Careers in Financial Economics
Below are descriptions of various career opportunities in financial economics.
Also: Money Management, Investment Management or Portfolio Management.
The focus of this industry is to increase the value of assets for mutual funds, Hedge Funds, institutional investors, and high net worth clients. Money management professionals are considered to be on the "buy-side" of Wall Street, meaning that their primary role is to buy and hold securities and equities on behalf of their clients. The structure of buy-side firms is usually less rigid and formal than that of sell-side firms such as investment banks, which means there is no one standard way of entering the industry.
The field of investment banking has several segments, including the underwriting of stock and bond offerings, merger and acquisition advisory and other trading and asset management activities. They are considered to be on the "sell-side," because most of their focus is on finding buyers for their clients' stocks and bonds. Additionally, investment bankers often provide advisory services for companies considering mergers and acquisitions. In most activities, investment banks charge a percentage fee for their services. The entry-level position for those with undergraduate degrees is most often as analysts, and those coming from MBA programs are associates. Both positions are known for long hours and a high workload.
Commercial Banking and Management of Financial Institutions
Historically, the primary focus of a commercial bank is deposit-taking and loan-making. Commercial banks generally accept the deposits of individuals (such as in a savings or checking account) and lend the money to others, in the form of mortgages, business loans, etc. While the commercial bank makes a profit by charging a higher interest rate to its lenders than it gives to depositors, it is also accepting the risk if a lender defaults. According to www.careers-in-finance.com, more people are employed in commercial banking than in any other finance industry.
The field of financial engineering is a relatively new one, having emerged with the rapid technological advances and increased global nature of the economy in recent years. As the name suggests, this area involves the application of engineering, computer science, and mathematical principles to finance issues. Many universities offer advanced degrees in financial engineering, and those proficient in this discipline are finding their skills increasingly in demand. Financial engineering is especially useful for careers in risk management, investment strategy, strategic planning, insurance, and investment banking.
There are a number of excellent graduate programs in financial engineering (generally MS programs).
Corporate Financial Management
Professionals working in the area of corporate financial management usually work for individual companies, determining strategies for acquiring capital, planning mergers, acquisitions and managing other major financial decisions for the company. Generally, jobs in this area center on administering the company's financial resources in accordance with the organization's long-term goals, rather than having a strong focus on short-term returns. While many jobs in this area require accounting experience, strong analytical skills are also vital for success.
The consulting business provides an array of career options for those interested in applying problem solving-skills to a variety of managerial issues and related applications, including information technology, auditing and accounting, litigation, risk management, mergers, restructuring, compensation strategy, pricing strategy, etc. The consulting industry provides opportunities in many industries and geographic areas and is increasingly important in developing economies. Large consulting firms hire top students from leading undergraduate programs as analysts. These analyst programs generally last three years.
Private Equity / Venture Capital
Private Equity involves the provision of equity finance (venture capital) primarily to high-growth, start-up businesses. Private Equity specialists structure tailor-made financing packages that meet the needs of investee companies. Private Equity firms work with a wide variety of businesses and may also provide managerial and consulting services to clients. Jobs in these areas generally require broad-based experience.
Please see Professor Mike O'Neill in the Mathematics Department for more information about Financial Engineering careers.
A listing of employers that currently recruit at the Claremont Colleges can be obtained by clicking here.
For more information on these and other careers in finance, we strongly suggest that you visit the following sites:
This site gives descriptions of various areas, along with job options, the skills and talents necessary for various positions, and salary information.
The Vault Career and Industry guides are a great resource for most industries, and Financial Economics is no exception. The guides give extensive explanations of each area, as well as advice on starting a career in your chosen field. CMC students can access the Vault Career Library free-of-charge by requesting a password from Career Services. Some suggested reading includes:
- The Guide to Finance Interviews
- The Guide to Investment Banking
- The Guide to Investment Management
- The Guide to Venture Capital
- The Guide to the Top 100 Banking Employers
Other sites, recommended by Career Services, include: