Valuable tips for kickstarting your career in markets

26/06/2015

“Everyone here is pissed off all the time. If things don’t start getting better in the next few months I’m going to have to find something else to do with my life.” – Mergers & Acquisitions Associate at Morgan Stanley

“As far as I’m concerned, I have the best job in the world.” – Securitised Products Trading Associate at Morgan Stanley

Sales and trading, as well as other markets-based roles, have historically received less attention from KY Finance than investment banking and consulting. As a result, many KY Finance members may be unaware of the plethora of interesting, challenging, and exciting roles in the financial markets that are available to current students and recent graduates. The purpose of this article is to offer some of my views and opinions on how to approach the job application process for these roles, and on the kinds of things I think you should be thinking about when starting your career in finance.

As far as my own background is concerned, I spent a year at Valo Research and Trading, which was a quantitative trading firm based in Helsinki. My role there was to develop, implement, and trade high-frequency and quantitative trading strategies on US and Nordic equity markets. After leaving Valo I did a summer internship at Morgan Stanley, where I did rotations in Securitised Products Trading, the Quantitative and Derivative Strategies Group, and Interest Rate Options Trading. Having experienced both a small, buy-side firm in Helsinki and a large, sell-side firm in London, I think I can provide an interesting perspective that will hopefully be useful to you. So without further ado, let’s get started.

1 Know what’s out there

While the sales and trading divisions of investment banks receive a lot of attention, they are only one player in the financial markets. Proprietary trading firms, hedge funds, mutual funds, pension funds, insurance companies, reinsurance companies, sovereign wealth funds, corporate treasuries, commodity trading firms, brokerages, and many more all offer interesting and varied job opportunities both in Finland and abroad. A sufficiently motivated applicant should have no trouble finding well over a hundred internship and/or full time opportunities to apply to in any given year.

The wide variety of available jobs also means that there are positions available for candidates with a wide variety of backgrounds and skillsets. At one extreme there are certain proprietary trading firms and hedge funds where the only thing that matters is how much money you make; if you want to work alone and just focus on doing your own thing, you can, and indeed there are some very successful firms such as the hedge fund Millennium Management where portfolio managers are explicitly forbidden from discussing their strategies and trade ideas with other portfolio managers. At the other extreme there are roles in client relationship management that are very social and really all about working closely with your clients. And in between these extremes you have every possible mixture of quantitative vs. qualitative, individual vs. group, and buy-side vs. sell-side that you can think of, so there truly is something for everyone.

2. Know what you want

Once you have a sense of the opportunities that are available, it is useful to critically evaluate your own interests, strengths, and weaknesses, to identify those opportunities that seem like the best fit for you. This is not to say that you shouldn’t also apply to the other opportunities, because interests can and do change, but having at least a rough idea of what you want to do is a good way to weed out those opportunities that you know you definitely aren’t interested in.

Knowing what you want to do is also useful because it will help you tailor your studies and preparation for the roles you want. For example, if you are interested in trading you will need to have strong quantitative skills as well as some familiarity with programming, which you can obtain by taking mathematics and computer science courses at Otaniemi.

3. Some thoughts on investment banks and making the right decision for you

Since I know a lot of people are very interested in investment banks and see them as some kind of Holy Grail for Aalto University finance graduates, I’m going to take a slight detour here to discuss them specifically.

When reading the popular press and talking to the general public, you occasionally run into people who believe that the big investment banks constantly screw over their clients in order to increase their own profits. I think this view is completely wrong. In my experience, investment banks’ sales and trading businesses revolve almost entirely around what their clients want, and in reality the banks go out of their way to meet their clients’ demands. For salespeople this is obvious, but even for traders it means trading with clients at prices that you don’t really want to trade at, and having your own options limited by your clients’ wants. To paraphrase one trader from Citi, “I have all these great trade ideas I want to put on, and then my clients call me and **** them all up”.

The nature of the work on the trading floor of an investment bank demands that a large part of your day will be spent on the phone or in Bloomberg chats with your clients. If you’re an independent thinker who likes to follow the markets, analyse companies, generate trading strategies, take strong views on the market, and take proprietary risk, then I would suggest that an investment bank is not necessarily the right place for you. Indeed, I think one JP Morgan Managing Director put it best when he said, “if you work on the trading floor it doesn’t matter what your title is; ultimately you work in sales”. Obviously many people are going to be very excited about this. But working in this kind of client service environment isn’t for everyone, and knowing yourself and what you want to do is the best defence against falling into the trap of thinking that just because investment banks are more well-known than some other firms, that they are automatically a better fit for you. To give just one example, a soon-to-be Aalto University graduate recently turned down a full time offer from Goldman Sachs to join the fixed income trading team of a young but growing British buy-side firm, because he knew it was professionally and culturally a better fit for him. Ultimately it is your life, and you are the one who has to grind through the long hours at whatever job you choose, so make sure you choose the job which is the best one for you, and not the one that society tells you is the most impressive and prestigious.

4. Use people who have been there before to your advantage

If you’re applying to an internship or full time position, it is probably pretty likely that someone at this school has at some point applied to the same position. In many cases you can even find someone who interviewed for the very position you are applying to. Use this to your advantage by seeking out advice from these people.

For example, when I received the invitation to my first-round interview at Morgan Stanley, one of the first things I did was to reach out to the people that had been on the KY Finance London trip with me that year, to see if any of them knew anyone who had interviewed for the same position. One of the trip participants then put me in touch with someone who had interviewed at Morgan Stanley the previous year, and by asking them for help I gained great insight into what the interview process would be like, what kinds of questions they were likely to ask, and what things I should focus on during my preparation.

It has been my experience that the people who have done internships and been to interviews are more than happy to share their experiences and offer advice when you approach them, so don’t be afraid to seek them out.

5. Prepare well

The kinds of interview questions you can expect vary tremendously depending on the role you applying for. At one extreme, proprietary trading firms will typically only ask brainteasers and mental arithmetic questions, with the occasional motivation question thrown in for good measure. At the other, an interview for a position in prime brokerage would probably be very qualitative and really just a test of your social skills. This is why seeking out people who have been there before is so valuable.

That said, there are some things that you should prepare well for any interview. First, you have to know your own CV inside and out, and you must be able to speak persuasively and intelligently about every point you have listed. Most interviews are short, so first impressions matter a lot, and one of the quickest ways to lose the interest of an interviewer is to not be able to confidently and clearly answer very basic questions about e.g. your previous jobs or your studies.

Second, have some idea of what is happening in the world. You don’t need to be an expert, nor do you need to follow the markets obsessively every day, but make sure you do your research and have at least a basic grasp of the three or four big stories that people are talking about.

Finally, have a good trade idea prepared and ready. It doesn’t matter if the idea is very simple or if you didn’t come up with it personally. What matters is that you present the idea in a logical and coherent manner, and that you back up your idea with supporting arguments and statistics. It is also very important that you have thought about the risks involved with the trade. For example, you should ideally be able to quantify how much you stand to lose if the trade moves against you, and you should have a good idea of how the trade may develop in the future and how you will react to different market events that could occur.

6. Relax

In my experience, interviewers appreciate it when you show that you are capable of having a normal, back-and-forth conversation with them. While interviews are obviously a test of your knowledge and skills, from the interviewer’s perspective it is just as much a question of whether you are the kind of person that they would want to sit next to for ten or twelve hours a day. So just act like a normal human being and you will be fine.

7. Don’t be disheartened

Finally, there is a tremendous amount of variance involved with job applications and you have to realise that you could do everything brilliantly and still not get the job. While this might seem depressing, the good news is that over a large enough sample size your luck will even out, so apply to many different places, keep trying, and don’t be discouraged by temporary setbacks.

 

Aleksi Pitkäjärvi – Finance student at Aalto University

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