The following is a transcript of the author's insightful talk at InsideIIM's Konversations on Finance Careers, conducted in early 2019.
I first started considering a career in Finance when I was 18, just after my 12th standard. And in the decade that followed, I spent eight years doing something or the other related to Finance. At the age of 28, I stepped away from Finance for good. In this post, I will tell you about:
- My journey in and out of Finance,
- The realizations I had along the way, and
- What questions you should ask yourself right now, to decide if Finance is the right career for you.
From CA To MBA
After my 12th, I was certain of only one thing – I didn’t want to do medicine, the career path I had been preparing to start at that time. After some superficial research, it seemed liked pursuing Chartered Accountancy was the best move for me. I was a great student, with a tendency to be analytical and structured. I wasn’t scared of numbers. And very importantly, CA brings a good return on investment, especially if you get into Finance, because that’s where the big bucks are. I was convinced.
Once I started, I was really good at accounting, and then developed an interest in taxation. But after a year of working as a tax assistant, I felt unfulfilled. I wanted to do more. That’s when I decided to do an MBA. The idea was to get an easy entry into a Corporate Finance role, where I could apply my strengths in accounting and taxation, but also do more than just these bits.
Landing A PPO From Goldman Sachs
During MBA, I landed a summer internship role at Goldman Sachs. I was part of Global Investment Research. Our department was responsible for putting together opinions and advice on the types of investments clients should make. The team I was part of worked primarily in equity markets, specifically Europe. There were two parts to the internship:
- Helping out the team in its day-to-day work of supporting equity analysts, and
- Working on our own investment pitch, which we had to make to the London Head of Investment Research at the end of our two months.
Working on that investment pitch was a fantastic learning experience. Let me tell you more about it.
An investment pitch is often about a specific stock. Let’s say I cover Unilever as an analyst. I would build a valuation model, using data such as historical and forecast income statement numbers. I would also use qualitative information to justify my numbers. The net result would be what I think is the right value for Unilever stock. And then, based on Unilever’s current market price, I would recommend all you investors to either Buy or Sell Unilever.
Investment pitches can also be about an opinion on baskets of stocks. In this case, instead of focussing on one single stock, I would focus on a bunch of companies at a time. Why? That way my risk is lower. Let’s say, as per my previous investment pitch, I recommended that you buy Unilever. But 1 month later, one of the largest operations of Unilever goes under. Since you had purchased only Unilever, you would now make a loss. But, if I had recommended that you buy a bunch of FMCG stocks, i.e. Unilever and others, then your loss would be limited. My investment pitch was something similar. I suggested a basket of stocks. I shortlisted stocks based on some macro factors and then used data about their historical and forecast performance to suggest which basket of stocks to buy.
Getting the numbers and the recommendation ready was just step 1. We also had to be succinct and convincing in our arguments. So,
- We had to use the right data,
- In a strong visual format,
- Accompanied by a confident verbal pitch.
Rejecting Goldman Sachs And Joining The TATA Administrative Services
Although this experience was valuable and I landed a PPO, I knew Goldman Sachs wouldn’t work for me. I hated the markets. I still don’t know why I don’t enjoy markets. But perhaps there’s a few of you who do enjoy the energy and agility of the markets. In that case, there are several possibilities in Finance that will certainly energize you.
Anyway, through the final placements at XLRI, I got into TAS. For those of you who don’t know, TAS is the leadership and general management program of the Tata Group.
Life As A TAS Manager
My first permanent role through TAS was two years in Corporate Finance and Treasury at Tata Power. This was an out-and-out Finance role, exactly what I’d been looking for. And it was a damn good job. At Tata Power, I was part of the team that was responsible for managing the investments in overseas ventures. Mostly in Indonesia, Singapore, South Africa and Mauritius. I did several different things here,
- The day-to-day management of our Mauritian companies, especially their accounting, taxation and cash flow was my responsibility
- We also regularly analysed the performance and evaluated the legal, accounting and taxation aspects of all current investments abroad
- Whenever Tata Power invested in assets abroad or sold off assets abroad, someone from the Corp Fin team would be involved to sign-off on the finance aspects
To give you an example, let’s say TATA Power decides to invest in a coal mine in Indonesia. First, the company needs to decide the fair price to pay for the coal mine. The business development department, with some inputs from Finance, would build a business model to arrive at or justify the price. Once the commercials are fixed, there are many other details to figure out.
- One, the legal structure to own the asset. There are many rules about how Indian companies can invest abroad. There would be another set of rules in Indonesia on how foreigners may invest in local assets - we need to follow all those rules.
- Two, what would be tax or any other cost implications in the future. If there is an investment abroad, one would like to realize the benefits of it. Perhaps through dividend earnings, or maybe even selling it in the future. Tax is a huge cost on earnings, and it needs to be thought through in advance.
- Finally, accounting and other implications such as governance or cash flows.
Going through even a single acquisition or sale deal is a valuable experience, and I’m glad I got to be part of that.
Why Finance Jobs Are Not Just About "Finance"
But I also want to highlight that Finance jobs, at least the ones in Corporate Finance or Treasury, are not just about “Finance”. Besides working on financial models and investment decisions, a large part of my time was actually spent in other things such as,
- Managing or interacting with people, especially those that didn’t report to me, but I still needed to influence
- Reading and negotiating legal documents
- Understanding the business itself, how does the asset make money, what factors influence the revenue and costs, how does the money flow, etc.
- A large part of my time was also spent in just getting a number of things approved or signed off. Corp Fin departments often have a lot of visibility with the highest management of the company, and with good reason – Corp Fin knows where the money is coming from and where it goes. As a result of this visibility, it was important to make sure the highest powers were in sync with our actions or vice versa.
All in all, being in Corporate Finance is a fantastic learning experience. More so, because you get unhindered access to what the company does and a bird’s-eye view of how the business functions.
So, what happened next? First of all, the long hours got to me. But secondly, and more importantly, I came to the realization that getting to the highest point of this career path didn’t seem attractive to me.
The path I took after that is a different story, but I have reflected a lot about career choices since then. And I want to share those thoughts with you.
Five Important Points To Know While Deciding If Finance Is For You
I want to share with you five points that you should think about, as you decide whether a career in Finance makes sense for you.
1. A career in Finance involves more than just “Finance”. My internship at Goldman Sachs was very markets-focussed. But the investment pitch at the end of the internship was judged not just on my ability to analyse markets and crunch numbers. How I presented data, my written and verbal communication skills, my ability to persuade were all put to test. My role in Corp Fin was even wider. Financial models, investment theory, markets, accounting, taxation were all part of my life. But so was people management, negotiation, legal knowledge, communication. This is true of any area, to be honest. Anyone who has told you that being good at Sales means being good at talking to people is only telling you one side of the story. At B-school, we have set up these convenient boundaries between business domains, but real life isn’t so neatly bifurcated.
2. Second, ask yourself what draws you to Finance? I’m sure there are many different reasons in this room. Perhaps you are great at numbers. Or you love the unpredictability of the markets. Or maybe you just love money. Whatever it may be, fact-check your assumptions. Make sure the thing that draws you in, is actually going to be available in that career. Especially because there is so much width in the careers within Finance. What’s true for Investment Banking isn’t true for a Commodities Trader.
3. Third, what are your strengths? Do they match with Finance and will they be put to good use? For example, I consider myself a very creative person. And I truly enjoy exercising that creativity. But I didn’t get to use it much in Finance, and I missed that. Or say that one of you is a big-picture person – you understand macro well but don’t like getting into the details. That strength is great for driving business growth and strategy, but may be ill-suited for certain roles in Finance.
4. Fourth, what are your desires for your professional life? And here I am emphasizing – what are your desires. Not what your friends tell you is cool to desire. Not what your parents demand that you desire. Not what your employers tell you is good for you to desire. Once you know your desires, prioritize. Maybe you will find that earning 20 lakhs per annum is a non-negotiable desire for you. Or maybe you desire being able to balance work and personal life, but can live without that balance for a few years. Once you know these desires, evaluate whether a career in Finance will be in sync with these desires.
5. Lastly, remember that there are benefits in keeping your mind and choices open. One key concept in Finance is that of Sunk Cost. It says that the costs that have already been incurred on a project should not be considered in decision making at the current moment, because those costs have been “sunk”. Past investments are not relevant for taking a decision about future pay-offs or investments. This may not be very relevant for you at the moment. But a few years down the line, if an alternate career choice makes a lot of sense, but the only thing holding you back is the time, money and effort you’ve already invested in your current career, then do think about this.
After answering all these questions, perhaps you will determine that Finance is indeed the way ahead for you. In that case, I suggest that you take a couple of concrete, practical steps to affirm that decision.
- Step 1, Check out some online Finance courses before you start your MBA. This has two benefits. It will help you get a head-start and also help you determine whether you enjoy it.
- If Step 1 goes well, then Step 2 should be trying to land an internship in Finance during your summers. You will see what live application looks like and also that a finance job is more than just what you study in college.
Figuring out the right career path is an iterative process, so I wish you a lifetime of positive career choices and all the best!