Top 10 careers in finance

Finance -- the sector most battered by the global meltdown -- is making a comeback. News streaming in from top B-school campuses such as the IIMs talks of finance positions once again claiming their place in the sun. Financial heavyweights are flexing their muscles once again on Day Zero. Names currently doing the rounds are Morgan Stanley, JP Morgan Chase, Credit Suisse, UBS, HSBC, RBS, Barclays, Bank of America -- Merrill Lynch, Nomura and many more.

Although a lot of us may want to take advantage of this, a lot of questions may also arise in our mind.

What are the roles these financial companies offer? What is the meaning of all the perplexing finance positions in these companies? What does one do exactly? What is the skill set required? How much does one get paid?

Finance as a career option is a very wide term. In a survey by an education portal, it was pointed out that over 75 per cent students took finance purely because they felt that it paid the most. That shows one thing: mostly students and job-seekers find who opt for this specialisation do not know what they are getting into.

This is an attempt to simplify some of the financial career options students should look at when contemplating a career in finance.

1. Private equity: The role of private equity is to raise funds from large investors and invest the money directly into businesses. The usual manner is to raise money from overseas investors and then find businesses in the growth stage. Most private equity funds 'exit' the investment after a period of time by selling their holding in the business to some other investors or doing an initial public offering of the shares of the business.

The author is an MBA from NMIMS and an ex-investment banker. He is currently associated with Bengal Institute of Business Studies, Kolkata.

Investment banking comprises two major businesses. One is the advisory/ corporate finance role which entails mergers and acquisitions. This would entail understanding valuations, finding targets, negotiation and compliance with legal regulations. The second role is what is more popularly called equity capital markets role. This entails helping corporates raise funds from investors or the public. So it may entail working on IPOs or Institutional Offerings.

3. Fund Management: As a fund manager, one is an important decision-maker typically at a mutual fund. The fund manager has a good overall understanding of the macro factors which affect the markets as well as the micro factors about which company to invest in. He invests money in stock market, debt market, directly into companies, etc depending upon his fund mandate.

4. Equity Research & Sales: The role of equity research is to find out the correct value of the stock which is trading on the stock exchange doing various types of research namely fundamental and technical analysis. There are two types of ERs though. One is the sell-side research which belongs to a brokerage, the aim is to do research and sell investment ideas to investors so as to earn commission on trading by the investor. The second is buy-side research, which is a part of usually a buy side fund like a mutual fund. They analyse the research results of various brokerages in addition to their own research on investment ideas for the fund manager.

This role entails arranging for long-term finance for infrastructure and industrial projects which will take a long time to pay back. The first step is to understand the project, conduct a feasibility study, risk assessment and a detailed financial model. This is done with the purpose to rope in equity partners (known as sponsors) and lenders. Generally the lending part is done by multiple banks under leadership of the syndicate bank.

6. Financial Risk Management: Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plans to address them. Financial risk management can be qualitative and quantitative. As a specialisation of risk management, financial risk management focuses on when and how to hedge using financial instruments to manage costly exposures to risk. In the banking sector worldwide, the Basel Accords are generally adopted by internationally active banks for tracking, reporting and exposing operational, credit and market risks.

This role entails the entire plethora of banking services required by corporates. Corporate can be divided into largely two sections Large Corporates and MSME which is Medium and Small enterprises. A corporate banker would thus have companies as his clients and service them. Within corporate banking some of the departments are:

• Credit Borrowing to companies for their expansion and working capital requirements. Would entail doing a credit evaluation on the company and sanctioning the loan
• Treasury Help companies manage various types of risks such as foreign exchange, interest rate fluctuations. Treasuries also take proprietary positions to make profit in the 'forex' and bond markets.
• Cash Management Solutions: As most companies have a large number of customers, distributors or branch offices across the country it becomes a huge challenge to deal in money. Banks offer cash management solutions to help streamline this entire operation for its corporate customers.

8. Wealth Management: Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services. High net worth individuals, small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management.

Wealth managers can be independent, certified financial planners. One must already have accumulated a significant amount of wealth for wealth management strategies to be effective. Wealth management can be provided by banks, brokerages, independent financial advisers or multi-licensed portfolio managers whose services are designed to focus on high-net worth customers.

The fallout of the events of 2008 has produced a high level of skepticism and distrust among investors, and they will demand greater transparency from their providers to understand what they own, the value of their investments and associated risks.

Also known as consumer banking, it entails dealing with products / services for individual customers. So the scope encompasses getting business for products such as credit cards, savings accounts, personal loans and auto loans. Operational roles would entail teller, authorising, clearing, remittances and customer service.

10. Corporate Finance: A career in corporate finance means you would work for a company to help it find money to run the business, grow the business, make acquisitions, plan for its financial future and manage any cash on hand. You might work for a large multinational company or a smaller player with high growth prospects.

The job of the financial officer is to create value for a company. As a corporate finance professional one is typicall involved in four main activities to meet its objectives: 1) designing, implementing and monitoring financial policies, 2) planning and executing the financing programme, 3) managing cash resources, and 4) interfacing with the financial community and investors.

Jobs in corporate finance are also relatively stable. Performance in these jobs counts, but your job is not going to depend on whether you're selling enough this week or getting good deals finished this quarter. Rather the key to performing well in corporate finance is to work with a long view of what's going to make your company successful. Many would argue that corporate finance jobs are the most desirable in the entire field of finance. Some of the benefits of working in corporate finance are:

• You generally work in teams which help you work with people
• It's a lot of fun to tackle business problems that really matter
• You'll have many opportunities to travel and meet people and
• The pay in corporate finance is generally quite good

Thus, a budding financial wiz should look at understanding which area interests him/her the most and build skill sets which can help take the leap into financial sector.