Sunrise Finance Breakfast PrimerConsortium for Graduate Study in Management Orientation Program 2008

Presenter

• Patty Phillips• Executive Director, Career Management Center –

Simon Graduate School of Business

Finance Industry Overview

• Investment Banking • Sales & Trading• Equity/Fixed Income Research• Investment Management• Commercial Banking• Corporate Finance

The Securities Industry

InvestmentBanking

Issuing Securities= Primary Market

THE SECONDARY MARKET

Sales &Trading

Equity /Fixed Income

Research

Investment/Private WealthManagement

RatingAgencies

InstitutionalInvestor

Corporate Finance / Commercial Banking

InvestmentBanking

Money fromIssuing Securities in Primary Market

CommercialBank

CompanyA

Needs $

CorporateFinance

Division1

Division3

Division2

Loan

Investment Banks: MBA career paths

Investment Bank

Investment Banking

Private Client Services (PCS)/

Private Wealth Management (PWM)

Sales & Trading Research

“Wall Between”

Coverage Groups Product Groups Distribution

Underwriting

Support secondary market liquidity

Client

The Securities Industry

• Investment Banking • Sales & Trading• Equity/Fixed Income Research• Investment Management

Investment Banking: Overview

• Deal primarily with raising capital, corporate mergers and acquisitions

• Typically offer the following services to companies, institutions, and individuals:

• Capital raising

• Advisory (Mergers and Acquisitions)

• Merchant banking

Investment Banking

• Investment Banking - process of raising money for corporate clients and public institutions in the form of equity, debt, convertible, or other derivative securities through either a public issue or private placement.

• Mergers and Acquisitions - the process of acting as an advisor to a company that is in transactions involving the purchase or sale of a whole company, a division, or certain assets.

Investment Banking

• Merchant Banking - the process where the investment bank acts as a principal in a transaction, either by buying or selling a stake in an M&A transaction or by purchasing newly issued securities of a firm.

• Advisory/Financial Consulting. This area is linked to all of the  above. Advisory and consulting includes capital structure analysis, comparable analysis, industry research, and various forms of fairness opinions.

Investment Banking requires the following qualities:  

1. Analytical skills and detail orientation

2. Strong work ethic and a willingness to work long hours (and weekends)

3. Comfort working with numbers and computers

4. Client management skills

5. Strong leadership and teamwork skills

Investment Banking

Investment Banking: Key players

Sales & Trading

• The bank’s distribution arm.

• Responsible for selling and making a market of all financial products developed by the investment banking department and on the secondary market.

• On an institutional level,  customers include pension, mutual, and hedge funds, insurance companies, and high-net-worth individuals.

• If you are analytical and have strong people skills, sales is for you. If you live for non-stop action and can handle multiple tasks at once without leaving the seat of your chair, trading is for you.

Sales & Trading

Sales positions require:

Sales professionals develop strong relationships with institutional investors (buy side) and serve as quarterback for the firm’s bankers and Research Analysts for their institutional clients.

• Client management skills• Ability to “close” a deal• Someone who is driven to achieve• Someone with good product/industry/economy

knowledge

Sales & Trading

Trading positions require the following qualities:

Traders take positions and make markets in stocks the firm may cover. They not only advise salespeople, clients, and research analysts on individual stocks and market activity, but they also manage the firm’s risk vs. the market.

• Quantitatively adept• Ability to make quick decisions• Someone who likes a “daily report card”

Research (Buy Side/Sell Side)

• Research incorporates quantitative research, market strategy research, economic research, and individual company research.

• Sell-side research is typically divided by economic sector or industry.  The analyst is normally charged with knowing a small group of stocks intimately.

• Sell-side analysts normally work closely with buy-side analysts and portfolio managers, as well as the investment banking and sales & trading departments.

Research

Research positions (buy-side and sell-side) require:

• Strong analytical skills and financial modeling skills

• Strong writing and presentation skills

• Strong economic and industry understanding

• Confidence in your analysis

Private Client Services / Private Wealth Management / Private Banking

• The bank’s investment management division for high-net-worth individuals.

• Investment Management Representatives are typically generalists and offer all the services of the firm (equities, fixed income, derivatives, private equity, asset management) to high-net-worth clients.

• The Investment Management  function is more client-service oriented than either research or Asset management.  The job requires frequent social interaction in order to establish a book of business. 

• Those who choose Investment Management may work independently, but often they join a small group with an already-established clientele.

• If you are entrepreneurial and enjoy working with sophisticated high-net-worth investors, then Investment Management is for you. If you do not like sales, entertaining, and making "cold" calls, then you should look elsewhere.

Investment Management: Overview

• Customer of sell side. Assets are provided by individuals (through mutual funds) or institutions (through large separate accounts).

• Their focus is buying and selling securities based on the fund or portfolio’s objective and investment style, and they are rarely involved in raising capital for portfolios.

• Portfolio management jobs are in high demand. Managers of investment accounts are called Portfolio Managers. Nearly all portfolio managers begin as a buy-side or sell-side research analyst.  In many cases, the role of a buy-side analyst and a portfolio manager is indistinguishable.

• Investment positions require these qualities:

• Strong analytical skills and financial modeling skills• Strong writing and presentation skills• Strong economic and industry understanding• Client management skills

Private Client Services / Private Wealth Management / Investment Management

Investment Management: Key players

Finance Overview

Investment Banking Sales & TradingEquity/Fixed Income ResearchInvestment Management• Commercial Banking• Corporate Finance

Commercial Banking: Overview

• An institution which accepts deposits, makes business loans, and offers related services.

• Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit.

Commercial Banking: Overview

• While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.

-investorwords.com

• Positions available in various areas:

• Credit analyst Mortgage banker

• Loan officer

• Branch manager

• Trust officer

Commercial Banking: Overview

Commercial Banking positions require:

• Quantitative and Credit Analysis skills• Broad business understanding and people skills• Sales and marketing skills – ability to “cross-sell”• Ability to work cross-departmentally • Accounting and writing skills• Strong work ethic• Curiosity

Commercial Banking: Key players

Finance Industry Overview

Investment Banking Sales & TradingEquity/Fixed Income ResearchInvestment ManagementCommercial Banking• Corporate Finance

Corporate Finance: Overview

• Financial function within a corporation (e.g., Corporate, Group or Division). Most positions require frequent interaction with other functional areas such as marketing and operations.

• Reports up to the Chief Financial Officer

Corporate Finance: Overview

• Positions available in various areas:  

• Treasury

• Financial Planning & Accounting

• Strategic Planning

• Corporate Development Finance

• Product Development Finance

• Tax

Corporate Finance: Overview

Corporate Finance positions require:

• Strong analytical skills• Ability to work cross-departmentally and to motivate

those who do not necessarily report to you.• The ability to provide financial insight into business

decisions and develop pro-forma income statements, balance sheets and cash flow statements

Corporate Finance: Overview

Corporate Finance positions require:

• Strong verbal and written communication skills, as well as excellent organization and multi-tasking skills

• Proficiency in spreadsheet, database, word processing and presentation applications software

• An understanding of financial concepts, such as Net Present Value, Return on Investment and Discounted Cash flow

Corporate Finance: Key players

ALL COMPANIES

Finance Industry Summary

Investment Banking Sales & TradingEquity/Fixed Income ResearchInvestment ManagementCommercial BankingCorporate Finance

Finance Industry Summary

ALL Finance positions require:

• Strong analytical skills

• Ability to work cross-departmentally and to motivate those who do not necessarily report to you.

• Strong verbal and written communication skills, as well as excellent organization and multitasking skills

• Proficiency in spreadsheet, database, word processing and presentation applications software

• Cash flow projections

What questions do you have?

Additional resources

Web sites:

• Hoovers www.hoovers.com

• Yahoo! Finance finance.yahoo.com/

• Vault.com www.vault.com

• WetFeet.com www.wetfeet.com

Periodicals: Books:

The Deal Barbarians at the Gate

The Wall Street Journal Liar’s Poker

Business Week Monkey Business

The Financial Times The Big Deal