Saturday, September 29, 2007

Jobs Investment Banking - 2

1. CFA Career Prospects in Investment Banking


Interview with Bob Johnson, a managing director at the CFA Institute, the organization behind the Chartered Financial Analyst (CFA) Charter, the world’s most gargantuan financial services qualification.

Over 100,000 sit the three levels of the qualification annually, in locations as far afield as Dublin and Shanghai. Johnson promotes the Charter as a great way of kick starting a financial services career. -

Q: Who should be thinking of taking a CFA? Is it only relevant to fund managers and equities analysts?

A: It’s for anyone working in the investment management industry, broadly defined. As well as fund analysts and money managers, our candidates include people working in investment banks as corporate financiers and equities analysts. We also find plenty of people in the corporate finance functions of major corporations studying for the charter.

Q: What are the advantages to having the qualification?

A: Being a charter holder demonstrates a high standard of professionalism and integrity. Some organizations require their employees to have the charter, and will curtail employment without it. Over time, it also makes a difference to earnings. – Our recent survey of 16,000 members of the CFA Institute showed people who have the charter typically earn 54% more than those who don’t ($180,000 vs. $116,000).

Q: Will having a CFA help me to land a job?

A: Money management is a tough business and is an especially tough business to break into. It’s good to have as many arrows in your quiver as possible, and in this kind of environment the CFA charter can increase your options. It’s a signal to people that you have mastered a comprehensive and rigorous curriculum and that you also have high ethical standards. Another advantage is the kinship CFA charter holders feel with one another – as more and more CFA charter holders assume positions of responsibility in organizations they’re more likely to give a job to a fellow CFA charter holder than someone without.

Q: Can someone who’s not currently working in financial services use the qualification as a route in?

A: Sure. We don’t actually award the charter in full until you have accrued four years’ relevant work experience. But you can study for all three levels of the charter in your own time, and then apply for a job on the basis that you’re committed to the industry and have passed the exams. Out of 7,000 people who passed level three last year, around 1,000 were so-called ‘charter pendings’ of this type. Many of these were likely accountants who want to move into money management.

Q: How long does it take to get the charter?

A: It typically takes four years, and the median candidate fails once. As a CFA charter holder I studied 300 hours a year for over three years. The minimum time it takes to earn the charter is 2 years.

Q: At 34%, the pass rate for Level One is very low. - Why?

A: Our surveys suggest that candidates simply aren’t putting in the amount of study time necessary to be successful on the examinations. In addition, people increasingly have an entitlement mentality. They think that by paying for their tuition they should get a qualification, even if they don’t put the effort in. That’s not what we’re about. What we find when we look at successful and unsuccessful candidates is that successful candidates study diligently; unsuccessful ones don’t.

Q: There have been complaints that the criteria for passing the CFA exams are unclear. – What’s the minimum passing score?

A: It varies each year – we can’t set exams that are exactly the same level difficulty and the passing score changes to take account of this. Our board of governors (who are also CFA charter holders) sets the minimum passing score using several inputs. One of the inputs is a standard setting process whereby approximately 30 standard setters from all over the world judge how hard the paper is and advise on a fair minimum level of achievement.

Q: So the pass rate isn’t relative – you don’t aim to have at least 35% of candidates passing each year, for example?

No. Our board of governors sets the hurdle score and how ever many candidates meet or exceed that score determines the pass rate.

Q: Which is best: CFA or MBA?

A: The MBA and the CFA are complementary educational programs. If one wants to work in the investment management business, broadly defined, I would say the CFA charter. It’s fundamentally different to an MBA. The CFA is based upon what practitioners say is necessary to do their job well. One measure of the CFA’s success is that business schools like Boston University, Concordia University and the University of Reading are increasingly incorporating elements of our curriculum into their courses. Another is the fact that our survey showed CFA holders with 10 years experience out-earn MBAs by 18%.

Q: Where are the next big growth areas for the CFA?

A: India and China. Five years ago we had 400 candidates in China and 381 in India. This year we expect to have 10,000 in China and 3500 in India. I would add that the pass rates in China at Level I are among the highest in the world – candidates there have a huge incentive to do well – being a charter holder can make a huge difference in terms of pay and ultimately standard of living.

We thought we’d check the marketability of the CFA with recruiters before sending would-be asset managers and bankers off to start studying level one. They roughly agreed with Johnson .-

Connie Thanasoulis in campus recruiting at Merrill Lynch in the US said it’s ‘absolutely’ worth completing one or all the CFA exams if you’re trying to break into the asset management profession: “It’s your card to come and talk to us,” she says, “It proves you’re serious about wanting to work in asset management.”

Marianne Montgomery, a consultant at the Sandton Group, a London asset management recruiter, said the CFA designation would put job seekers a rung above people who don’t have it, but wouldn’t be sufficient to enable a career shift: “It’s useful to have, but won’t guarantee a job,” she said, “You’ll also need client relations, marketing and sales skills.”

Paul Ferrari, a consultant at London asset management recruiter Shepherd Little, was less positive: “I’ve never seen a fund manager hire a CFA with no industry experience,” he said. “An accountant with a CFA might be able to move into a fundamental research role, but it would be very unusual.”

Using a CFA as a launch pad for a career in corporate finance or sell-side equity research is likely to be harder still. – “A CFA won’t open the same doors in investment banking”, cautions Thanasoulis at Merrill.

Don’t expect a CFA to open doors into investment banking careers. “The MBA is still the preferred route for most people,” says the head of recruiting at a US bank in London. “We have a programme for recruiting MBAs, but there’s no official route in for CFAs,” he adds.

2. Merrill Lynch is identifying the best recruits as early as freshman year.


Last fall an intense competition swept a half-dozen U.S. college campuses. Four-person teams of undergraduate business majors battled to generate the biggest returns -- using “fantasy funds,” not real money. It was all part of a “portfolio challenge” game designed by Merrill Lynch Inc. to help identify young talent for analyst jobs. Winners pocketed $9,000 in cash prizes and other giveaways. More important, the finalists nabbed a coveted place at the top of Merrill's callback list.

Such games might seem unusual to anyone who graduated from college more than a few years ago. But in the increasingly competitive war for fresh talent, a small group of companies including Merrill, PricewaterhouseCoopers, L'Oreal, and others is changing the rules. A growing economy and the need to ramp up hiring quickly and cheaply have spurred recruiters to bypass MBA programs and hire the bulk of their new people straight out of college.

At Merrill Lynch, undergraduate recruiting has increased 20% to 25% annually in three years, and the company is devising innovative ways to build up the pipeline. The firm expects to hire about 300 undergraduates in the U.S. this school year alone, according to WetFeet Inc., a San Francisco research outfit. By identifying the best undergraduates early, managers can see if they're a good fit and make offers long before rivals do. At Merrill, three out of four summer interns will receive full-time offers, a practice that benefits prospective employees. “Having an internship lets you hit the ground running,” says Anne Osmun, a Harvard University grad who joined Merrill's investment banking unit in July.

It's an increasingly common strategy. In 2004-05, according to BusinessWeek's survey of corporate recruiters, 28% of new entry-level hires were former interns, up from 26% the year before, and one out of four reported that at least half of all new hires came from the intern pool. What sets Merrill apart is its willingness to hire younger interns, including freshmen. Says Elton Ndoma-Ogar, head of diversity campus recruiting: “We're trying to build relationships earlier and turn these young people into professionals.”

Fast Start

To that end, the company is reaching out to prospects via alumni networks and school clubs. It's also beefing up its Web presence and marketing with details about the company and employee benefits.

When making offers, Merrill uses an approach tailored to Generation Y: It mails benefits enrollment packages to new hires and their parents in hopes the materials will prompt a discussion about the company's benefits and ultimately lead to a deal. New hires get up to two years of training. And most go to work as analysts from day one. “They're not making copies and delivering mail,” says Connie Thanasoulis-Cerrachio, director for U.S. campus recruiting. “They're rolling up their sleeves and making deals.”

Merrill's approach is the exception today, but it might not be for long, especially if the economy remains strong and demand for talent grows. That puts career-minded undergrads in a coveted position: the driver's seat.


Here's how Merrill Lynch tries to attract the best
undergraduate students:

Merrill puts an emphasis on recruiting interns and
makes the best full-time offers. To thwart rivals,
it offers internships to students as early
as their freshman year.

Some prospects are reached through alumni networks,
campus visits, and marketing efforts that highlight
the company's diversity and employee benefits.

Merrill tries to sell the parents on the company,
too -- by mailing them the benefits enrollment
package, for example.

New hires get up to two years of training. Most
go to work immediately as analysts, not glorified


Lobster And Cristal For The Intern


Not all interns are created equal. While many toil away in corporate mail rooms for little or no compensation, some finance majors on Wall Street will earn up to $15,000 this summer. February marks the height of undergraduate recruiting for firms such as Goldman Sachs and Merrill Lynch, and a few lucky candidates are getting a decadent taste of what's to come. After multiple interviews at top schools, finalists are flown to headquarters to mix and mingle with senior managers. The selling involves more than just pizza and bowling. "They're getting wined and dined in New York, staying at the finest hotels, and eating $400 dinners," says Steven Rothberg, president of "It's absurd, but it works."

There's a reason for Wall Street's open-wallet policy. With undergraduates making up 75% of new hires at Merrill, relationship-building is paramount. "If they're not with us, they're with our competitors," says Connie Thanasoulis, Merrill's chief operating officer for campus recruiting. Most companies won't discuss specifics, but Merrill recruiters say they cover all candidates' expenses, including travel, lodging, meals, and sometimes even those of a "significant other." Dude, is it too late to change majors?


4. INVESTMENT BANKING A job that's bang on the money

Sep 2005

The good news for graduates interested in the fast-paced world of banking and investment is that the market is buoyant in 2005. According to the Association of Graduate Recruiters, graduate vacancies in investment banking are up by 15.7 per cent on last year.

Helen Bostock, global head of campus marketing at JPMorgan.

Her advice for UK graduates is to really seriously consider whether they can match the skills of their european counterparts, as well as getting their applications in early. 'The window of opportunity is relatively small. Leaving applications until our deadline of November is risky, so I'd suggest graduates get out on campus and think about their options as early as possible.

She adds that graduates who are not yet in their final year should apply for an internship. 'They are still a key differentiator in the recruitment process,' she says. 'We would look for people who have had one with us or with another investment bank.'

You'd be hard pushed to find an employer in this sector who disagrees " all say that getting involved at an early stage is a vital part of a career strategy. Calum Forrest, European head of recruitment at Goldman Sachs, says if you've done a summer internship at the bank you'd like to work at, even better.

'We don't rely solely on people who have done internships with us. There is always room for others. But it is clearly useful to see someone in action for 10 weeks. Typically, we get more than half of our graduate intake through the internship programme,' he says.

If you're successful " and the assessment process can be almost as tough as for a real job " an internship allows you to discover whether your skills and expectations fit the role and organisation you have focused on. What's more, it will give you the chance to develop important relationships with people who may be in a position to help you obtain a full-time position later on. That's why it's crucial to make the right impression.

Internships are also important because the culture of each employer is different. Forrest explains, 'At Goldman Sachs, we are relatively consensus driven and wouldn't be described as a 'star culture' " where there is more emphasis on the individual being held up in the limelight for their success rather than the whole team.'

The banking and investment business is about making money work as hard as possible. It is borrowed and invested in a huge range of ways, with the financial markets open 24 hours a day, straddling different time zones worldwide. So it should come as no surprise that employers work their graduates hard " probably more so than in any other industry, although you will be rewarded both financially and through the sheer excitement of the work.

The assessment process is no easy ride either. Mr Forrest explains how it works at Goldman Sachs. 'Because all the firm's divisions share common goals in terms of skill sets " including, for example, communication skills and analytical capability " the first- round interview is essentially a company-wide screening process, lasting 40 minutes.'

If you're applying for an analyst role, rather than an associate role, you will have already sat a 40-minute test, which examines your verbal reasoning capability, he adds. 'We hire from so many education systems that it gives us a helping hand with our overall decision, although we don't use the score as an end in itself. So, if I interview someone who appears weak in their analytical skills, the test might reinforce that or it may persuade me otherwise.'

Assuming the interview goes well, the candidate is invited back to see up to two divisions, such as fixed income, currency and commodities or investment banking. Here, you'll go through perhaps half a dozen interviews, with one or two people at a time, and the focus is more on the particular division, so you'll need to show more specific attributes, such as a passion for financial markets or deal-making.

Christine Bangor-Jones, graduate recruitment and training manager at RBC Capital Markets, adds that creativity, logic and interpersonal skills are also key attributes in this sector.

Like most employers, she says, 'We don't really mind what degree people have, although we do look for a minimum of a 2.1. Whether it's philosophy or engineering, what we are more interested in is agile intellect, strong numerical and analytical skills, an awareness of global economic issues and a genuine interest in the financial market.'

Early responsibility is a critical element of any graduate role in banking and investment, and RBC Capital Markets is no exception. 'Our 17-week graduate programme provides an opportunity to rotate around the key capital market areas " such as foreign exchange, treasury management and debt finance. Together with the classroom based learning and e-learning that support this on-the-job training, graduates get the chance not only to learn fast, but to progress quickly as a result,' she says.

Ms Bangor-Jones points out that academic capability is not the only thing people should strive towards at university. 'We are looking for well-rounded individuals,' she explains. 'It's important to be able to demonstrate skills like leadership through extra- curricular activities.'

Mark Blythe, managing director of GTI, the specialist graduate publishers, confirms, 'It's no longer enough to assume that because you've got good A-levels, and you are cruising through a good degree, that you've got your entry ticket. More and more graduates are doing well, so employers are expecting a lot more from their applications.'

Research, research, research is his advice. 'If you don't, you can bet the next candidate in line will know all the big deals the employer has done and the stock share prices. This is a sector where graduates need to fully understand what the business they are applying to is trying to achieve and the context within which they work.'

If you are lucky enough to get in, Grover warns that the hours are long. 'I generally start at 9am and finish anywhere between 9pm and 3am. But no day is ever the same, with each providing new challenges,' she says.

From Wall Street, New Haven to Wall Street, NY
Students are drawn to careers in finance year after year. But why?

October 2004

very year, 1,200 of the world's best and brightest students arrive at Yale as freshmen, expecting to spend the next four years of their lives immersed in critical scholarship. They are talented individuals with wide-ranging interests, but when the senior year job rush sets in, many students make career choices that have little to do with their program of study. Four years ago, more than one-fifth of Yale seniors went into investment banking; still today, 13 percent follow in their footsteps. What is it within Yale's career culture that drives students from the wide-open world of academia to the corporate haven of Wall Street?

"I didn't consider banking until last summer," said Howard Han, SM '05, who, after a summer internship, is now considering a full-time position. "I had no idea what i-banking was."
Although investment banking advertisements litter the dining halls and recruiters flock to Yale in the first months of class, Han's experiences are no anomaly. "Everyone I know who is not a junior or senior econ major has misconceptions of what i-banking is," said economics major Boris Volodarsky, TC '05.

Indeed, while many students are drawn to i-banking by visions of wealth and high-stakes, split-second decision-making, the reality of finance professions often diverges greatly from student expectations.

"[Real] investment banking is very much about helping companies raise capital through either debt or equity offerings, and helping them position themselves strategically to improve profitability often through mergers and acquisitions," explained Matt Schlenker BK '05, vice-president of the Yale Investment Club.

The other divisions of an investment bank engage in varied activities that include selling stocks and bonds, underwriting, and managing assets, but "i-banking" is the catch-all term used colloquially by students to describe the career path.

Although many students may not understand the specifics of investment banking, they are very aware of the occupation's bottom line benefits. A Yale freshman was asked last week whether or not he wanted to pursue "i-banking". At first, he paused and said, "What is that? Internet banking?" But as soon as the word "investment" was uttered, he exclaimed "Oh yeah! I want to do that." When asked why, he shrugged his shoulders and said, "because of the money."

While the salaries do tend to be high— estimates the average wage of a financial analyst working in New York City to be over $70,000 a year—hours also tend to be long, sometimes reaching over 100 a week. The high-energy lifestyle isn't for everyone, but many are willing to make the sacrifice.

"It's true that our industry has a reputation for offering attractive compensation," said Jonathan Jones, senior recruiter at Goldman Sachs, "but that alone will not sustain your career here."

A first-year corporate finance analyst typically spends a 12-hour day running financial models on Excel and preparing pitch books to lure in prospective clients. The work is not very exciting and the level of stress is high, and yet, from at Yale, many students still apply.

"There is a lot of mystique surrounding Wall Street and what happens there," Schlenker said. Much of the phenomenon can be attributed to the aggressive recruiting efforts of competing investment banks. Each year, students are bombarded with a flurry of business career activity, including on-campus visits from high-powered i-banks. These events bring senior executives, usually alumni, to Yale to make presentations and hold open bar receptions before interviews start.

Goldman Sachs finds it easy to recruit on campus because it knows it can find a deep and diverse pool of talent at Yale. "Geographically, it's easy for us to travel to, and more importantly, we have a deep bench of Yale alumni now working here who are passionate about recruiting. It isn't difficult to persuade them to go back and visit the campus," Jones said.

"The fact is that Yale is one of a fairly select group of schools we consider top-tier," said Jones, citing Yalies' high level of academic curiosity and intelligence.

"The banks are focused on getting what they think is best, and their perception is that the level of the product they get from us, [the Ivies, and schools such as MIT and NYU], is higher," said Director of Career Services Philip Jones.

Yale students may be considered highly qualified, but often, the qualifications recruiters look for aren't found on a diploma. Jonathan Jones denied preference for any particular major in applicants, emphasizing that the liberal arts education that Yale offers is not a detriment.

"I don't think that Yale students are less prepared for investment banking because of their education," he said. "Whenever we hire we look at strengths in different areas such as intellect, maturity, teamwork, leadership, depth of interest in our industry and the ability to think creatively in solving problems."

"The learning curve here at Goldman Sachs is so steep and the depth of knowledge one needs to acquire is so great that we want people who have the ability to learn, and not necessarily those who have an intimate knowledge of how to do the job already," he added.

Given recruiters' open-minded attitudes on academics, even those not majoring in economics or math are often swept into the i-banking fray.

"I chose history [as my major] because I have always found it fascinating, but I knew going into it that I had no intention of becoming a teacher," Nick Campbell, PC '05, said. "I had [banking] internships my freshmen and sophomore year trying to expose myself to the business world, and it has helped me realize even more that this is the correct career path for me."

Katherine Reaves SM '05, a political science major, also had no prior knowledge of finance—in fact, she had no desire to work in the finance industry before she interned with Ariel Capital Management Inc. based in Chicago. Still, she felt the need to expose herself to the business world anyway. "I decided that having experience in the finance sector would make me a more complete applicant no matter what I decided to do," she said.

Over the past two years, Goldman Sachs has hired over 30 Yale students for full-time and summer analyst positions. The firm hires many more than that number from the Wharton School of Business in the University of Pennsylvania, but Jonathan Jones is quick to point out that Wharton stands out because of the high level of interest so many students there exhibit towards the industry, not because students there are any better than the ones at Yale. "After Wharton, there is really no correlation [between liberal arts and pre-professional schools] anymore," he said.

At Yale, Economics DUS Patrick Bayer admits that there is a high demand for finance-related classes but claims that designing a Wharton-style program runs contrary to Yale's academic aims.

"Rather than specializing, we want to keep students taking a wider set of courses. That's part of what a Yale education is all about," he said, adding that "I think it's a mistake if people think that [taking a large number of finance courses] is the only way to get [an i-banking] job." He believes that the benefit of taking a lot of finance classes to a prospective i-banker is marginal, at most.

Jones said that recruiting college graduates with no job experience can actually be beneficial to the firms like Goldman Sachs. "They bring a great deal of energy, drive and ambition, intellectual curiosity and capability, along with fresh ideas and newer perspectives," he said. "If we only targeted students from one type of academic background, we would not have the diversity of perspective knowledge and skill-set needed to generate the degree of innovation and creativity we need to be successful."

Despite recruiters' acceptance of students of all academic backgrounds, i-banking is not for everyone. Philip Jones speculates that a perceived need to "justify" a Yale education with an i-banking job may lead some students astray. "Yale students sometimes limit themselves to jobs that they think and appropriate for a Yale degree, when what is really appropriate for them is what they passionately want to do," he said.

Sometimes, uninformed choices can lead to the wrong decisions. "I wanted to be an i-banker because, one, it guarantees me a job when I graduate; two, I went to the information session of Morgan Stanley and the way people talked, dressed and behaved impressed me," Yuan Ren, BK '07, said.

After doing an internship last summer at Deutsche Bank in Beijing though, Ren lost interest. "The internship was great. It's just that it was too busy [for me to be able to lead] a normal life and I want to enjoy life more," he said. "Most importantly, though, I've realized that i-banking is not the only way to get rich fast."

"Some of the best things about our job are that it's demanding, challenging, fast-paced and you're surrounded by bright, motivated people who really want to help you," Jones noted. "But if you're not truly excited about your work, these things can be as much of a negative as they are a positive."

There is no denying the pervasiveness of the i-banking trend at Yale. However, students with other career goals have felt that other jobs are not being given as much attention as financial positions are.

"I just think that [UCS] is not really equipped to help out those of us who aren't going the i-banking or consulting route," Natalie Spicyn PC '05, said. "My own and my friends' UCS appointments have often resulted in being told to check out their website. The UCS job website is not helpful to me. For example when I search the word 'museum,' I get one hit—for a part-time job - while 'finance' yields 169 results."

Philip Jones noted that the semester structure unevenly distributes finance careers in the first months of class. "The world doesn't run according to academic years. The variety will come in the second semester," he said. "We don't make it easier or harder for anyone [to recruit at Yale]. Frankly, I'd like to see a lot more diversity [of job offerings], but [i-banking recruitment at colleges] is a national feature, not just a Yale one."

Jones also says that given how i-bank recruiting is structured, "it lends itself very nicely to working with us." But UCS, Jones points out, does offer direct approaches to smaller organizations through programs such as Metrolink, where prospective job applicants interested in diverse fields such as law, publishing, think tanks, government, and fashion are brought to New York and Washington D.C. for a series of interview days.

"Every year, 160 organizations come to campus to recruit. There are 2 million small businesses in the US. We missed a few. You just limit yourself if you feel that you have to pick from the 160 organizations," Jones said. "The vast majority of students get jobs through networking and direct applications to organizations whether they're advertising or not."

Despite all of the enthusiasm about i-banking jobs at the moment, it seems in the new economic climate, the i-banking trend has shown signs of slowing. Since the late '90s, the Office of Institutional Research at Yale has found fewer students pursuing financial positions after graduation. In fact, a survey of the Class of 2002 one year after graduation found that more students became teachers (15 percent) than investment bankers. Yalies are still waiting to see a corresponding shift in the type of recruiters UCS brings to campus.

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