Careers in Finance
Lesson 2
Exploring Financial Institutions
and Careers
Careers in Financial Markets
Aim:
 What types of rewarding careers exist
in finance?
Do Now:
 Identify three financial firms (ie: ones
that deal with money) you know of, as
well as why you know of them.
Careers in Financial Markets
 Do Now answer: Names may include
our biggest banks, biggest insurance
companies and biggest brokerages.
 These firms have made themselves
known to the general public by having
retail locations and/or by advertising
heavily.
Careers in Financial Markets
Financial Institutions:
Organizations that allow
individuals, companies,
governments, etc. to make
deposits, exchange
currency, take out loans,
and invest in different
financial instruments.
Careers in Financial Markets
1. Commercial Banks
Loan Officers:
Work with a
variety of clients
ranging from
large businesses
to individuals,
establishing
relationships
with people
trying to borrow
money.
Credit Risk
Analysts: Work to
price risk in order
to make decisions
regarding clients’
eligibility to
receive loans and
what rate (cost of
finance) these
clients will pay.
Careers in Financial Markets
Retail Branch
Management:
Responsible for all
functions of a retail
bank branch
including managing
employees, building
relationships with
customers and the
community and
approving loans.
Operations
Support
Management:
Back-office
operations that
support the bank’s
business of
deposit taking and
lending.
Careers in Financial Markets
2. Investment Banks: Financial Institutions that
are major purchasers of financial instruments.
Investment banks are involved in both the “buy”
and “sell” side transactions in financial
instruments (example: Goldman Sachs).
• Salesperson: Sells financial
instruments to investors
(typically institutions).
Careers in Financial Markets
Trader: Buys and sells financial instruments for
their own portfolio. Their goal is to buy “low” (at
an inexpensive price) and sell “high” (at a more
expensive price) making a “spread” - or profit.
Research Analyst: Studies financial markets.
Writes research reports used by buy-side
institutions to make investment decisions.
Operations Support Management: Settles trades –
the buying and selling of financial instruments.
Careers in Financial Markets
3. Other Institutional Investors: Consist of both
“buy side” and “sell side” institutions.
“Buy Side” Institutions: These
institutions buy financial
instruments to assemble Hedge Funds: A fund comprised of a
portfolios to achieve certain group of different investments and
strategies. Investors in a Hedge Fund
objectives.
must be “qualified”. That is, their
net worth must be at least $1 million
not including their primary
residence.
Careers in Financial Markets
Private Equity: A firm that manages private investments for
institutions and high net worth individuals. They generally
buy companies, improve their efficiency, and then sell
(exit) those companies for a profit. (Example: BlackRock).
Mutual Funds: A fund financed by a pool of capital from
many different investors. The mutual fund is run by a
manager who makes investment decisions based on the
goals set forth in the prospectus. (Example: Fidelity
Mutual Funds).
Careers in Financial Markets
Pension Funds: Invest in many different financial
instruments in order to generate enough capital
to provide retirement benefits to its members.
(Example: TIAA CREF).
Insurance Companies: A company that collects
payments and, in return, protects the insured
against adverse events (i.e. accident, death,
property destruction). The company invests
payments in different financial instruments in
order to generate capital growth to pay the
insured if claims are made. (Example: Prudential
Insurance Co.).
Mutual Funds vs. Hedge Funds
A mutual fund is safer for investors because, under law, the
managers cannot take very risky positions. Also, only a
small amount of investor capital is required to invest in
mutual funds and the funds are generally very large. A
hedge fund is less regulated. Managers are permitted to
take risky positions and a great deal of capital is needed to
invest in hedge funds.
“Sell Side” Institutions
Brokerage Firms (Salespeople): A firm that sells
financial instruments and completes the trades for
buyers and sellers. They match sellers then act as
the intermediary for the transaction. They generate
profits by collecting commission from trading
(example: Charles Schwab).
Corporate Finance Associates: Advise companies,
municipalities and governments with mergers and
acquisitions, investment decisions and growth
strategies. Assist companies in determining
optimal financing strategies.
Financial Planner
Certified Financial Planner: Individuals who are
responsible for the analysis and management of a client’s
overall financial/investment portfolio. They analyze each
customer's financial situation, timeline for retirement,
financial goals over the long term, and then make
recommendations accordingly. Investment advisors are
paid a flat fee or percentage fee based on the amount of
assets they manage.
Treasurer
4. Treasurer’s Office of a corporation.
Regulation and Compliance
5. Financial Service Regulation and Compliance:
Many different positions exist at different
regulatory “watchdogs” of the financial
industry.
Examples: Federal
Reserve, Securities &
Exchange Commission
(SEC), Internal Revenue
Service (IRS), Financial
Industry Regulatory
Authority (FINRA), etc.
Careers in Financial Markets
Requirements for these positions
often include a Bachelor Degree in
Business, Math or Economics.
However, many firms appreciate
academic diversity so an interest in
the economy and the markets might
enable one without the specific
educational background to start a
career in the financial industry.
Lesson Summary
1. What broad name do we give to firms that
safeguard money, provide loans and offer
various investments products?
2. What does a credit risk analyst do at a
commercial bank?
3. In what career does a person develop a
personalized investment plan for individuals?
4. In which position does a person try to make
money by buying and selling investments?
5. What types of rewarding careers exist in
finance?
Web Challenge #1
Challenge: The Dodd Frank Wall Street reform
act has caused many changes in the finance
industry. Research how its requirements are
causing firms to shed certain jobs as well as
which other types of jobs are being added into
comply with the law.
Web Challenge #2
Challenge: If you are serious about a career in
the finance industry, you should know which
type of college majors financial employers
prefer. Research the top five majors which lead
to jobs careers in finance. Which were as you
expected and which surprised you?
Web Challenge #3
Challenge: Because the financial industry is so
large and so critical to the economy, there are
numerous “watchdogs” agencies (both
governmental and self-regulatory). The pay at
these agencies is substantially less than in the
financial institutions they monitor. Research the
pay disparity. Consider what this means to you.
Would you be willing to work for less money
knowing that work you were doing keeps the
markets safe? Why or why not?