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Investment banking Investment bankers are often seen as the most glamorous people in the financial services industry as they play a key role in the business world. The financial rewards for those who are successful can be enormous. However, the hours needed and, at times, the pressures of the job can be equally large. The term investment banking’ covers a wide remit — covering mergers and acquisitions and corporate finance as well as dealing with private client portfolios. It is imperative that those working in this sector maintain awareness of portfolio management trends, stock market conditions and economic trends. The amount of responsibility they have over the portfolios will vary from total decision-making powers to a minimal amount — only being responsible for tailoring the funds to suit the client. Contact with the client will vary depending on the amount of active management required for the portfolio, but an investment review must be conducted at least every 6 months. Those involved in corporate finance will give advice to companies, institutions and government, which can have far-reaching effects. They will then help them to implement and, ultimately achieve the desired results. Many of those coming into investment banking are young and hungry to make their money — work hard and play hard. Debt capital Companies, governments or other institutions that need to raise money use the debt capital markets. The companies will issue bonds through investment houses. Purchasers of these bonds will receive an amount of interest for a set period of time — the life of the bond. When the bond expires at the end of this period, the purchaser will also get the their principal back. For the bonds issue to be a success, a great deal of financial analysis and promotion needs to go into it. If investors are not interested, the company will not be able to make its money and the underwriting bank who issued the bonds could be left with a substantial debt. As a result of the money-raising aspect, there will also be close cooperation with corporate financiers. Graduates looking to go into this sector will need to be high academic achievers, capable of processing large amounts of information in a short space of time. Competition is high, but the rewards can be substantial. Equity capital Equity capital is used by companies to raise money for particular projects or expansions, however instead of issuing bonds, equity capital money is raised by the issue of shares. Those who purchase shares receive money through dividends and the possibility that the shares will rise in value as the company prospers. These raise huge amounts of money and can dramatically affect the success of a business. There has been a downturn in the number of issues in recent years, but peaks and troughs are common. Recruiters for this area will be looking for team players and you will need to be resourceful, ambitious and committed. The hours can be long and socialising is often done within the group so it is very important that you get on with those you work with. Fund management Fund managers invest the money held by pension funds, insurance funds and other products such as ISAs (Individual Savings Accounts) and OEICs (Open Ended Investment Companies). They will buy and sell shares, bonds and other assets in order to increase their clients’ portfolios. In order for the clients to believe in their fund manager’s decision, the manager must have self-confidence and credibility. This is especially vital when the markets are going down and the portfolio may not be performing as well as hoped for. Fund managers can work in either the institutional or retail side. The latter deals with individuals who buy, for example, an ISA, whereas the former work on behalf of institutions — for example, investing company pension schemes. Obviously, institutional fund management involves a far greater amount of money and is therefore seen as the more prestigious area of fund management. Research analysts are also vital in the fund management arena. They look at companies, regions or industries in detail in order to enable financial forecasts and share valuations. Those who construct the portfolios will rely on this information and, depending on the risks the client wishes to take, will put together the portfolio as they see fit. The client will then meet with a manager to talk through the decisions and make sure they are happy with them. Graduates in this area will usually be accepted on to company training schemes. In this sector, the hours can still be fairly long, but the atmosphere is not as hectic or high pressured as some of the others. However, this may mean that remuneration is slightly less too. Private banking The image of the private banker is still perceived as being only for ‘old money’ who have been dealing with their bank for generations. Although these people certainly still exist, the number and variety of people using private banking services have greatly increased in recent years. Many are very wealthy individuals who will demand discretion and integrity from their banker and these attributes are vital if you are to succeed in this sector. You will also come into contact with wealthy individuals from outside the UK who will need advice on cross-border tax planning, exchange rate implications etc. There are many opportunities for graduates in this sector. The roles of client adviser and portfolio manager can combine with those of financial planning and dealing — especially when dealing for those clients who like more of a risk than simply leaving all their money in the bank. The most independent group are the relationship managers who bring in the new clients. They will have a team who researches possible opportunities and potential investments and will pass this information on to their manager. A mature attitude is certainly a must in this sector, but this doesn’t necessarily mean that you have to be older in years. You will also find that the clients will expect you to be at their beck and call so expect longer hours and, potentially, traveling opportunities. This sector is one where personality is important so it is not for the shrinking violet. Operations and finance management The operations and finance management area of the firm is the area which deals with the administration after a trade has been made. If these areas are not up to scratch, they have the potential to lose any money that may have been made on that trade. These areas make sure that, once a trade has been made, the money and relevant administration are secured to transfer the assets traded from the seller to the buyer. This sector has seen a boom in its use of technology. Assets that used to take several weeks to be cleared now take 3 days. This has been made necessary by the large increase in the number of trades taking place on a daily basis. However, much of the increase in technology can only be used on the simplest of trades, but many are now extremely complex, with many taking place across international borders. Outsourcing of operations is now becoming commonplace as firms demand more and more operations support. The increase in trade volumes, the complexity of the trades and the stringent regulations imposed on firms means that exciting opportunities can be found here, even if they may not be perceived as glamorous to some of the trading community. The hours in the operations arena are certainly more ‘normal’ than for many other areas. Graduates in this field will usually have a background in accounting, maths or business, but this is not essential as most employers will run training programmes. The most important qualities are attention to detail, numeracy and a methodical, organised approach to their work. Risk management Risk managers attempt to analyse and prevent an enormous variety of dangers that a financial firm might face, from repayment of a client’s loan to the state of the market at the current time. Risk managers will specialize in particular areas of the business, usually in one of five areas — credit risk (individuals or companies failing to meet their repayments), market risk (assessing the movements of the markets and the effect this will have), liquidity risk (a particular product or market’s buoyancy), legal risk and operational risk (risks associated with human error, systems failures or lack of internal controls). Over recent years, financial deals have become far more complex and, therefore, the risks associated with them have increased dramatically. In the modern financial world, the increase in international business deals has increased this still further. As a result, the need for risk management has soared. Recruiters in this field usually look for graduates with finance, maths, accountancy and statistics degrees. Many companies will recruit on to graduate rotation programmes and some will offer summer internships to students in their final year of university. These are a good entry point into the arena. Career prospects for those who are successful are good in this quickly growing environment. Compliance Compliance is one of the fastest-growing areas in financial services. It is the job of the compliance officer to ensure that the organisation they work for operates within the parameters set by the regulators. Since the Financial Services Authority gained their full powers in November 2001, these rules have become increasingly detailed, primarily to protect investors and stop the companies making mistakes with their clients’ money. It is not always an easy job for the compliance officer, because they are the ones who have to question their colleagues’ methods and enforce change when necessary. It is the compliance department that has to make sure that everyone within their company knows the rules and regulations and abides by them. This means a lot of liaison with the Human Resources department to ensure that all staff documentation and necessary training are kept up to date. They must also investigate any suspected breaches of regulations and provide any information to the regulator that is demanded. The compliance officer will also have to liaise with the marketing department to make sure all advertisements and literature from the firm follow the stringent regulations. Smaller firms will have one or two compliance officers who will look after all these functions. In larger firms, there will be compliance officers in charge of specific business areas. Hours of work in this area are much more regular 9 to 5, but you would also need to be available to deal with any emergencies. Good compliance officers are highly sought after — they must be approachable, but be able to maintain a distance between themselves and those they watch to avoid any potential conflicts of interest. Graduate compliance officers usually come from a legal, accounting or economics background, but this is certainly not compulsory. Markets and trading Traders deal with the day-to-day buying and selling of shares, bonds and other assets such as derivatives (futures and options). The job is a frantic one, even on quiet days — checking share prices on screen, on the phone talking to other dealers etc. They will buy and sell on behalf of clients and the company in order to maximise money or to minimise financial risk. Teams of researchers will feed the traders the information on the companies whose shares they are looking to trade and general market trends. They will then use this to make informed decisions as to whether to buy or sell. Although this research will give the traders a great deal of insight, their personal judgement and also an element of luck will play a part in whether the trader will win or lose money on each trade. Traders will try to predict how the markets will move and buy or sell accordingly. This is especially true in the case of derivatives where traders will try to predict the state of a particular market at a future date. However, sometimes there are unexpected regional or world events that can move markets within minutes. At these times, trading can become hectic and large sums of money can be made or lost in minutes. Graduates looking to go into the trading environment will need to have the utmost self-confidence, determination and the ability to think on their feet and make informed decisions quickly. |
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