying your health, you can't sleep without sleeping pills any more, then in the morning you need more pills to get going.
And he'd say, I know you're right, this job is taking over everything, I am losing you. Give me 10 more years and I'll never have to work another day in my life, I'll never have to go back.
I have met a lot of finance people who disliked their jobs but were in it to "make their number". Once they have, their plan was to get out. Sadly, many don't. Theibanker article confirms my observation:
Sadly, only some of the people who swear an oath to the tour of duty on that very first day fulfill their mission.  Everybody reading knows what I’m talking about.  To those in the business: how many times have you told yourself, ‘just one more year…just one more bonus’?  To those who have friends in the business: how many times have you heard them insist they’ll soon leave their job?  Most end up MIA (missing in action).  Once behind enemy lines and captured people slowly forget the original plan, easily overshadowed by the perks of the job.
I am fortunate that I do love what I do. I would be in this field if it paid little or nothing (and this unpaid blog is an example of my passion).

To say that the work can be hard is an understatement. The ex-girlfriend's story above is an example of how the job can eat up your soul and your entire being. Here is an account from a former mergers and acquisitions banker who made the jump and quit the business:
As a young banker in M+A, you have no social life, I mean, none. A work week has seven days. There's no time for friends, and when you have a few hours off, you try to maximise it. Drink really hard, party wild, and you get confronted with drugs – which seems to be a taboo although many do it. You need to feel in those few moments that you're still alive. On Sundays, following one of these binges, I would wake up feeling so rotten, so empty.

I used to be the kind of person who enjoys life, who gets up in the morning eager for another day. The past two years I found myself changing. I lost my interest in politics, in sports … I began to wonder: what's happening to me?

My flatmate is in finance too. I've seen him coming home crying, from exhaustion, from something that happened to him. Why are we doing this to ourselves? My sense is that the majority of the people in finance have an urge to prove themselves. And banks offer a platform where they can do so. I feel there's a particular kind of insecurity to many bankers, a form of neediness and a deep desire to compensate. Love?
The hours are brutal, but the work can be exciting and stimulating:
In the first year I would work from 9.30 am till 3am, every day. You keep telling yourself, this is going to get better. But it doesn't, not really.

Compared with my years in university I have learned so much more in the past two years, so much more. Then again, given my 18-hour work days, these were actually four years. Basically M+A teaches you to truly understand a company; to analyse it the way a doctor would with a human body. You build models of how the company operates, where it might improve in the future, and how. It's genuinely stimulating work.
To be sure, there are those for whom finance is a calling (from theibanker):
Some people know they want to work in finance from a young age. True, it’s rare but when you meet them in a bank you’ll recognize it. More often than not they’re very sharp. Everyone in the team will either love or hate them. There is no in between. At a junior level (i.e. analyst / associate) they are typically the guys who make far fewer mistakes in presentations and models, digest information and data the quickest and generally appear to feel most at home in the building. It is almost a given that they’ve breezed through their finance studies in university. Some of them probably could have joined a bank straight from school rather than attend university.
When these worshippers of finance walk across the trading floor or past the Head of M+A’s office they’ll fight hard to keep a stupid smile from manifesting itself. They cannot help it…the trading floor is like a playground for them…the Head of M+A’s office like a throne. And if receive a nod of acknowledgement from the man inside that office they may rush to the bathroom, lock themselves in a stall and cry out of joy for the job they consider a blessing. They probably hear Vivaldi’s Four Seasons (Spring!) in their heads when they walk around the bank on a busy Monday morning. Or perhaps Beethoven’s Ode to Joy – the part where the entire ensemble comes together in joyous harmony.
OK, Maybe he exaggerates. Nevertheless, the job can have its rewards. Here is the account of a brokerage firm research analyst:
One of the things I like about the financial sector, it's meritocratic … the boardrooms are often really multicultural.
Here is what a fund manager said. You can tell that he does enjoy his work:
The best moments in this job? There is the game element. Basically, an investment is a hypothesis about the future value of a given company. You believe its share price will go up, and you test your hypothesis by taking a 'position' [buying the share]. Then when you are vindicated, that is really very satisfying. And yes, that means you make more money. In that respect, the money you make expresses the degree to which you have been successful at what you do.

Another top moment in this job is when a client decides to trust you with a large sum of money to invest for them. It's a vote of confidence, and that feels great. Yes, it also means that my income goes up, because we get paid partly on the basis of the total amount of money under management. The more you manage, the more you get. But there's the sense of responsibility too, I mean, in the end we represent families, the people who paid into the pension fund whose money we are managing. One of the greatest pitfalls for fund managers is thinking we are more important than the clients whose money we are managing. That's why there are not a lot of Gordon Gekkos among us.

Finally, great moments in this job are when your relationship with the company you have invested in has become so strong, and your insights into that company and the market it operates in have become so in-depth, that you end up almost in an advisory role. Obviously management knows its own company best, but you may bring a perspective from the capital markets. Say, we show the company that their current structure is 'suboptimal' as we call that, and we suggest that they sell off part of their operations and accelerate investments in their core business. If such discussions truly lead to value enhancing actions by the company, that is very rewarding.
Maybe you are a nerd (as I was - all quants have to be somewhat nerdy) and you really like working with numbers:
Why finance? I am a nerd. Wasn't always one, but with the years I am becoming nerdier and nerdier. I just love a difficult problem, to tweak and try, until I crack it. I like numbers, too. The work in M&A is really rather interesting, and the better you get at it, the more fun it becomes. I also like to think that this work adds value to society; we help companies sell loss-making divisions, improving their financial health.
If you are indeed looking for a job in finance, go and read the Guardian series. Don't go into the business for the money and the prestige. It will ruin your life.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

1 comment:

Michele said...

As a complete outsider to the whole financial industry, and the unpaid author of my own market blog, I found those comments fascinating. Thanks for posting that.