The V-type recovery of Investment Banking

It really seems that the Investment Banking is picking up. Number of companies (like Morgan Stanley, Barclays Capitals, Nomura, Goldman Sachs and some small investment boutiques) are hiring actively. At the moment hiring is mostly in the space of seniors and middle-ranks. The reason for this is a huge number of experienced people, who stay our of employment - firms are willing to take advantage of the state of the market to hire experience people at low cost. I expect that this hiring fever will soon spill to the junior job market as well - I believe that this year will give excellent opportunities to find a job in lucrative sector at the junior level. I don't believe that the financial industry could be hit again anytime soon.

My advice at the moment is: Don't be afraid of working in companies that performed badly during the crisis (like RBS, UBS, Citibank etc.). It's very likely that especially these companies will provide extremely interesting opportunities for all juniors. This organizations cut big part of their businesses and hence now they need to rebuild rapidly to remain competitive and profitable.

Yet another proof of the improvement of the business conditions in the investment banking is the fact that I got a job recently! I am soon finishing my PhD and I will be starting in Barclays Capital in their Investment Banking Division.

Usefulness of CFA in Managment Consulting

As you may see in the 13th Survey I just started on the blog, people are thinking that Management Consulting would be a next "place to be" after the crisis. I thought that it would be interesting to analyze how different financial credentials are applicable to management consulting job.

CFA - This credential is very well rounded. When you study for CFA you need to learn not only about the basics of financial mathematics, but you learn in depth about companies balance sheets and accounting in general. You learn about ethics, about rules of proper conduct etc. This knowledge and especially the breath of this knowledge may be a good preparation for the career in Managment Consultancy. In fact I know number of people, who got their charter and joined top consultancies (McKinsey, Bain, BCG). From what I hear, it seems that the knowledge they got from CFA is much more valuable than what they learned in their Masters degree for example.

FRM - Some of my friends with FRM work in Consultancies (like KPMG, Ernst) in risk departments. In fact these departments grew significantly in recent years and there is really quite a lot of hiring in these space.

CAIA - This certificate is very focused on alternative asset managment, and I haven't heard of anyone, who had it and worked in consultancy space.

PhD - There is some demand for PhD from Consulting Firms (mostly McKinsey), but from my observation PhD in Finance or Economics are not really prefared. It seems they like more PhD in "soft" sciences like PhD in Public Policy, PhD in Medicine etc. Companies like McKinsey attract PhDs to inject some non-standard thinking into the firm. However, PhD in Finance or Economics think very alike MBA students and CFAs, so they don't add much.

MBA - MBA has been the most standard way of getting into Managment Consulting. Companies like Bain or Booz Allen Hamilton recruit most of their employees from MBA students at the best universities. Some companies (like McKinsey) put so much emphasis on MBA business education that they tend to send majority of their non-MBA employees to MBA courses at Top Business School around the world.

Summing up, considering the costs of the degree CFA can be an interesting alternative to MBA for everyone interested in managment consultancy jobs.

Good luck to CFA delegates!

The date of CFA exam is approaching very fast. Although I am not taking my level III this year (because of my commitments at the university) I feel the excitement of the moment. At my university half of the library is filled with just people, who are reading CFA textbooks. Some of them use Schwesers, others are studying directly from CFA Textbooks (which is good thing, but maybe not really just before the exam as the CFA Textbooks are really heavy-weight).
This CFA exam is administrated at important time for the financial industry. It is soon to be decided if the finance industry recovers from ashes and would provide attractive employment opportunities not only for CFA Charterholders. Even if you expect the financial world to look bleaker now than some years ago, do not lose the fighting spirit before your CFA exam. Yes, there are less jobs, yes, salaries are lower, but still with CFA designation you will be able to find a job which would be better than average.
As you could see from the survey which was published yesterday CFA is expected to be the most desirable credential in the new finance world. I expect this is because of two important characteristics of CFA. First it provides really rigorous knowledge. The crisis was caused in fact by PhDs, who knew stochastic calculus, market microstructure theory, but they had real problem with taking the holistic view of the world. CFA with its broad curriculum, provides you with everything what is important to have a global overview of the situation. Second, I belive there is no other designation that puts so much emphasis on ethics and good standards and in fact lack of regulations and ethics is a root of the recent crisis.

All candidates, good luck!

Results of 13th Survey

The light for financial industry is even brighter...

After the word of Soros, who claims that the lowest point of the downturn is behind us, and number of other market practitioners there is now even more optimism in the financial industry.

The most notable signal I observe is the revival of the job market for graduates. In last two weeks I observed number of companies approaching students in London. Just to mention few, I have seen a private equity company (Blackstone) willing to find 4-5 interns for the summer, a management consultancy (Bain) willing to find 2-3 graduates for full time job from summer 2009.
It seems that companies are now expecting the worst to be over and they are preparing themselves for the possible recovery.
It seems that financial degrees and CFAs or CAIAs are not dead yet. It seems that people with these qualifications will probably be able to find a job really quickly, when the markets improve. This means that starting CFA or a Masters degree in a respected institution might be a good choice right now. When markets recover (and they surely recover sooner or later) graduates will be able to profit.

Results of twelveth survey

Light in the tunnel

After very strong Q1 results from JPMorgan, Goldman Sachs, Citibank and Wells Fargo some people claim that the situation of the financial industry starts to improve. The banks, which suffered extremely large losses during 2008 are now coming back to profitability. Citibank recorded the first positive (and solid) quarterly result for the first time since the middle of 2007. It is worth to mention that vast majority of these results was generated by sales&trading divisions.

Although it's far to early to claim that the banks are coming back to health, I firmly believe that this is definite sign of the recover of the financial industry.
Of course the banks will not restart hiring immediately. It's even possible that they will continue with firing, as the crisis in real economy is still unabated. However, recent increase in profitability gives a very good prediction about the future of the financial industry. It seems that the news about the death of financial sector are overstated - banking will still be here and will be strong - there is no other way. Any economy needs a healthy and profitable financial sector to sustain an economic growth.
I think it soon will be the best time for the newcomer to enter the industry. Now, it is really hard to find a job in the industry, but soon the demand for quality workers (with CFA for example) will pick-up. And at some point it will outweight the supply what would lead to wage inflation.

(If you want to discuss this article please visit: http://forum.examhub.org)

Declining interest in Finance

One of my recent and important observations is that the interest in finance is declining. As I am teaching n London Undergraduate courses in Economics and Finance I see that people are less and less convinced to pursue a career in finance. My students claim, that "they found that Investment Banking is not for them...". They now prefer to go for management consultancy or government organization. The same is with my fellow PhD Students. Many of them decided that they want to abandon their Investment Banking dream, as the industry will probably not offer opportunities for many years to come.
The falling interest in finance is a big concern for many Banks in London. They now that if they lose the reputation among graduates it will be very difficult for them to fuel expansion when markets recover (if they do). The situation similar to that from 2001-2002 may be repeated... Then banks just couldn't find qualified graduates to fill their graduate programs.
Situation may be repeated, as nowadays the banks not only lost their earnings potential, but also a big part of a reputation. This is not likely that banking will be treated as prestigious profession anytime soon.

Results of Eleventh Survey

What to do when you were fired?

This is always a problem. In any industry, at any time being fired is not a pleasant thing. However, circumstances in Financial Industry are very extreme. All companies are firing people, so the market is extremely competitive and in fact it is almost impossible to find a replacement job. In addition to this some of you work (worked) in such areas like trading and your skills are almost non-transferable to any other industry. So what can you do?

First, think about your future. Don't assume (of course) that you will not come to finance again, but anyway think about what else you can do. Think about alternatives - where your skills would be applicable and where would you be able to use your potential. I privately expect that there will be a lot more money to be made outside the financial industry in like 5 years to come. I think that really good bets for now would be consulting and law. Some skills especially from the IBD (Investment Banking Division) are really very easily transferable to consultancy (ability to work long hours included :) ), so redundant Investment Bankers should have no problem with finding a new job in consultancy. I also think that talented assets managers would be able to find a job in mainline companies in treasury departments, which now have difficult time managing the liquidity and require talented asset managers/traders. Another tendency I expect to see in following years is the rise of the job market for professionals in emerging markets. I think there would be soon no large discrepancy between opportunities in let’s say China and UK for the professionals. In fact it may be wise to come back to you country of origin, as it may positively affect your career.
Second, consider entrepreneurship. Don't assume that the only possibility is a job in someone else’s company. In fact you may be able to create a business on your own – just look around on what is good in place you live and try to copy this to the region or country you are originally coming from. Think about creating a restaurant, internet shop or anything else you understand.
Third, keep on looking for a job. Even in this market people are hired. It is best to have a good head hunter (for all readers of my blog – if you have good CV I can forward it to my friendly and solid headhunter for consideration – use the email: phdstudent2007@gmail.com) and to be in touch with him regularly. Maybe at some point he will have an offer that would be interesting for you.
Fourth, enjoy your free time. Study languages, exercise, meet friends etc.
Fifth, boost your profile. You should spend a big part of your free time on improving your profile – remember that the world is not standing in one place just because of the financial crisis. People are gaining new prestigious qualifications everyday and you should not lag.
For the list of most relevant business qualifications please visit http://examhub.org.

Good luck in your endeavors!
PS: If you want to ask me specific question please post message on http://forum.examhub.org.

Results of tenth survey