Today’s blog post is written by Jeremy K, an Investment Banking Analyst at a bulge bracket investment bank in Chicago, IL, where he also interned for two summers. Jeremy graduated from Michigan State University with a B.A. in Finance in 2016 and enjoys traveling, watching sports, and exploring Chicago.
I spend my working hours as an investment banker, a title that, unless you have family or friends that work as investment bankers, will likely mean nothing to you. If my headshot wasn’t above this article, I would guess that you picture me as a younger version of Jordan Belfort, Gordon Gecko, Jim Young, or Patrick Bateman (hopefully not Patrick Bateman), Hollywood’s most famous bankers.
Unfortunately, Hollywood and other media portrayals of careers on Wall Street are grossly exaggerated and offer poor depictions of what life is like for a 20-something professional in finance. I do not trade stock for a living; I do not spend my summer afternoons sipping whiskey on a yacht, and I did not cause the financial crisis. In fact, I’m generally not allowed to trade stock; I spend most summer mornings, afternoons, and evenings at the office, and my team and the investment banking division of my bank had absolutely nothing to do with the financial crisis.
Individuals that work in financial services often get grouped together because our jobs i) have opaque responsibilities ii) operate behind the scenes and iii) utilize jargon that someone outside of the industry would not understand. The combination of these three things makes the finance world intimidating and inaccessible for those outside the industry. I believe that we lose a lot of great, potential employees because of this, and I am writing this article today to briefly explain why I decided to work in finance and introduce you to some of the most common careers in finance for someone with an undergraduate degree.
I chose to pursue a career in finance for two reasons: I wanted a career that would challenge me analytically, and I wanted to learn how to answer what I consider to be the most important questions in business: “how much money are we going to make, and what are we going to do with it?” My current role accomplishes both.
I work in investment banking, a job that almost all who are familiar with the career consider very demanding but very much worth the hard work. My team is responsible for giving clients advice about how they can raise money (usually taking out a loan, selling part of their business, etc.) and how they can spend money (buying other companies, paying down loans, etc.). We compete against other banks for these opportunities. A lot of my work involves preparing presentations for our clients that “pitch” them ideas, like acquiring a competitor or selling shares to the public in an Initial Public Offering (“IPO”). We take these meetings very seriously because as an investment bank, our product is our employees and their capabilities. We do not have superior ingredients or a fancy box; we have our ideas and a 40-page PowerPoint to explain them.
I work anywhere between 60-100 hours a week, which generally translates to 9am – 10pm and occasional work on the weekend; my schedule ebbs and flows and is often unpredictable, but that can be true in any client- or customer-facing role. Meetings tend to be scheduled or rescheduled last minute, which can be a blessing or a curse depending on how much of the presentation we have left to complete and whether the meeting is pushed back or moved forward.
My day-to-day responsibilities include creating PowerPoints, building Excel models, reading industry research, looking at company presentations, and taking notes on phone calls. It’s by no means a glamorous job, and it’s no wonder why Hollywood has to exaggerate the lifestyle that I have. I love what I do, but if I had to watch myself do it in third-person, it would put me to sleep.
With that being said, I learn something new everyday. Today it was about how we should consider the securitization of receivables in a joint venture. Yesterday it was about the education technology market and how many venture capital firms are investing in the space. I have no idea what I will learn tomorrow, and that’s the beauty of this career.
My job presents me with small challenges each day. Does it get slow at times? Sure it does. Do I ever get frustrated that I work long hours? Of course. But, do I ever feel like I am running in place, like I am “stuck?” Absolutely not. Each day as an investment banker makes me a better employee, a better financier, and a better thinker, and that’s all I could ever want in a full-time job.
Like I mentioned earlier, I think that there exists an unfortunate disconnect between what some call “Main Street” and “Wall Street.” I have taken the rest of this post to discuss a few myths about finance and share a simple explanation of some common careers in finance for you to consider.
Myths about Careers in Finance
Before I jump into a few potential careers, I want to make sure we are on the same page. Below are some of the most common assumptions about finance that are incorrect.
Myth #1: You have to major in finance to work in finance
Though a degree in finance or business is helpful for the recruiting and interviewing process, many jobs in finance consist of mostly on-the-job learning that do not require a specific background. On my first day of investment banking intern training, I was seated at a table with three other interns—a psychology major, a neurobiology major, and an aerospace engineering major. These students had no business background whatsoever; in fact, their schools did not even offer business degrees to undergraduate students. What they did have, though, was an inherent desire to learn about finance and the motivation to overcome the learning curve, which are the best ways to stand out among the other applicants. This can be demonstrated through extracurricular activities like joining a finance club or investment association and through personal endeavors like managing a stock portfolio (with real or fake money) or reading books about finance.
Myth #2: Someone who dislikes math should avoid careers in finance
It is true that careers in finance involve numbers, and in today’s data-driven society, almost all jobs will; however, careers in finance do not usually require employees to perform mental math or use calculus. Finance combines both qualitative and quantitative analysis, with the quantitative piece requiring simple algebra at the most complicated level and almost always being calculated in Excel.
Myth #3: The hours in finance will prevent me from having a social life / people in finance spend half the day on a golf course or a boat
It is fair to say that the hours in careers in finance are longer than a traditional 9-5 role (although that seems unrealistic in many industries now). In fact, hours vary greatly by both career and firm. At the extreme end, investment banking analysts can work anywhere between 60-100 hours per week, arriving at the office between 9-10am and leaving between 9pm-2am, with occasional weekend work. Morning-people may prefer careers in Sales and Trading, where the workday starts between 5-7am and ends shortly after market-close, between 5-7pm. Corporate finance jobs work a more traditional 8am-5pm schedule, although they can experience spikes during particularly busy seasons like at quarter-end and during an acquisition. Working long, unpredictable hours can sometimes be frustrating, but I often learn the most during these periods.
Myth #4: To work in finance, you have to work in New York
New York City is the center of global finance; there is absolutely a benefit to working in the city and building your network. With that being said, San Francisco, Chicago, Austin, Boston, Seattle, and many other metropolitan areas are home to financial services hubs. These locations tend to specialize in certain industries (like SF in Technology, Houston in Oil & Gas, etc.), so there are plenty of opportunities to succeed in finance outside of NYC.
Select Careers in Finance
The Corporate Finance function sits beneath the Chief Financial Officer of a company with the purpose of managing a company’s day-to-day financial health and funding long-term strategic goals. In simple terms, the Corporate Finance team makes sure that the business has enough money to afford normal business expenses (buying supplies, paying employees, etc.) and helps the business save money for large-scale projects (building a new factory, manufacturing a new product, etc.). The group will often interact with other teams within the company to ensure that they have the right information when making decisions that affect the company’s cash balance. They also spend time working with external parties, like investment bankers and consultants, to consider potential acquisitions or new initiatives related to growth or cost savings.
As a new hire, the work is often numbers-related, but it is not “math” in the traditional sense of the word. A typical project might involve inputting data into an Excel spreadsheet, reformatting the data so that it is easy to understand trends, and linking the outputs to a PowerPoint. Your team might consider the impact of the hiring of 10 new sales associates, for example. You would estimate the cost to hire, train, and employ 10 people as well as the sales that the people would generate. Afterwards, your team would compare the results of this exercise to other projects and decide which is best for the company.
Corporate finance teams will generally recruit at university career fairs. All large businesses have a corporate finance division, so potential employers include just about everyone.
Investment bankers provide two main services to their clients: they help them raise money, and they help them buy and sell other companies.
If you wanted to take out a small loan to start a business, you could walk into a Chase bank, fill out a few forms, explain your business plan, and if all goes well, receive a loan. If a company like General Electric wanted to take out a $500 million loan, the process becomes a lot more complicated because no debt investor would want to lend GE $500 million—it’s simply too risky. GE might be able to find a debt investor to lend them a smaller amount, maybe $25 million; and, if they could find 20 of these debt investors, they could group all of the loans together for a total of $500 million. GE would hire an investment bank to connect them with lenders and manage this process.
Investment banks also help companies identify opportunities to transform their service offerings through acquisitions or divestitures. They meet regularly with clients and discuss industry trends and ways to capitalize on them. For example, an investment banker may suggest that a business acquire a foreign competitor to increase its presence in another continent. It would provide the business with valuation support, help conduct diligence, and ultimately advise them on how to proceed.
As a new hire, the work consists largely of creating PowerPoints, building and reformatting Excel models, and reading industry research. An example project might revolve around a meeting with a company like Subway. The analyst would research data on the fast food industry to learn about consumer preferences and trends in food prices. Perhaps the team would consider a scenario in which Subway acquires Potbelly to quickly incorporate higher-end sandwiches on its menu. The junior members of the team would build an Excel model to analyze the profitability of the combined business, and if the results were promising, they could include this possibility in their presentation.
Equity researchers are responsible for becoming experts on specific equities (stocks) and creating reports that investors can buy. It is important to note that the equity research team does not invest—they only provide advice for people who do. The equity research team will focus on a specific sector of stocks, like automotive, and study the companies and the industries diligently. They analyze macroeconomic trends (GDP, unemployment, monetary policy, etc.) and company events (introducing new products, releasing financial statements, hiring a new company executive, etc.) and project future financial performance. Because stock prices change every second, and news is always being released, equity researchers update their views often.
As a new hire, an equity researcher might be responsible for taking notes while reading the most updated version of an industry report or during discussions with company management about future growth opportunities. They may also read about global events and think critically about how an event will impact a company’s profitability and update a recommendation accordingly. Finally, equity researchers build financial models to predict future earnings and derive a “Buy,” “Sell,” or “Hold” recommendation.
Sales and Trading
Individuals who work in sales and trading provide liquidity services for their clients. In finance, something that can be bought or sold quickly is considered liquid. In the outside world, a candy bar would be considered liquid, and a home would be considered illiquid. Thus, the sales and trading team helps clients buy and sell stocks, bonds, currencies, and other investment products. Several decades ago, traders would meet on the floor of the New York Stock Exchange and discuss (or more likely, shout) prices at which they would be willing to buy or sell these products. Over time, it became less necessary to meet because traders could negotiate prices over the phone or the internet.
The sales and trading team spends the majority of the day on the phone with clients and with each other. For example, a salesman may call a client to discuss long-term goals for their investment portfolio and provide an investment recommendation that helps accomplish these goals. If the client wants to invest, the salesman will call his trading partner and ask that he purchase this investment on behalf of the client. The team will also study macroeconomic events to anticipate what its clients will want each day. If a new report announces massive growth in Germany, the sales team might recommend German investments to its clients.
Financial advisors provide advice regarding their clients’ financial positions. An advisor’s client can be people of all ages and income levels because almost anyone can benefit from this kind of service. You might have wondered about how to save for retirement or whether or not you should buy or lease a car; a financial advisor could help you choose the best option for your situation.
Out of undergrad, the work at an advisory firm is diverse because every client is different. Perhaps one client has just inherited a large sum of money and would like to invest it; another client asks you for advice on how to save for their child’s future education while also saving for retirement and having enough money to take a vacation in the next 6 months; a third client asks you to help create a budget so that student loans can be paid off in a timely fashion. Your work will involve building relationships with these customers and researching various investment products so that you can give your clients the best advice and keep them financially healthy.
What Comes Next?
If you are interested in any of the above careers, I recommend that you use the following resources to learn more:
- Mergers and Inquisitions: Started by a former investment banker, M&I is a website designed to teach students how to prepare for both interviews and internships and to ultimately help them earn full-time jobs on Wall Street. M&I is famous for its guide, “Breaking into Wall Street.”
- Wall Street Oasis: WSO is a finance community that’s goal is to provide an entertaining and useful environment that brings transparency to the financial services industry. Users include both students and professionals that share the same goal of helping each other develop career skills required to succeed in the industry
- Investopedia – A financial education website that offers content for investors, both beginners and experts. Investopedia is owned by IAC Publishing, whose other brands include The Daily Beast, About.com, and Dictionary.com