“The prices today are around 500 dollars per megalitres or per million litres,” says the CEO of Waterfind—an Australian water trading firm. I was astonished; I had heard that the markets trade natural resources and commodities but didn’t think that could even include water. How far the financial markets have come!
Elon Musk tweets once and the markets swing wildly; logic, theories, experiences, all go out the window. A band of wild west underdogs of the subreddit WallStreetBets drives the price of GameStop from $10 to $400 in a matter of days, in the process, inflicting huge losses on established hedge funds. A piece of digital art, easily replicable, sells for more than works of some of the most revered artists from eras bygone. Finance is really a strange thing, you would be led to believe.
Peel through this social-media-fuelled noise and you can see a field that influences every facet of your daily life. It is an influencer in every aspect: right from the everyday, mundane decisions that we make with little to no thought—such as the amount of water to use for bathing, or the cloth to wear on a particular day—to the most complicated policy decisions the governments make. It defines the fabric of the society as we are, and have been from ages, and it is the catalyst for all good, and indeed evil, in this world.
The earliest recorded financial transactions were made in Mesopotamia; but the barter system has been there since time immemorial. With the invention of money—coins first and paper later—the process streamlined and trade between the different parts of the world flourished. Rulers began conquering, colonizing, and exploiting places, near and far, to increase their financial might. Empires came and went but the goal remained the same. Political systems, such as democracies and authoritarianism, are fundamentally based on the differences of their financial systems.
This key sector, thus, attracts top talent from business schools and pays handsomely for the efforts that it demands. That’s why perhaps you are here, reading this article.
Is a Career in Finance the Right Option for Me?
To answer this question, let’s look at a few things that a career in finance demands:
Love for Numbers: Whichever field of finance you choose, working with numbers is inevitable; some may need higher degree of number-crunching than others. The ability to quickly grasp the sense of data represented and to represent data in a meaningful format is sought after. By extension, the use of Microsoft Excel may become your bread and butter.
Finance Background: Prior knowledge of finance subjects, either as part of your curriculum (B.Com, BBA, etc.), certifications that you have pursued (CA, CFA), or your work experience, definitely renders you credible and provides you an edge. Even if you don’t have any background, appearing for the CFA exam provides an edge over others.
Financial Analysis and Modelling Skills: Financial Statement Analysis and Financial Modelling Skills form the backbone of most of the coveted jobs in the industry. You would be dealing with this day in and day out, especially at the earlier stages of your career. Hence, developing these skills is a must.
Educational Background: As you have sown so shall you reap. If you have a solid foundation with exceptional performance throughout your educational journey and supplement that with top-notch results in business schools, the finance companies would be clamoring to hire you.
Long Hours: You may be aware of the recent Goldman Sachs Investment Banking Division Analyst survey wherein responders indicated that they have been overworked and have suffered mental and physical issues in the process. While this is an extreme case, this field demands extended working hours and high-quality results.
Self-Motivated and Driven: As you would be working in an extremely competitive environment within small teams with highly productive competitors, you would be expected to match them. This would require you to be self-motivated and have a one-track mind towards achieving your goals.
Art of Selling: In the end, everything boils down to your capability to sell—both yourself and the deals that you are trying to make. This skill is as important as the technical skills, because, in the end, you have to impress upon key stakeholders your importance and the benefits of the deal you are making.
What are the Career Options in Finance after Business School?
You own a business selling “Tom and Jerry” toys. You want to expand your footprint and include “Lion King” toys in your collection for which you need to raise capital. That is precisely the moment when you would turn to an investment bank for guidance. The investment bank will provide you with two options to raise money—either through an Initial Public Offering (IPO) or by issuing bonds.
You choose the IPO route. A few years later, you see an up-and-coming toy maker selling “Hakuna Matata” toys and you want to make that a part of your line-up. The investment bank will then facilitate your acquisition.
You always want to know how the markets view your company. You read equity research reports about how well your company is performing, with a wide smile. You give your corporate finance team a big fat bonus for managing your cash flows and risks adequately.
You realise after a few more years that you no longer want to keep the company public. You have a high-performing business and the benefits of de-listing it outweigh the cons. But, you would now need capital from a different source to invest money in your business. Private equity funds would come to the rescue. They have war-chests from high net worth individuals and firms who want to invest their money in private companies to derive maximum returns. They would provide you the capital and help take your company private in return for a stake in your company. Everyone wins!
While you have been busy in the toy industry, you realized that there is a great scope in the stand-up comedy scene and you want a part of the action. You launch a start-up, “Laughing Buddha,” which is a comedy club in a prominent part of your city.
The club is doing great and now you wish to expand your footprint further. You need capital. Venture capital funds, sensing your impending success, fund your start-up for a piece of the pie.
After many such rounds, you cash out and your comedy club chain is acquired by a larger competitor. You now have a lot of money lying around while you need to take care of your toy business. Wealth Management groups happily employ your capital in appropriate financial instruments for a small commission.
As you can see, the financial services industry has evolved to cater to all the needs of the clients.
That’s Good, but Can You go a Bit More into Each Role?
Sure, let’s dive head-first into specific characteristics of few roles that are offered at the campus:
Investment Banking Associates: “Sell side” roles are offered by top investment banks such as JPMorgan Chase, Citigroup, Credit Suisse, Bank of America Merrill Lynch, Goldman Sachs, Avendus, Ambit, O2Capital, etc. They recruit candidates to an entry-level position in the investment banking team. The on-campus role primarily entails undertaking research and creating reports in a particular domain or on a specific company to create pitch-books. These pitch-books are like brochures, which investment banks send to their potential clients to gain their business.
Technically, you need to be strong with DCF Valuations, Financial Statement Analysis, and Financial Modelling. Once the deal is won, you are expected to work with the team that helps the client achieve their objectives.
Bulge bracket (leading investment banking) firms offer two roles—front office and middle office; front office deals directly with clients while middle office supports the front office in various functions.
Private Equity Analyst: Private equities are one of the “buy side” roles that are offered on campus along with venture capitals and, very rarely, hedge funds.
Private Equity Analyst roles are entry-level roles which require the candidates to:
evaluate prospective acquisition targets through the lens of their financial prowess, strategic direction, and future prospects,
carry out execution of a particular deal,
assess the information shared by sell-side bankers,
identify potential acquisition targets, and
track performance of existing portfolio companies.
While the roles offered across campuses are quite limited, a few recruiters, such as Blackstone RE, Temasek, Accel, Kalaari, SAIF, Matrix, Multiples, Arga Investments, Brookfield, etc., hire analysts straight out of the campus.
Here, again, the technical skills you would need include Financial Statement Analysis, Financial Modelling including LBO Modelling and DCF valuation.
Investment Analyst/Associate (Venture Capitals): Another of the “buy side” roles. This also sees some roles from firms, such as Sequoia Capital, Accel Partners, Bessemer Venture Funds, Eight Roads, KOIS Invest, Omidyar Network, etc. The role of an Investment Analyst or Associate in a venture capital requires one to primarily focus on:
identifying new investment opportunities in early-stage start-ups,
reaching out to potential start-ups to invest after shortlisting a few, and
conducting thorough due-diligence of prospective acquisition targets through the lens of their financial prowess, strategic direction, and future prospects.
Apart from this, one might be required to manage portfolio companies, participate in raising funds for the venture capital, and network to identify opportunities. Technical skills required here are working knowledge of Start-up Valuation Methods, Financial Statement Analysis, and Financial Modelling.
Equity Research Analyst: Equity Research Analyst roles are offered by mutual funds and asset management companies, both global and Indian. These include Goldman Sachs, Credit Suisse, JPMorgan Chase, Morningstar, Ambit, JM Financial, etc. The role of an Equity Research Analyst entails the following:
undertaking primary and secondary research on specific sectors or specific securities using levers of financial performance, macroeconomic and microeconomic factors, quality of management, etc.,
creating financial models to predict future performance and analyze past performance of the companies studied,
attending investor calls with the management of firms covered and asking insightful questions, and
creating equity research reports and prescribing a buy, sell, or hold recommendation for the scrip.
The role requires you to have top-notch Financial Modelling, Financial Statement Analysis skills, and a working knowledge of the financial markets.
Wealth Management Associate: Wealth management roles are increasingly being offered in various campuses around the country as the country’s rich need professionals to manage their wealth. Avendus, Kotak Mahindra Bank, Edelweiss, YES Bank, etc., are some of the firms that offer this role. This role requires you to:
create sales-pitch for wealthy individuals (HNIs) detailing the offering,
analyze various investment avenues including primary markets, secondary markets, VC, PE, alternative investment funds, etc., and
manage client relationships and client investments in various funds, companies, etc.
This role demands that you be a strong communicator with relationship-building skills and have Financial Modelling and Financial Statement Analysis skills along with the knowledge of traditional and alternative investment sources.
Capital Markets (Analyst): Capital Markets roles are offered by firms that either have their proprietary trading desks or manage client’s investments. Barclays, JPMorgan Chase, Citigroup, etc., offer such roles to top candidates. There are two types of profiles:
Trading: In this role, the analyst trades in various financial instruments, such as equity, derivatives, currency, fixed income, and sometimes cryptocurrency.
Sales: This role entails selling investment products, market ideas, and trading opportunities to high-net-worth individuals and institutions
This would require an aspirant to have working knowledge of capital markets and the various financial products offered and traded, keep abreast of the current affairs of the world, and have relationship-building skills.
Corporate Finance: There are many types of corporate finance roles offered at MBA schools: Project Finance, Treasury, Financial Planning and Analysis, among others. Some of the key features of these roles are:
Project Finance: This role is associated with capital intensive projects that are high-risk, high-reward and are kept separate from a company’s books by creating Special Purpose Vehicles (SPVs). The role requires forecasting cash flows throughout project life-cycle, performing cost-benefit analysis to determine if project’s projected returns are acceptable given the risk, determining financing structure and mix, and obtaining funding.
Treasury: Treasury teams deal with cash management operations of the firm. They have to ensure that the business has money to fund their day-to-day functioning all the while also secure funding for the future needs. The role has many facets: managing cash, working capital needs, investments, foreign exchange, regulations and risks and raising funds.
Financial Planning and Analysis: FP&A roles deal with budgeting for the firm’s current and future financial needs, forecasting the firm’s future needs, and analyzing the variance between the planned and budgeted income and expenses. The role needs collaboration between various arms of the organization: from operations to accounting.
Apart from these roles, some other roles, such as Mergers and Acquisitions, Accounting, etc., are also offered at campuses. Major Recruiters include Reliance, Swiggy, Zomato, Johnson and Johnson, ITC, P&G, Hindustan Unilever, etc.
Apart from the jobs mentioned, there are some jobs offered in Quants/Strats, Corporate Banking, Financial Consulting, Transactions Advisory, and Risk Management.
You may have observed from the plethora of roles that the financial system today has evolved into a living organism with complex characteristics. Money acts as its blood, reaching every part of the body; central banks are its hearts—pumping the money to each nook and cranny of the body; financial markets are its lungs—providing the oxygen it needs to keep working; and retail banks are the veins—borrowing and lending money. Other financial institutions play key roles in the functioning. While the opportunities are limited, the competition is fierce; hence, every small edge gained matters.
Nitin Chandak is a graduate from the Indian Institute of Management Calcutta, where he majored in Finance. He has been a consistent academic performer throughout. Post completion of his MBA, he has worked as an analytics consultant for three years. Prior to his MBA, he worked with Backspace (as Breakspace was then known) where he was instrumental in strengthening the Communications and Education Consulting divisions. Nitin is an ardent Manchester United fan and a chocoholic. He wishes to travel the world.