The field of finance has undergone tremendous change since the deregulation of financial institutions in the early 1980s. A wave of acquisitions, mergers, and divestitures devised by financiers has had much impact on the identities of America's best-known corporations. Complex changes both within and between the various financial institutions have occurred. The nature of banking has changed as a variety of new financial products has been introduced into the marketplace. The line between commercial and investment banking has disintegrated as both types of institutions now offer similar products, including insurance, while insurance companies now sell securities. Huge financial conglomerates offering every type of financial service-including banking, brokerage, real estate, and insurance- are the way of the future because of the acquisitions and mergers currently taking place. Changes in the field of finance have many career implications for those entering the ranks.
According to the U.S. Bureau of Labor Statistics, financial services will grow faster than services as a whole. It is also up near the top with respect to income level. Financial products such as certificates of deposit (CDs), mutual funds, limited partnerships, bond funds, and variable annuities, as well as life and disability insurance, are especially attractive to middle- and upper-income-level professionals. From parents providing for their children's college expenses to the extremely wealthy, clients flock to estate and financial planners, who use sophisticated computer programs to analyze and evaluate financial alternatives. Baby boomers, forced to think about retirement, seek the help of financial planners.
This article will enable you to look at a wide variety of careers in finance. It includes such information as
- what financial specialists do?
- who employs them
- salaries and career paths
- latest trends
- job opportunities
- education and skills needed to pursue a career in finance
- sources of additional information on financial careers
Careers in finance are found in virtually every type of industry. Within the field are various categories and specific areas in which finance professionals may opt to work. Some broad areas are described below.
Banking
Operational efficiency, the emphasis in the past, has given way to selling the bank's services, which today are many and varied. Competition from other banks, brokerage firms, and insurance companies has posed new challenges for bankers. The securities industry now offers such products as cash management and ready asset accounts that compete directly with bank products. Banks in turn are able to underwrite commercial paper, municipal revenue bonds, and other securities.
Large banks hire new college graduates as bank trainees to work in specific areas including corporate finance (leveraged buyouts and mergers and acquisitions), sales and trading, retail banking, credit cards, mortgages, branch management, fee-based services, operations and systems, and audit. Trainees are rotated through product and industry specialties within these areas. Managers determine the best permanent place for each individual after completing the training program. Many college graduates "move to the line" after training, which is bank jargon meaning to become bank officers.
Loan officer
Customers applying for loans provide information on applications with the help of loan officers. These officers then analyze and verify this information and make recommendations on whether credit should be extended to the applicant. Generally, a loan officer specializes in commercial, consumer, or mortgage loans.
A commercial loan officer is responsible for deciding whether the bank will finance business or corporate ventures. These ventures include such things as the acquisition of another company, new product development, plant expansion, farm production, equipment leasing, short-term loans, and community improvements. Big banks lend to corporations and governments all over the world, including the U.S. government. Commercial loan officers usually further specialize, for example, in local companies or major corporations. The commercial loan officer faces continuous change in the economy, a fast pace and considerable risk taking. Influence and promotability in the bank are indicated by the size of the loan that the officer is authorized to make.
Working closely with the loan officer are the credit investigators and analysts who compile the financial data on loan applicants. The loan officer bases a decision of whether or not to lend the money on this information. Often an employee might begin as a credit investigator or analyst, and then move into a position as a commercial loan officer.
A consumer loan officer works with customers who apply for personal, auto-mobile, or home equity loans. Personal loans to consolidate bills, finance large purchases, or pay for a college education are processed by consumer loan officers. Collateral may be used to lower the interest rate on such loans and reduce the bank's risk. Explaining the terms of the loan and assisting applicants with the forms are part of the job. Financial counseling for clients who are inexperienced in loan matters is a responsibility of the loan officer.
Mortgage loan officers specialize in home loans. Banks offer a variety of mortgage products that must be explained to applicants. These officers help clients qualify for mortgage loans by reviewing applications and locating government programs that might help individuals procure loans. Normally, mortgage loan officers may take on as many clients as they can handle. Their work involves visiting clients at their homes and viewing their prospective purchases.
Consumer bank officer
Working with individual customers on a personal basis is becoming more important as consumer transactions become an increasingly larger chunk of the banking business. The consumer bank officer sells as many of the bank's services as possible to the customer-loans; asset, savings, and checking accounts; certificates of deposit; travelers' checks; and safe deposit boxes, to name the major ones.
Trust administrator
The trust administrator has a constructive and humanly rewarding position in the bank. Responsible for helping individuals and corporations manage their financial assets, the trust administrator is knowledgeable in how to use trust techniques to minimize the negative effects of inflation and taxes. Trust administrators may work with a number of different types of financial instruments and trusts, including living trusts, which enable people to better man-age their assets while they are alive; Individual Retirement Accounts (IRAS) to shelter income from taxes; various estate planning trusts to plan how their assets will be distributed among their heirs and/or charities after their death while minimizing taxes; life insurance trusts; corporate pension and profit-sharing funds; trusts holding politicians' assets during their period of government service; and property management for income-producing real estate.
International banking officer
Most large and medium-sized banks have accounts located throughout the world. The international banking officer is responsible for maintaining the balance of these accounts and determining the foreign exchange position. International banking sometimes involves figuring at what price currency can be purchased or sold by reading financial reports and money market quotations. An international banking officer may also sell foreign exchange drafts and determine what proceeds of the sale will go to the bank. Usually a person specializes, dealing with one or two currencies in one part of the world. Ours has become a global economy as trade barriers are relaxed throughout Europe and the rest of the world. World banking is now common, and international banking expertise will be in much demand in the future.
Bank manager
There are numerous levels of managers in big banks. In addition to management positions in all of the areas previously discussed, there are management positions in operations. The operations department is the largest in the bank, primarily comprised of clerical employees-tellers, bookkeepers, data entry and computer operators, customer service representatives, and others. A bank manager in the operations department supervises these employees and keeps the bank running smoothly on a day-to-day basis. In today's age of electronic banking, knowledge of computers, telecommunications, and other high-technology equipment is important for managing various facets of operations.
Managerial positions such as branch bank manager are open to bank officers with promise. After an executive training program providing experience in a variety of banking activities, an individual may be assigned to a branch bank as manager. The branch manager usually works under pleasant, fairly autonomous conditions, reporting only to upper-level executives of the main bank.
Responsibilities include supervision of branch employees, final decisions on loans, and ideas for new services, procedures, or security to improve the efficiency of the bank. To be effective, the branch manager must be aware of local business, economic, and social conditions.
Bank officers and managers may aspire to such executive levels as assistant vice-president, vice-president, or even bank president. Why not? Promotion from within and conservatism in general in banks suggest that career service pays off.
Opportunities with the Federal Reserve System
In addition to the positions found throughout the Federal Reserve Banks and their branches, the Federal Reserve System (the Fed) employs bank examiners who conduct semiannual, week-long on-site examinations, called internal audits, of the banks and their branches. Bank examiners travel 100 percent of their working time, with frequent paid trips home.
Operations analysts are also employed by the Fed. They travel 30 percent of the time and assure such operations as information systems and communications networks are functioning according to established procedures.
Consumer Credit
The rapidly growing career area of consumer credit deserves special attention.
Because it is the American way to buy on credit, now more than ever before, credit itself has become a field that is rich in job opportunities. Most forms of consumer credit fall into one of two types. The first type-non-installment credit--involves a bill that is paid in one payment. It includes single-payment cash loans, 30-day charge accounts, and such service credit as medical, telephone, and utilities.
The second type of credit--installment credit--involves bills that are paid in two or more installments. Most job opportunities in consumer credit are related to installment cash credit and installment sales credit. Consumer finance companies extend installment cash credit in the form of cash to consumers to be spent according to their needs. Sales finance companies offer installment sales credit to enable consumers to "buy on time" whatever merchandise or services they need, for example, an automobile or a membership in a health club. A special kind of credit, mortgage credit, is used to purchase a home. Consumer finance and sales finance companies compete with banks, savings and loan companies, department stores, and credit unions. Also, large corporations provide credit to consumers as an incentive to purchase their company's goods and services.
Positions in consumer credit are similar in most institutions. Consumer credit counselors interview customers to gather credit information, explain arrangements for making payments, and complete supporting papers. They work with customers to help them decide whether they can afford the credit they are seeking. The decision to extend credit is made by a credit officer. Individuals in the collections department monitor payments. The credit manager may be in charge of a credit department of a store, of a credit union, of the loan department of a savings and loan, of the consumer loan department of a bank, or of a specialized area in consumer finance or a sales finance company.
Consumer credit, then, is a specialized area of finance careers offering many opportunities for employment and advancement. The field of consumer credit, like all careers in finance, is becoming more sophisticated and complex. For example, students interested in consumer credit today will enroll in such new courses as computer applications to credit, financial decision making, managerial psychology, international credit and finance, and modern marketing strategy keyed to financial and manufacturing policy.
Three professional designations are sponsored by the National Association of Credit Management (NACM). The Credit Business Associate (CBA) is an academic designation indicating mastery over basic financial accounting, credit and collection principles, and introductory financial analysis. The Credit Business Fellow (CBF) designation indicates that a credit professional has both received the CBA and has completed additional coursework. The highest professional designation, the Certified Credit Executive (CCE), indicates that the achiever is able to manage the credit function at an executive level.
Corporate Finance Chief financial officer
The top position in corporate finance is the chief financial officer (CFO), usually titled vice president of finance. This executive is in line for the position of chief executive officer (CEO) of the company. In fact, the largest percentage of the CEOS of major corporations today have risen through the finance or accounting ranks. Responsibilities include participation with other key executives in developing company policy and implementation of financial policy within the organization.
Promotion to this position used to be from within the organization and based on length of service and dedication to the company. This is no longer always true. More companies are hiring professional managers with strong credentials and experience in finance who, rather than moving up in a single corporate hierarchy, have moved laterally from one position of financial management to another, even across industries.
Treasurer and controller
The key elements of effective financial management are those performed by or supervised by the chief financial officer, the treasurer, and the controller. The treasurer has two major responsibilities-the acquisition of funds and the administration and protection of funds. The controller manages accounting and other financial information systems, conducts financial planning and performance evaluation, and complies with the requirements of the Internal Revenue Service and other regulatory agencies.
The controller and treasurer may have educational backgrounds in either accounting or finance. Entry-level employees work in either the controller's or treasure's domain, depending on their background and interest. An individual with a master of business administration degree (M.B.A.) might be hired as a financial analyst. This position was established primarily to speed the entry into a line position in a large corporation. Responsibilities include the analysis of overall financial operations, policies, or problems of the company and the preparation of reports making specific recommendations to management.
Pension fund manager
Another opportunity for employment within most large corporations is in the position of pension fund manager. The responsibilities of this position depend on how the fund is managed. The balanced fund manager treats the fund as a total portfolio that is actively managed by the corporation itself. The trend today, however, is away from this and toward dividing the fund among professional money managers, who are usually industry specialists working tor money management firms. This reduces the extent of responsibility and status of the pension fund manager, who may find the job to be potentially a dead end.
Positions in financial public relations
An area in corporate finance in demand is financial public relations. Responsibilities associated with a position in financial public relations include financial publicity, stockholder correspondence, stockholder surveys, preparation of annual financial reports or quarterly earnings statements, and financial and educational advertising. Financial public relations personnel may also be involved in planning annual stockholders' meetings and working with security analysts.
Securities
Approximately 8,000 security firms of all sizes meet the financial and investment needs of organizations and individuals today. The securities industry is involved in the buying and selling of stocks, bonds, government issues, shares in mutual funds, or other types of financial instruments. The four basic functional areas are sales, trading, underwriting, and research. Sales and trading personnel must meet state licensing requirements, which normally require passing an examination and sometimes posting a personal bond. The National Association of Securities Dealers (NASD) administers the General Securities Registered Representative Examination required of beginners wishing to become a registered sales representative. In addition to passing the exam, applicants must be employees of a registered firm for at least four months. A second examination, the Uniform Securities Agents State Law Examination, is required by most states as well.
Sales
Both individual investors and organizations with millions to invest work through securities sales representatives, also called registered representatives or stockbrokers. These securities sales representatives provide numerous services to their customers, including financial counseling; advice on the purchase or sale of a particular security; development of a financial portfolio including securities, life insurance, and other investments according to the needs of the individual customer; the latest stock and bond quotations on any security that interests the investor; information on activities and the financial positions of companies; and sale of securities for a commission. Securities sales representatives may specialize by customer--for example, small individual investors, large institutional investors, or pension fund managers--and by the type of security--for example, stocks, corporate bonds, municipal bonds, federal government or agency bonds and notes, stock options, commodity futures, mutual funds, or annuities.
Financial planners
Financial planners work for themselves, alone or in groups. New investment opportunities and confusing tax laws make financial planning an area in great demand today. Financial planners provide services to individuals or to such organizations as banks, corporations, brokerage houses, insurance companies, and savings and loan associations. They are also called money managers or investment counselors. Clients may be provided with a complete money management strategy-that is, a workable budget, adequate insurance, an investment program, a will, and an estate plan or trust. Financial planners may specialize by industry rather than providing a wide range of services. In this case, they would sell a client on investing a sizable portion of available investment funds in a particular industry. Financial planners may work for large or small financial services firms, banks, insurance companies, or they may be self-employed.
The designation Certified Financial Planner (CFP) is becoming an industry standard. To achieve this title, one must have completed six specified courses, per-formed successfully on six exams over a two-year period, worked a minimum of three years in financial planning, signed an ethics statement, and passed a back-ground check.
Trading
Traders do not deal with investors. Rather, they work for an investment firm. Floor brokers spend their entire working day on the trading floor at the New York or American Stock Exchanges filling their own investment firm's buy-and-sell orders or developing an inventory of particular securities. Traders may also trade securities with other firms. They specialize by type of security, as do security sales representatives.
Traders who deal in commodity futures spend their days at the Chicago Board of Trade buying and selling such things as mortgages and soybeans for a given price at a future time, as much as eighteen months into the future. Traders must have a high level of expertise and be able to make quick judgments.
Research
Securities research and analysis is crucial to the sales, trading, and underwriting of securities. Securities analysts provide investment advice for sales reps, brokerage firms, institutions, agencies, and the investment community in general. Most analysts specialize by industry in summarizing statistical data, describing short-term and long-term trends in investment risks, and defining measurable economic influences on various investments.
Two specialty areas other than specialization by industry are money market analysis and technical analysis. Money market analysts closely watch the activities of the Federal Reserve System and collect information on the money supply both in the United States and abroad. Technical analysts work with computers to gain timely information for quick trading.
Other opportunities in the securities industry
The National Association of Securities Dealers (NASD) is the nonprofit trade organization for the securities industry. Its members function on the floors of exchanges and participate in corporate and public finance. NASD retains a paid staff, with additional volunteers from the brokerage community, who enforce the rules of conduct for the securities industry by examining firms once every three years; by reviewing the backgrounds of the registered representatives; by observing, reporting, and analyzing excessive price changes in securities; and by taking disciplinary action when professional standards are not adhered to strictly. Paid employees of NASD include accountants, lawyers, investigators, and financial analysts.
Also investigating the securities industry is the Securities and Exchange Commission (SEC) of the federal government. Opportunities with the SEC range from investigator trainee through senior investigator. The senior investigator trains the entry-level worker, who performs such tasks as examining books and records of registered reps, traders, and investment counselors for possible violations of federal securities laws. The SEC monitors all stock offerings to the public to be sure that corporations and investment bankers are providing full and accurate information to potential investors.
International Finance Opportunities for work in international finance occur in a number of areas. Through investment banking firms that specialize in international operations, a foreign enterprise or government can issue securities to be sold in the United States or can raise capital in other countries. Some American financial institutions are exclusively international in scope, raising capital only for U.S. firms with overseas operations, or are involved in financing the many multinational corporations. Many graduate programs offer specialization in international finance or international affairs and numerous banks, corporations, and government agencies provide training in this area. Corporations, banks, and other financial organizations pay premium salaries to M.B.A.s who have specialized in international finance.
Financial Journalism Financial journalism is still another area in which researchers and analysts who are trained in finance, economics, and statistics find jobs. Financial journalists write for such statistical publications as Standard & Poor's and Dun & Bradstteet or for news publications such as The Wall Street Journal, Forbes, or Business Week. Financial journalism is perhaps the only area of financial careers that has a very tight job market. Because of limited opportunities, those who seek positions as financial journalists must plan a very aggressive job search and often accept a position with a very low entry salary. However, once a journalist is established, salary becomes comparable to those in the securities industry in general. A person seeking to enter this field should have not only a good background in finance and business, but also strong writing and communication skills. Computer experience helps as well.
Investment Banking
An industry that has grown in importance over years of mergers, acquisitions, and divestitures is investment banking. Financial officers in all types of organizations use investment banking firms in a number of ways. Investment bankers assist companies in creating stock, bond, and other types of security offerings to be sold to the public. Essentially, the investment banker underwrites or finances the sale of a corporation's securities to the public by purchasing the securities then selling them on the open market. In recent years, the role has expanded to include structuring joint ventures as well as providing assistance in lease financing, interest rate and currency hedging, and acquisition advising. Investment bankers also may create new financial instruments. Areas of specialization within investment banking include corporate finance, mergers and acquisitions, real estate, and sales and trading.
Because of the enormous amount of capital involved, this is one of the riskiest, most challenging, exciting areas of finance. If the stock sells, handsome profits can be made. If it doesn't, the investment banker suffers loss of prestige as well as money. Only top-level professionals are employed as investment bankers, and success is crucial to maintaining their status.
Current Trends
Both financial and banking fields will be characterized by intense competition as banks, financial service firms, and insurance companies vie for the same customers. The financial field is expected to undergo continued changes. The entire financial arena is shifting from national to global markets. Improved communications and deregulation of barriers provide access to these markets. Multinational corporations contend with shifting dollar values. Large brokerage firms are participating in foreign exchanges in London, Tokyo, and Sydney. The need now is to have financial analysts who are fluent in foreign languages and understand foreign customs, cultures, and politics.
New Technologies
New technologies permit rapid exchanges of dollars and information. The development of electronic funds transfer and expanded network systems require financial officers with technical backgrounds. The need for more financial information is creating new information services and blending financial and publishing industries, such as the joint venture between Citibank and McGraw-Hill.
Diversified Products
Financial firms have diversified with new products, multiple types of accounts, and investment services. The financial field will experience greater job mobility and growing complexity, especially in the role of financial planner. Millions of baby boomers provide an expanding customer base in a bull market. Bank mergers and acquisitions are likely to continue along with diversification of offerings. It is likely with loosening restrictions on bank offerings that they will enter the areas of mutual fund offerings, annuities, securities underwriting, and numerous other fee-based areas that heretofore have been the domain of financial services. Banks are reorganizing their services, identifying niche markets, and tapping into the new technologies to implement more cost-effective operations. These changes are necessary to compete with financial services firms and insurance companies that are offering products that were exclusively offered by banks in the past.
These are but a few of the trends in the ever-changing finance and banking communities.
