Financial services cover a broad range of graduate careers and positions. Broadly speaking, in the financial services industry you have: Commercial banks and building societies - dealing with transmission of money, loans, mortgages, pensions, insurance, foreign currency, trade finance, stocks and shares and a wide range of other investment and lending services.
- Supermarkets, airlines, large motor car companies etc. - retail financial products such as mortgages, pensions, tax efficient savings accounts, ordinary savings and current accounts. - Investment banks - dealing with corporate finance and engineering such as mergers, acquisitions and take-overs; capital market activity such as bonds and equities (shares); stock market analysis; fund and portfolio management, derivatives including foreign exchange hedging Insurance companies. - Insurance and re-insurance - providing financial protection against risk for the cost of a premium. - Independent financial advisers - helping people plan for their financial future. - Broking firms - buying and selling stocks and shares. - Unit and investment trust companies - financial organisations concerned with earning money for their investors through techniques such as portfolio management
The term the 'City' is often used as a shorthand description for the financial services sector. London is still the main financial hub, but many other cities, such as Birmingham, Edinburgh, Leeds and Manchester also have booming financial centres. One of the advantages of the UK over other countries with financial markets is its geographical position. This place is between the time zones of the world's other leading financial centres - New York and Tokyo - and overlaps them both with its opening hours. The City comprises a mixture of institutions, providing services from insurance to arranging funding of major government infrastructure.
London is the largest foreign exchange centre in the world. It is used by governments and companies to offset financial risks, pure speculation or because they have a need for certain currency (such as import/export companies). Currency markets react quickly to political and economic events with hundreds of trades being completed by each trader every day. It can certainly get hectic, especially if, for example, a sudden world situation causes the foreign exchange markets to fluctuate wildly.
'Custody' is the term used for the keeping of records of shares and other assets by the bank, on behalf of their owners. As business has become more international, 'global custody' has developed to give the range of services for cross border investments. These services include performance measurement, cash management, reporting orders to the appropriate parties and proxy voting on behalf of the clients.
Investment banking is often seen as the most glamorous area of the financial services industry as it plays a key role in the business world. The term 'investment banking' spans a wide remit - covering mergers, acquisitions and corporate finance, as well as dealing with the portfolios of the very wealthy.
The banking and finance sectors offer some of the highest basic salaries and coupled with potentially very high bonuses, this makes them a career of choice for many graduates looking for jobs with big rewards. However this is also matched with historically long working hours and stressful working conditions. With a high vulnerability to market conditions it can make job security in this area low. Commercial banking, i.e. retail banking, the second main sector in banking tends to offer a more secure route into finance. Although the rewards are not as high as investment banking, many firms in this area have established and respected training programmes that lead to recognised industry qualifications and a structured career path where the financial rewards are good.
Many graduates choose to join a graduate training scheme that gives experience in different areas of banking and allows them to make a choice at the end of the scheme as to where they are best suited. For those graduates who do not secure a place on one of the various graduate programmes, there are still various attractive options.
In investment banking graduates will generally start as analysts carrying out the analysis that supports the origination and execution of transactions, or as assistants to a senior manager or maybe even in a research position where some firms offer training for industry recognised qualifications. After a period of time you will start to move into positions where you will make financial decisions on behalf of your firm or clients of your firms. This is when the rewards can be potentially very high but the learning curve can be steep and you will be expected to meet and work closely with clients and travel abroad in connection with your deals. Promotion tends to be on a meritocratic basis, so there is scope for salaries to rise dramatically, with the top individuals earning six figure salaries within three to four years. Some areas, such as stockbroking and corporate finance, are notorious for the potential to earn big money, as a large proportion of the salary is based on commission and there is no restriction on pay figures.
M&A (Mergers and Acquisitions) is a major part of investment banking. Specialists in this area advise companies on which companies make good take over prospects and, on the other side advise potential targets on the best ways not to get taken over. This advice can range from simple strategic suggestions to detailed advice on how much to bid, how to raise the amount to bid and launching any counter bid.
As a graduate, you would be involved in the financial analysis, looking at the company's profits, strengths and other key factors. You will also increasingly be involved in face-to-face meetings with clients, including chief executives and entrepreneurs from a wide range of companies.
Governments or other institutions that need to raise money will use the debt capital markets. The companies will issue bonds through investment houses. Purchasers of these bonds will receive an amount of interest for a set period of time - the life of a bond. When the bond expires at the end of this period, the purchaser will also get their principal back. For the bonds issue to be a success, a great deal of financial analysis and promotion needs to go into it. Graduates who work in this success are capable of processing large amounts of information in a short space of time.
As with the debt capital markets, equity capital is used by companies to raise money for particular projects or expansions. However instead of issuing bonds where the purchasers are guaranteed an income and the principal back at the end of a set period, equity capital money is raised by the issue of shares.
Fund managers invest the money held by pension funds, insurance funds and others. They will buy and sell shares, bonds and other assets in order to increase the value of their clients' portfolios. In order for the clients to believe in their fund manager's decision, the manager must have a great deal of self confidence and credibility. This is especially vital when the markets are going down and the portfolio may not be performing as well as hoped for. Fund managers can work in the institutional, the private client or the retail side.
Operations and finance management is the area which deals with the administration after a trade has been made. They are increasingly recognised by management as key to a firm's profitability and central to its risk management, and are fast growing in importance. They make sure that once a trade has been made, the money and relevant administration are secured to transfer the assets traded from the seller to the buyer. This sector has seen a boom in its use of technology. Assets that used take several weeks to be cleared now take on a few days. This has been made necessary by the large increase in the number of trades taking place on a daily basis.
Risk managers attempt to analyse and manage an enormous variety of risks that a financial firm might face, from repayment of a client's loan to the state of the market at the current time. Risk managers will specialise in a particular areas of the business, usually in one of five areas: credit risk, market risk, liquidity risk, legal risk and operational risk. Over recent years, financial deals have become far more complex and, therefore the risks associated with them have increased dramatically. In the modern financial world, the increase in international business deals has increased further this still further. As a result, the need for graduates to enter risk management has grown.
Compliance is also one of the fastest-growing areas in financial services. It is the job of the compliance officer to ensure that the organisation they work for operates within the parameters set by the regulators. It is the compliance department that has to make sure that everyone within the company knows the rules and regulations and abides by them. This means a lot of liaison with the Human Resources department to ensure that all staff are kept up to date. They must also investigate any suspected breaches of regulations and provide any information to the regulator that is demanded.
Traders deal with the day-to-day buying and selling of shares, bonds and other assets such as derivatives (futures and options). The job is fast paced and involved checking share prices on screen, on the phone talking to other dealers etc. They will buy and sell on behalf of clients and the company in order to maximise money or to minimise financial risk. Teams of researchers will feed the traders the information on the companies whose shares they are looking to trade and general market trends. They will then use this to make informed decisions as to whether to buy or sell, although personal judgement and luck will play a part in the process.
Retail banking is a term used for those banking institutions whose activities do not cover the business of issuing and trading in international bonds and equities, offering advice to corporation on acquisitions, mergers and new issues and looking after funds of pensions funds and investment and unit trusts.
Fundamentally these large commercial banks offer a full range of banking services, will finance trade and industry, lend money, undertake foreign exchange transactions, give financial advice, including interest bearing accounts, current accounts and cheque cards.
Retail banking has changed greatly in recent years, with mergers, new technology and a greater emphasis on customer satisfaction, and this has led to a greater variety of entry routes. Retail banking encompasses branch networks that provide services for local communities and group functions that tend to be based in a small number of regional centres. The two main business areas include the provision of services in branches (maintaining and expanding existing services) and group functions for branches (supporting the branch networks and dealing with centralised issues such as finance, human resources, marketing and the development of new distribution channels).
In commercial banking you will generally start on the ground floor if you are looking for a managerial role, i.e. in a high street bank, to get a basic grounding of retail banking. Graduates will spend time in the branch, getting a feel for the full range of jobs and responsibilities before specialisation in one management area. Most trainee programmes will involve study for recognised banking or general financial management qualifications. From then on career progression can be varied (depending on the specialism developed) leading to branch management, private banking, online banking, new product development, financial advising, human resources or operations.
Qualifications and skills needed
In preparation for a financial career, useful study options include: English language, mathematics, economics, statistics, business studies, accounting, management and communication. A second language is also useful.
Competition for jobs in the City is very fierce and most employers do now ask for a degree of 2:1 or higher along with a good UCAS points score. Completion of an internship is also highly valued by employers. Although not necessarily a prerequisite, it would certainly be advantageous to have a mathematical based degree - accountancy, economics, engineering etc. However this can depend on the area you wish to become involved in. For example, law degrees are useful if going into the field of compliance. The main thing though, is that you will need to be genuinely interested in the business and financial worlds, in the business reports on TV, read the Financial Times, watch how the FTSE share index moves etc. You need to demonstrate to a potential employer that you are wholly committed to a career in this industry.
There are, of course many non-academic factors which are equally important when applying for jobs and attending interviews. Recruiters will be looking for a very broad range of personal skills such as the following:
- Good all-rounders - Specific industry sector knowledge - Leadership potential - Commitment to tasks - Trustworthy - High standards of personal presentation - Team player
Due to the variety of jobs available you will need to have a broad range and depth of skills to show employers. For example traders need self-belief and the ability to make instant decisions while research analysts need excellent analytical ability and should be able to think laterally. If you are working in the City then you will need to be outgoing, tough and resourceful, and not afraid to voice your convictions. There will also be plenty of situations which will involve socialising - such as wining and dining clients and other corporate hospitality events.
Generally financial companies look for high motivation skills, excellent communication, presentation, judgement, negotiation and commercial skills from very self-confident and dedicated candidates. They will also assess your ability to process large amounts of financial data in a time critical environment. Commercial banks also look for commercial and customer facing skills from numerate candidates.
Once you have joined an organisation you will be expected to become qualified within the area you are working. The length of time this takes will be dependent on which are of the industry you have joined. Trainees will probably be expected to pass a regulatory 'benchmark' (i.e. entry level) qualification within 6-12 months of joining - some jobs require this prior to being able to work on your own. However, you will be expected to keep your knowledge up to date throughout your career and some employers may require you to take a senior professional qualification, which may take between 18 months to two years to complete.
Most firms will provide further training and pay for your exam fees, but you will be expected to put in the study time out of hours - often a few extra hours once you have come home from work. Once you have achieved your qualifications, your opportunities for career advancement will increase.