So, you want to work in finance?
No, seriously. You’ll need it:
No contacts, not the right schools, no money? Aiming to become so good they can’t ignore you anyway? You want to become one of the best (and richest) portfolio managers (ever), starting from scratch? There you go again…
Okay, so I did it that way. That only makes me a sigma-something anomaly and nothing to try to copy – just as most top performers in all areas, including ball players, athletes, musicians, models, fund managers and so on.
However, without hard work and at least trying, you are certain to go nowhere at all. The ones whose strategies you should try to emulate are among the hard working and excellent top one per cent, rather than the stellar, and lucky or gifted, top basis point (1/100 per cent).
Finance Cloud 9
Caveats aside, here is the Retard’s Path To Finance Cloud 8 (too many sigmas at 9, and Buffett):
How To Become Someone In Finance
Apart from money, luck and doing whatever Wall Street Playboys say, here is my way.
First, make sure you understand what you are talking about:
- Do you want to work on the Buy side or Sell side?
- Do you want to be a broker, an analyst, a PM or a corp guy?
- Are you into equities, bonds, commodities, macro economy (or real estate – though not quite finance)?
- Do you prefer sales or number crunching?
- Are you interested in business models and the economy,
- or more into group psychology and trend analysis?
It’s okay, you actually don’t have to decide right now. Many, including me, have profitably gone from one area to the other, back and forth, up and down.
Some paths are more lucrative than others, but most work – as long as you don’t stay too long in sales, i.e., unless you plan to stay there (-the only way to get rich unless you own your business, according to the WSP sages).
I personally went from broker assistant, to licensed broker, to sell side analyst, to certified analyst, to buy side analyst, to portfolio manager and partner (owner).
The first few steps (up until and including certified analyst) were done in around a year. I then worked as a certified sell side analyst for 5 years, before joining a hedge fund, where I became Partner, Portfolio Manager and the Managing Director after respectively 4-5 years. I worked in that (those!) capacity for the remaining 10 years, hiring a handful of analysts and dismissing many more applications over the years.
Then I couldn’t wait to quit, and you ask me for advice on how to get in…!?
Show me the money!
You don’t care what side of the money you are, you just want it. Fuck the job, just tell me how to make enough para to get the hell out before becoming ancient.
That’s the spirit. No, really. If you are going to work in this soul sucking industry anyway, make sure you get the green for it.
The dough is in sales (ref WSP) and in PM (portfolio management – if you have a stake in the firm, i.e., if you are a partner).
Sales can mean many things, but you’d want to be an institutional broker, an analyst or work in corporate finance as key account manager or possibly research. In short, you need to own the firm or you need to be a specialist with a direct client relationship (some kind of sales).
Please note, though, that new rules mean clients will pay less and less for research and brokerage services. In addition, the coming normalization (crash in prices and volumes) of markets most likely means the sell side industry (brokers and research boutiques) will be decimated, leaving a selct few making big bucks and the masses forced to cut down on their current too lavish lifestyles. New guys, like you, will be at the bottom of this food chain.
I would recommend aiming for the buy side (the money side, the client side), possibly via a short stint as an analyst on the sell side just to make yourself a name. If you are good or lucky enough, and work until your behind becomes unstuck, you’ll be noticed and just might get bought over to the money side by a greedy PM that has grown tired of doing the work himself.
Hmmm, who am I really talking about here..?
The path in practice
1. Start trading and make money. Get the skills online. Make yourself rich enough to not be ignored (only then will your track record be taken seriously). Then start your own hedge fund and accept outside money.
-Good luck! This would typically take forever, or end like the Challenger in 1986 (too soon?). Get rich quick schemes on the stock market are all but a sure way to ruin. In addition, why would you need or want outside money or employment if your formula works and you’re already rich?
2. Get the skills online (math, statistics, programming, economics, accounting, cash flow analysis, business model assessment).
Cold call existing mutual and hedge funds and sell yourself cheap enough (for free?) to get the chance to fetch lunch for the real money managers and analysts. Then prove yourself (build models, provide creative input, make your bosses look good) and hope that somebody dares take a chance on you for some real responsibility, despite lacking the right degrees and pedigree.
“Tell me more how you plan to get into high finance by yourself”
Unfortunately, no matter what I usually say about institutional education, when it comes to a traditional career in finance, you still have to take the…, well, traditional route. With a twist:
The straight and narrow
3. Get a degree from as prestigious a university you can get in to. Combine finance studies with math, statistics and programming, or perhaps engineering and/or law to stand out from the faceless crowd of “but, but, I have a master in finance” puppies. Any real world experience, such as running a start-up or working in technical industries (pharma, med tech, technology, software etc.) is a plus.
Do not take a back office job, “to get close to the real action and hope to transition from there”. It can happen. It has happened. I have actually personally interviewed and hired a three years straight back office summer intern and hired him. Just don’t count on it to happen. Both Futuris and I were outliers.
Instead, start as a front office assistant (or as high up as you manage to land a job, e.g., junior broker or analyst) on the buy side (much easier) or sell side (not that many slots available, so much harder to accomplish right out of the box).
Work your ass off. Be the light switch. Turn it on when you come to the office and off when you leave. Last. Make sure you get just about enough sleep to function (probably on average 5 hours a night, plus whatever naps you can get during transports etc.). Note, that this runs completely contrary to my advice for individual long term success and happiness. This is only for making it as a finance slut – something I usually advice against.
Whether you are an assistant, a broker assistant, an analyst assistant, a junior broker, a junior analyst or PM’s assistant, expand your skills as much as possible. Ask questions (not too many at a time though, and never the same question twice unless you couldn’t actually hear the answer). Read up on whatever is discussed and if the same topic surfaces again, respectfully and humbly provide your input. If possible, make it seem as if it was your closest superior that came up with the idea/solution.
Never be idle. The density of your tasks will be low in the beginning. Take advantage of that for both acquiring skills, getting contacts and not least taking initiative, aiming just low enough to be able to present real and unambiguous results in a short time. And again, and again.
E.g., back in 1994, on my first job as a broker assistant, my boss mentioned Warren Buffett’s model for selecting investments. The model’s criteria had recently been featured in Sweden’s largest financial magazine. My boss proposed perhaps screening some of our best buy recommendations according to that criteria.
A little proud, albeit still with my peculiar spectrum disorder detachment (not realizing the pivotal importance of the moment), I could tell him I had already built an Excel model doing just that, as well as tried it on our top cases. I showed him the model and the result (screaming buy for Scribona, among other companies). I had more “secret” projects lined up, so it wasn’t that much of a coincidence I hit that home run.
I like to think that specific moment was crucial to my keeping the job after the initial 6 trial months, despite being “kind of like a round peg in a square hole”.
4. Be a quant. If you love math, statistics and programming, prove yourself in some way – preferably with a finance related thesis or a PhD – and sell yourself to a quant/HFT/trend following fund and constantly blackmail the owners for a share of the company.
5. If you simply fail to land a job in finance, do not settle for back office, try management consulting instead, or a job in a real and technical industry (pharma, med tech, technology, software, gaming) where you can acquire a deep understanding, that later can be leveraged as an analyst or portfolio manager.
Use your spare time to study finance and apply for finance jobs. You’ll get in sooner or later.
Summary and conclusions
- If you are into DIY, I suggest trying a different career
Here is how to do the finance tango properly:
- Document and show interest in investing/finance/markets. Invest and trade.
- Get a degree. Get two, but don’t take your sweet time – do it in parallel
- Kiss ass, work ass off. No real skills needed to land or keep a job in finance
- Acquire real skills (for the future as a portfolio manager or sales)
- Finally, use the skills to produce value, and make sure you get your share (as owner or through blackmail [employer jumping, silly season pro])
It’s not easy. It’s not fun, but you can get rich
It’s not easy to get in, not to mention up, in finance, but if you really, really want to whore out in this business, I think almost anybody can make it quite high:
Just pay attention to what your bosses want, what your clients like to hear, and always be working, always improving, always acquiring skills (mostly cheap, easy to communicate skills, parlour tricks almost). Read my review of Carnegie’s “How to make friends” to get some cynical tips on how to approach and use people with power.
Here are some other useful books to read before your first interview: Liars’s Poker, Reminiscences of a stock operator, Bull!, Wall Street Meat, The Great Crash and City Boy. If you just want to impress you can claim you read Intelligent Investor (but don’t actually do it).
Always be investing
Do I have to add that it’s mandatory to have traded with your own money before applying? Unless you have a documented interest in the market you’ll be dismissed in a minute.
Please note, that:
the skill set for landing and keeping your first position is quite different from the skill set and habits needed for adding value
…and performing once you get some real responsibility.
Should you eventually find yourself in a position with actual responsibilities as a portfolio manager (or just managing your own money), then cut back on the hours, the parlour tricks, the kissing ass, the working extremities off, and focus on understanding, on strategy,…, well on all the things I laid out in my book The Retarded Hedge Fund Manager.
Some useful books for once you handle real money are: The Most Important Thing (risk), Margin Of Safety (investing), Lords Of Finance (central banks and their failure), Tomorrow’s Gold (power shifts), How An Economy Grows And Why It Crashes (macro economy and real investments) and The Black Swan (risk)
If you never read my book, do. If you haven’t subscribed yet, do it now and get the book for free. I hear it’s amateurish, but a page turner, a little fun and highly recommended.
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From n00b to master of the universe in 16 years. Are you up next?