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| FINANCIAL SERVICES |  | Finance theory has a surprisingly short history in economics and many of the theories on how financial markets function were formulated by economists who tended to regard it as just a small part of broader economic activity.
As such, early ideas about financial markets were largely intuitive, mostly formulated by practitioners. Pioneering theoretical work on financial markets, notably that of Louis Bachelier (1900), tended to be basically ignored by theoreticians and practitioners alike. In view of the uncertainties of money matters, attempts to understand the broad principles at work in financial activity have been largely explained in terms of theories, some of which are as follow: Portfolio Theory For many economists during this early period, financial markets were still regarded as mere "casinos" rather than "markets" properly speaking. |
| | | |  | Overview
Careers in Finance and Accounts have become extremely popular in the last decade. Globalisation and liberalisation of economies have resulted in a huge demand for professionals trained in the various aspects of finance such as Corporate Finance, Commercial Banking, Insurance, Money Management, Financial planning, Investment Banking, Real Estate and Accounts. Finance personnel play a key role in the management of organisations across all sectors as they have the knowledge and skill to make companies survive in a competitive environment.
Not so long ago, the department of Finance functioned mainly as a back office support activity for keeping company accounts and employee records. But things have changed a great deal and today’s finance professional has to operate in far more challenging and complex environment, which calls for specific skill sets and knowledge of financial concepts. Factors like competency, business intuition, knack for numbers and creative and analytical abilities are highly valued in this profession. Finance involves the process of raising capital, managing it and deploying it in an effective manner so as to bring in value addition to the company. Thus a professional in this field is expected to contribute to the company’s growth potential by providing positive inputs that will increase the shareholder’s as well as the company’ value. While this may sound forbidding finance jobs are actually a lot of fun for individuals who like to be intellectually challenged, get into many areas of activity and use their problem solving skills.
Today the jobs in Finance are global in nature, as the world of money has no borders. Salary structures are therefore extremely competitive and for persons with the right qualifications finance jobs can be very rewarding and monetarily satisfying. The philosophy at work here is- if you can make money for others your needs will be taken care of too. Qualification
To make a successful foray in Finance the first requirement is to get appropriate qualification. The first step towards this would be to get a bachelor’s degree in commerce or economics from any recognised college. Subsequently students can go in for specialisation in a management programme such as MBA, pursue a post graduate degree in finance or accounting or sit for qualifying exams conducted by professional institutes such as the Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants (ICWA) and Institute of Chartered Financial Analysts of India (ICFAI) to become Chartered Accountants/Cost Accountants, and Chartered Financial Analysts.
Some courses that lead to professional qualification in the area of Finance are: Chartered Accountancy Cost and Works Accountancy Company Secretary Financial Management (MBA+Finance) Master of Financial Control (MFC), PG programme Certified Financial Analyst (CFA) Chartered Public Accountant (CPA), exam conducted by the Institute of Certified Public Accountants Some of these courses can be done after 10 +2 also and also after graduation. Some American Universities take CFAs in their Ph.D programmes. Some of these are; J.C. Kellog Graduate School of Management, Illinois Graduate School of Business Administration California School of Management, Boston University Johnson Graduate School of Management, Cornell University, New York Some international qualifications for entry into the global job market in finance are: Chartered Financial Analyst (CFA) Association for Investment Management and Research (AIMR), Charlottesville, USA Association of Chartered Certified Accountants (ACCA), London, U.K Chartered Institute of Management Accountants (CIMA), London,U.K Certified Public Accountant (CPA), New York, USA The Chartered Financial Analyst Programme is available in India to cater to the needs of financial professionals in the corporate sector including the financial services industry. Launched in 1985-86, the programme focuses on: Corporate Finance Banking Insurance Treasury Management Risk Management Portfolio Management Consulting Equity Research Capital Markets Credit Rating Mutual Funds Venture Capital E-Business Information Technology International Finance Investment Management Financial Services Increasingly, CFA is being considered as a desirable value addition for executive positions in corporate sector recruitment. The programmes is targeted towards: -
Graduates who wish to build a career in Finance to work in the industry-Corporate/Financial Services/Banking Sectors or consulting practice
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CAs, Cost Accountants, Company Secretaries for updating knowledge in hard core finance and value addition
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MBAs/other management professionals/students of MBA courses looking for strong base in finance
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Working executives for enhancement of career mobility/increasing prospects in finance. The CFA programme is offered in two ways: 1. Regular 3-year CFA 2. Accelerated 2-year CFA The CFA Foundation Course It has been designed to provide undergraduate students with a strong foundation in financial accounting, microeconomics, and macroeconomics so that they can commence CFA studies thereafter.
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Eligibility : Students who have passed 10+2/equivalent exam. Job Opportunity
The finance sector offers huge opportunities as far as job options are concerned. Qualified finance professionals would find placements in the areas of Corporate Finance; International Finance; Merchant Banking (e.g. in public issue management, euro issue); Insurance, Portfolio Management, Financial, Commercial Banking, Capital and Money Markets and in the area of Real Estate. The best positions in the sphere of financial services usually get filled up from the reputed management institutes during campus recruitment or through a competitive selection procedure conducted by apex financial institutions and private/foreign financial institutions. CAs, CWAs, CFAs, Postgraduates in economics and finance with a strong analytical background, and knowledge of various aspects of financial management such as asset management and information and technology management, are also in demand to fill up vacancies in the corporate and business sector.
The field is still evolving and the demand for trained personnel will continue to rise in the foreseeable future. Today companies want professionals who can perform multiple functions and are adaptable to rapidly changing environments. Fresh graduates from management and financial institutes as well as professionals with work experience/exposure allied to financial services and to information technology management are in great demand. . Finally, the use of sophisticated corporate risk management strategies has increased in recent years, leading to a demand for individuals who are familiar with models, techniques, and derivatives that can be used to manage risk. In recent years new opportunities have emerged for finance graduates with technical expertise- in software consulting such as Enterprise Resource Planning (ERP) applications and E- business suites for enterprises.
These careers are highly remunerative and provide opportunities for career advancement. Monetary Benefits
Today’s financial companies operate in a global arena. Moreover banking services too have extended beyond national boundaries. As a result salaries have become internationally competitive, making the finance professionals very well paid indeed. Because of this increasing marketing-orientated strategy, many companies have been paying large salaries to lure experienced finance personnel from consumer products companies and are competing amongst themselves for "high-tech finance jocks" involved in foreign exchange derivatives and financial engineering.
There is also high demand for finance professionals who can develop products for the corporate market. And another high growth area in commercial banking is investment products and mutual funds. In India, a qualified finance professional can easily earn between Rs 8000- Rs 2 lakhs per month. Internationally starting salaries in corporate finance with a Bachelor's Degree in Finance range from $25,000 to $35,000. Starting salaries with an MBA degree range from $30,000 to $70,000.
In Banking salaries for Trainee/Credit Analyst are $24,000,that goes up to $80,000 for department managers. Salaries in money management are likely to be mainly a result of performance. Starting analyst positions for undergraduates at leading mutual funds, pension funds and bank trust departments have salaries in the neighbourhood of $30,000 to $50,000. In the world of equity portfolio managers, there is a high dispersion of pay. A job at a state pension fund or a bank trust department will pay in the $60,000 to $150,000 range. In a private fund or a money management outfit, salaries can rise quickly if you have a record of strong performance. It is not uncommon for some equity managers to earn from $500,000 to over a million. Self Employment
Individuals with relevant experience and exposure in the specialised areas of finance can chart out on their own as financial consultants. It is not advisable for a beginner to jump into consulting as it requires considerable groundwork viz-developing contacts, establishing credibility and a putting together a proven track record. It's important to have a good network of business contacts in consulting. As one progresses, new business development becomes part of the job. It is important to stay in touch with classmates as they rise in their respective business areas, as they may become a contact in developing business tie-ups.
Once a consultancy grows beyond a certain size it becomes imperative to put together a team and operate as a consulting firm. In business The essence of management consulting is to help a client obtain information and advice which leads to real and lasting solution of a problem. Consultants think, analyse, brainstorm, cajole and challenge good organisations to become even better by adopting new ideas.
Great consultants are able to step into ambiguous, sometimes hostile situations and sense what changes need to be made. Great consultants are driven by ideas and a strong desire to have a positive impact on clients. Chartered and Cost Accountants can also set up their own firms providing consultancy in the areas of corporate accounts and audit, cost analysis, valuation and decision making. Those with knowledge of insurance can become field agents for large insurance firms acting as intermediaries between policyholders and the Insurance Company. PositionsSpecialization
As in any other profession the financial sector also has a few specialised segments that call for a specific set of skills and knowledge. Some of these are: Corporate Finance Most corporate finance positions involve solving problems using a combination of intuition and analytical skills. It is also important to be comfortable with ambiguity and an environment where tasks change from day to day.
Technological literacy with computers, particularly spreadsheets, word processors, and presentation packages, is essential. This is especially true for entry-level positions where computational skills are essential for executing the details of corporate financial planning, accounting and raising capital. Initiative and knowledge of international corporate finance help in charting career growth in an increasingly global arena. The most important personal attribute sought by corporate finance employers is initiative.
Commercial Banking : To be good in banking, a person needs a broad understanding of business because banking jobs typically involve interacting with a variety of businesses. People skills are essential because bankers must work with customers to secure loans and make investments. The most common jobs in commercial banking are credit analyst and lending officer positions, both of which require an excellent understanding of both accounting and finance. Because banking often requires written documentation for loans and justification of credit analyses, written communication skills are vital. Successful bankers today are faced with a dynamic business environment. The prevailing business model, which has continued to spread throughout the banking industry, is that of the marketing-oriented consumer products company. Banks are trying to build valuable brand images with consumer-oriented advertising and distinct product lines. It is useful, but usually not necessary, to get an MBA in commercial banking. However, many top banking executives do have MBAs from prestigious schools, while others have attended summertime master's programs. Consumers are increasingly banking from home using online services and the Internet. Employees who are Internet savvy and familiar with computers will have an edge in the banking industry today. Insurance The insurance industry is a huge business that employs over two-and-a-half million people in the United States alone. In the coming years, as the population ages and wealth grows, the demand for insurance professionals will increase dramatically. Careers in insurance involve helping individuals and businesses manage risk by protecting them from catastrophic losses and by anticipating potential risk problems. Insurance professionals help clients understand their insurance needs, explain their options to them and help them purchase appropriate insurance policies. In India, with the passing of the Insurance Regulatory Bill 2000, and the subsequent setting up of the Insurance Regulatory Development Authority, the sector has opened up with a large number of private companies, both Indian and multi national, entering the market. This is expected to dramatically change the present scenario where only two major players the Government owned LIC of India and the GIC of India hold virtual monopoly of the insurance business. It is also expected that opening up of the sector will vastly improve the quality and variety of services besides creating new employment opportunities. Money Management : Money managers manage stocks, bonds, and other financial assets for individuals, businesses, and governments. While all money managers have their own unique styles and techniques, the key to being successful in money management is to have discipline, be broad-minded, and be willing to cut losses when necessary. Some money managers buy and hold fixed income securities including mortgaged-backed securities, corporate bonds, municipal bonds, agency securities, and asset-backed securities. Others money managers focus on equities, including small stocks, large caps, and emerging market stocks. Yet others work as financial planners, helping individuals work to develop a secure financial future. Good places to begin a money management career are in bank trust departments, state and local pension funds, and insurance companies. Many finance professionals cross over into money management after obtaining years of experience on the sell side of the business in investment banks. Perhaps one of the best ways to break in is on the marketing side as a broker. Many money management organisations are relatively small (with perhaps five principals and twenty others). In these organisations, the principals/owners generally do extremely well, earning as much as $10 million or more. Real Estate The real estate industry is broad and diverse. Career positions in real estate include the sale, management, and analysis of land and properties. The real estate industry is one of the largest components of the overall economy and offers excellent career opportunities. Real estate positions tend to be entrepreneurial, and create opportunities for individuals to become wealthy if they have the right mix of analytical skills and entrepreneurial drive. Career opportunities in real estate are broad and varied. Real estate developers use spreadsheets to project and analyze cash flows for proposed new developments. Agents and brokers in the field have considerable contact with customers on a day-to-day basis. Entrepreneurs and property owners and managers evaluate undervalued real estate buys and develop strategies for creating value. Financial Planning : Financial planners help individuals plan their financial futures. This work can be personally and financially rewarding and requires excellent interpersonal skills. A good financial planner understands investments, taxes, and estate planning issues and knows how to listen. This work can be done within a company or as a sole proprietorship. Most planners go solo or work within smaller practices. It's essential then that a planner should possess a certain amount of entrepreneurship given that he will be running his own business. The work pays well and is rewarding for someone with a helpful attitude.It helps to obtain the Certified Financial Planner (CFP) designation. Investment Banking Investment Banks help companies and governments issue securities, help investors purchase securities, manage financial assets, trade securities and provide financial advice. The leading investment banks including :
1.Merrill Lynch
2.Salomon Smith Barney
3.Morgan Stanley Dean Witter
4. Goldman Sachs are said to be the top league.
Other investment banks are regionally oriented or situated in the middle market Others are small, specialized firms called boutiques which might be oriented toward bond-trading, M&A advisory, technical analysis or program trading. Firms have lots of different areas and groups within them. In most firms, there is sales and trading which works with owners of securities, investment banking which works with issuers of securities (firms and governments) and capital markets which goes in between the other two. Career Advice
In this age of globalisation and open market economies the role of financial professionals have taken on new significance as they are at the forefront of ushering in economic reforms worldwide. But in spite of the increasing demand for good financial managers the competition for jobs is most intense. As a result, only those with the best professional qualifications and the right mix of personality attributes find themselves in the running for the best openings.
The top positions are usually reserved for highly qualified professionals with relevant experience and exceptional track records. Salaries in the finance sector are among the most competitive and depend upon the quality and type of professional attainments, the size and location of the organisation. Within the industry, the financial consultancy firms offer some of the most attractive pay packages but these companies are also the most vulnerable in times of slowdowns as at present.
The Banking sector offers the safest and most secure jobs although working conditions may not be as challenging as in other areas. Demand for finance professionals may go up or down a bit depending on the economy but there is never a shortage of jobs as the need for financial expertise is always present in all forms of business activity. |
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