What skills should finance students be looking to learn in school?

What are the exciting areas of finance? What career paths should students consider? How are current economic conditions affecting these career paths? What skills and courses should students focus on?

Every year in the early fall at Columbia Business School, we host a faculty-led panel where we come together to talk about hiring trends and the skills we’re hearing about, especially in the areas of finance, banking and investments. The audience is mainly made up of MBA students and master’s students in fundamental analysis or financial engineering.

Teachers are typically asked to address the following five questions:

What’s most exciting about what’s happening in your particular field/industry/sector of interest right now (paraphrased as “field” later)?

What types of career opportunities/paths do you encourage students to consider in this space (“paths” later)?

What is your perspective on the impact of current economic conditions on employment space and opportunities (“economic conditions”)?

What should students do now in school to best prepare for a career in this space (“skills”)?

What courses and other curricular/extracurricular opportunities do you encourage students to consider (“courses”)?

This year, I thought I would do something different. I posed these questions to four of my high street friends with different titles and functional backgrounds (ex-head of analytics for one of the largest banks, head of customer services at one of the largest European banks, leading consultant and head of research for a very large passive asset manager).

Here are their thoughts on these questions. I add my own take later in the piece.

Ex-head of analytics for one of the bulge media banks

Area

I would define my field as research – both buy-side and sell-side. For me, the most interesting trend is the increasing use of quantitative tools in non-quantitative fields like basic research. This includes data analysis of unstructured datasets, better behavioral tools around forecasting, and general use of alternative data.

Paths

Develop coding and statistical skills to augment traditional research skills.

Economic conditions

Recent market volatility demonstrates that the ability to generate alpha in developed markets is almost non-existent. Most successful asset managers are really just beta miners. Asset owners will be less willing to pay for this type of investment in the future.

Successful investors of the future will combine alternative data analysis with risk/reward frameworks that offer decent risk-adjusted returns.

Skills and courses

One answer for both questions. Coding, data analysis, and probabilistic skills are areas students can study for future careers.

Head of Client Services at one of Europe’s largest banks

Area

Torn here between pull factors such as the global macroeconomic context / geopolitical issues and push factors such as enterprise-level initiatives around sustainability and digital transformation

Inflation and supply issues present real problems and make post-pandemic and post-bearish longer/QE (quantitative easing)/stimulus stocks much harder to unwind.

We will see extreme dislocations between asset classes and even within asset futures structures and yield curves, as monetary policy attempts to solve a problem it cannot quite solve.

Paths

As an industry, we will focus on all aspects of our business and how we can use current and future technologies to improve our end-to-end business processes and reduce operational costs. Data will continue to play a bigger role in all aspects of our business and we will begin to place a higher value on anything we can capture or create that can provide better signals about customer demand or supply bottlenecks. bottleneck. As such, we will continue to seek candidates with quantitative and IT skills – think of us as much as technology companies as financial services companies.

Economic conditions

The current environment will impact hiring – across the board – we are seeing a marked downturn in the primary capital markets and this will impact all parts of the business – both public and private. However, don’t let that put you off – there is no good time to join this business and it is inherently cyclical.

Regardless of the current outlook, areas of the business that will continue to grow and need talent will be ESG/Sustainable Finance/Carbon and all that – (Compliance/Voluntary/Reduction/ removal/compensations)

Private markets will continue to develop and will require accounting/structuring and financial analysis skills

Skills

When in doubt about how to gear up – whatever your specialty – take a Python course, learn how to organize and present data via Tableau, and more.

Read a quality periodical such as The Economist.

Course

See previous comments on Python. Would also encourage participation in all campus-based financial companies. Learn about political economy and keep an eye on global macroeconomics

Best Advisor

Area

From a board perspective rather than a banking perspective, ESG is all the rage. I think the bottom line is not just that this is a great business opportunity, but that participating in its success gives our people purpose. Not that being a vital part of the financial reporting ecosystem isn’t important, I think it’s just a lot more abstract for our employees than ESG.

Economic conditions

The economic clouds are clearly darkening and we are seeing it in the trading space for sure. In the advisory space, this only adds to the appeal of ESG as it is not cyclical. By the way, the university community could really help everyone calm down a bit about inflation. Remember that the huge LBO of Gulf Oil happened when the risk-free rate was well into the double digits.

Skills and courses

In terms of advice, I get it all the time. To be a trusted advisor, you need to have a basic level of knowledge about many things. It means you have to read. This lets you connect the dots on the fly in meetings with clients, prospects, and other forums. Anyone can search for things. What’s essential is that when something comes up, you have something substantial to say.

Here is my example. I went to a meeting on a deal. For reasons of confidentiality, no information was provided in advance. It turned out to be the biggest deal ever in an Eastern European country. I knew enough about this country, but it is a small country and not in the euro zone. So this deal could actually freeze the financial plumbing of the country if they try to execute it in the local currency. That created a lot more credibility than saying it would be difficult to get a deal in Eastern Europe or some other vague statement like that. In terms of courses, the right balance between deepening your knowledge in your specialty and broadening your knowledge base.

Responsible for finding a very large passive asset manager

Domains and skills

In the exciting areas I would say voting choice/advances in proxy voting, and in the analytical end I would say natural language processing (NLP).

As far as schooling goes, it almost feels like a mix of law and data science with a focus on NLP. Especially an ability to do multilingual NLP. I can certainly say that the text from China is very different…both due to language differences and differences in the press and disclosure environment.

my catch

I spent most of my time chatting with CFOs (chief financial officers), leading analysts interested in fundamentals, and people interested in ESG. Here is what they expect from us and our students:

financial directors

The ability to zoom in and out to understand if the issue being discussed is important to the business and how it helps or weakens the strategic direction the business is moving in.

They are constantly frustrated with data scientists. Most of them don’t understand the context of the business and are rarely able to ask the “so what” or “what next” question. Many data scientists are unable to transition from “academic” work to work that helps the business make better decisions. A CFO told me, “The data scientists I’ve seen seem to say, ‘Oh, there’s a microcosm of an academic environment. I can continue to ask academic questions that interest me. How is it monetized? That’s what I want to know.

Fundamentals

Much of the “research” that is done is either highly standardized or naively extrapolates from the recent past, adding to the return momentum we see in the markets. By commoditized, I mean something that is not on CAPIQ and Bloomberg terminals in an easily digestible form is considered unimportant. People are rarely trained to look at primary documents to determine if and how the business is financially viable. The in-depth analysis that is done in a PE (private equity) type framework where we ask who is buying the product, why, can we deliver the product to the customer, what talent is available to deliver the product to the customer, how cost behavior, what to do with the capital structure, how is management paid and how do these elements fit together are rarely seen for publicly traded companies.

ESG

The ESG world is overcrowded with people with backgrounds in development economics, nonprofits, and NGOs. There is a dire need for students and professionals who are skilled in accounting, financial reporting, a basic sense of economics, finance and law and how these skills interact with development people to have an impact significant economic impact, both on the company and on society in general.

Your feedback, both from the perspective of finance students and seniors interested in hiring these students.

Valerie J. Wallis