1. Industry Overview
The Banking & Financial Services industry serves an important role in the global economy. By facilitating the movement of money from people or organizations with surplus capital to people or organizations wanting capital, financial intermediaries help power innovation and growth, creating jobs, building infrastructure and funding new ideas. Individuals tend to borrow more early in life (to pay for college and buy homes, for example) but invest more later in life (to build wealth and save for retirement). Financial intermediaries offer a service to help an individuals or firm to save or borrow money.
Company types: What do they do? Who do they do it for? And why do they do it
Retail banks - provide transaction services and facilitate the lending of money to individuals via credit cards, loans and mortgages. Commercial banks do the same for companies.
Corporate investment bankers – provide a range of financial services to companies, institutions and governments. They manage corporate, strategic and financial opportunities, including mergers, acquisitions, bonds and shares, lending, privatizations, initial public offerings (IPOs). Corporate investment bankers also advise and lead management buyouts, raise capital, provide strategic advice to clients, and identify and secure new deals.
Financial traders - buy and sell shares, bonds and assets for investors, including individuals and banks. They make prices and execute trades, seeking to maximize assets or minimize financial risk.
Investment banks - a bank that purchases large holdings of newly issued shares and resells them to investors.
Banks earn revenue on the difference between the rate of interest they pay to lenders and they charge to borrowers. If you have $1000 in your current account you will likely earn close to 0.1% in interest. If, however, you were to take out a $1000 loan you will likely be charged close to 10% in interest. The interest you pay is governed predominantly by your creditworthiness; the likelihood attached to your ability to repay your loans.
2. The Job Market
Market outlook: Who's hiring?
Students looking for finance positions commonly receive multiple offers so employers and hiring managers are increasingly having to be prepared to do more to capture exceptional talent, including focusing on candidate engagement and meeting and occasionally exceeding competitor offers.
The need for succession planning is taking on an urgent status in finance with baby boomers leaving on a regular basis. Senior-level openings often create other vacancies and shifts in the workforce as people advance, having a ripple effect throughout an organization. Strong succession planning and solid recruiting practices that are proactive instead of reactive include offering phased retirement options that keep valuable knowledge and experience through a transitional period and focusing on all levels when retirement vacancies loom large.
The banking and financial services job market has enjoyed a resurgence since the recession and many firms are looking to build out and upgrade staff. As the industry gears itself towards digital and mobile banking, graduates with technical skills are becoming increasingly sought-after.
Roles, career paths, earnings and work-life balance: What can I do?
Roles will vary across the various banking and finance sectors and departments but typical tasks may include:
- Researching market conditions and developments
- Financial modelling, developing and presenting appropriate financial solutions to clients
- Liaising with the Chief Executive and Chief Finance Officers of large organizations to discuss business plans and financial positions
- Working closely with other teams of professionals, including accountants, lawyers and PR consultants
- Information gathering and executing trades
Salaries can range from $55k - $100k+ depending on position, experience and specific company. The US National Average industry salary is $85K
A typical career path may look like so:
- Analyst Associate
- Senior Associate
- Associate VP
- Senior VP
- Associate Director
Work/life balance: 1/5
There’s no hiding it, work/life balance in the banking and financial services can be tough, but it improves dramatically once you’ve earned your spurs, which usually takes a few years.
Academic, hard and soft skills: What do I need?
Although required skills vary across the banking and financial services industry, you will need to demonstrate:
- Proven strong numerical and analytical skills
- Excellent team work and team leadership skills
- Communication and interpersonal skills
- Project and time management
- Dedication, energy and commitment
- Self-confidence and ability to make difficult decisions
- The ability to work under pressure and to cope well with stressful situations
3. Industry Knowledge: Things you should know
Terminology: What terms, phrases and concepts should I know?
Buy side - advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, hedge funds, and pension funds are the most common types of buy side entities.
Sell side - individuals and firms that work to create and service stock products that will be made available to the buy side of the financial industry.
Equities - a stock or any other security representing an ownership interest.
Bonds - debt investment in which an investor loans money to an entity (typically corporate or governmental) that borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
Currency - money in any form when in actual use or circulation as a medium of exchange, especially circulating banknotes and coins.
Derivatives - contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and often called the "underlying". Derivatives can be used for a number of purposes, including insuring against price movements (hedging), increasing exposure to price movements for speculation or getting access to otherwise hard-to-trade assets or markets. Common derivatives include forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default swaps.
Long - the buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.
Short - sell (stocks or other securities or commodities) in advance of acquiring them, with the aim of making a profit when the price falls.
Active - ongoing buying and selling actions by the investor, highly involved, investors purchase investments and continuously monitor their activity in order to exploit profitable conditions, typically seeking short-term profits.
Passive - limited ongoing buying and selling actions, long-term appreciation and limited maintenance, requires good initial research, patience and a well-diversified portfolio.
Mutual Fund - investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets; operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investor; give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities.
Hedge fund - mutual funds for the super-rich, with more flexibility in investment strategies and riskier.
Hot topics: What topical happenings should I be able to discuss?
Payments transformation: This year will be an evolutionary year as growth in contactless payments contributes to banks' role in the payments network while cutting further into interchange revenue and brand recognition. Banks will be keen to look for new ways to be the number one choice for a new generation of spenders and differentiate the customer experience.
Cyber security: To improve cyber security in 2016, banks will be forced to devote greater resources to enhancing the security, vigilance, and resilience of their cyber security model and will consider adopting new methods, such as attracting specialized talent, and increasing collaboration with other members of the digital ecosystem.
Emergence of a new breed of banks: More and more ‘challenger banks’ are entering the competitive fray, willing to fill the gap in digital expectations of an increasingly mobile consumer. These banks are picking up the white space left behind post-financial crisis and are beginning to drive incremental innovation in the wider market.
4. Resume & Interview Preparation: Things you should do
Resume content: How can I make my skills, experiences and interests count?
Joining banking and finance based clubs is an excellent way of showing that you are passionate about your chosen industry. Think about joining banking, real estate, economics and trading clubs, writing for the business section of your student newspaper and taking part in stock market leagues.
Sharing content and engaging in relevant debate on social media is not only a good way to keep up to date with industry happenings but also another avenue to publicly show that you are serious about your passions.
Having an online banking portfolio can also be a good way to impress hiring managers. Check out sites like Wall St. Survivor to begin your virtual banking career.
Interview preparation: What interview questions do I need to master?
- What interests you most about a career in the banking and financial services?
- Which industry or product teams interest you and why?
- Provide an example of a situation where you had to manage multiple competing deadlines? Were the deadlines met?
- What have you learned from your studies that can be applied to a career in the banking and financial services industry?
- What do you think you will be doing during your first year in this industry?
- What types of financial models will you build and what purpose will they serve?
- Explain our business model.
- Name a live investment banking deal that interests you or that the interviewing bank is involved in. What are the main issues at stake?
Must read blogs and websites:
Snarketing: Celebrating all that is good in the world of design, from packaging and typography to signage and business cards.
ACTION Financial Marketing Insights: - A daily dose of inspirational illustration.
Banking.com: Full of news, reviews, features, portfolios and guides to keep you up to date with digital artistry.
Bank Innovation: Regularly updated collection of artwork from across a variety of creative sectors. Endless motivation.
The Finanser: The oldest and most widely-circulated art magazine in the world, Art News has been a leading source of industry updates since 1902.
The Big Short (2015): Four outsiders in the world of high-finance predict the credit and housing bubble collapse of the mid-2000s, and decide to take on the big banks for their greed and lack of foresight. An interesting take on an event that rocked the world.
Margin Call (2011): The story takes place over 36 hours at a large investment bank at the beginning of the 2007/08 financial crisis. A junior analyst discovers that the banks holdings in worthless mortgage backed securities will soon bankrupt the bank, leading to all traders at the firm to knowingly sell worthless investments to clients. Thought provoking and eerily similar to the situation that occurred with Goldman Sachs in 2007.
Wall Street (1987): A look at the ugly side of banking and finance. A young stockbroker is willing to do anything to get to the top, including trading using illegal inside information.