Asad Malik's picture

A Career in Financial Consulting

 

 

In the ever growing and constantly evolving world of the Financial Industry, the variety of career opportunities available are extensive: buy side, sell side, back office, middle office, front office and I haven’t even begun counting the specific sectors and industries within each one … (you get the picture). Picking “the right one”, given a combination of personal strengths and interests can be daunting, even stressful. I thought I would make your job a little easier by shedding some light on a niche and yet, highly rewarding, career that few know about – Financial Consulting.

My recent summer internship at Towers Watson, one of the largest Financial Consulting firms in the UK, gave me this new perspective into the buy-side industry for large, institutional clients.

What is it?

Financial Consulting, as the title suggests, is essentially consulting for finance related activities. These can be transactions, merger and acquisition advisory in the form of an unbiased assessment or a larger analysis of client investments, usually funds. I am going to focus on the latter, sometimes referred to as Investment Consulting.  

Financial Consulting, in the context of institutional clients, entails providing investment advice, managing risks and even undertaking investments on their clients’ behalf. Where is this money coming from you ask? Pensions. Institutional clients have Billions of Pounds (or Dollars) worth of pensions that need to be invested with a long term goal of managing inflows and outflows over time.   

 

What do you do?

Unlike management consulting or just financial advisory, financial consulting firms sometimes take on the delegated role of fiduciary management to undertake investments on behalf of their clients. Due to this, the role involves elements of both consulting and asset management.

A typical set up might go along the following lines:

  1. Client Solutions (Client Team)

Every client gets their own set of consultants who work together as a team to understand their clients’ specific investment needs. Teams may be split between Direct Benefits, Direct Contributions (types of pensions) and Insurance (catering to insurance firms).

 

  1. Strategy (Portfolio Managers)

These are the brains running the numbers and analytics for each client’s portfolio with the objective of minimising risk and maximising returns.  

 

  1. Manager Research (Investment Idea Generators) – [this is where I interned]

The team works on investing the clients’ money by actively analysing investment funds and meeting with fund managers to pick the best ones. Teams in this division are generally split according to asset classes: equities, bonds, hedge funds, private equity, real estate and such.   

 

While the team primarily focuses on fund investments, they often get called onto consulting projects from time to time. These would involve an analysis into a fund, its fee structure, management or any other assessment of an investment related decision or the market for a certain asset class.

Ok, I’m interested … What kind of skills do I need to succeed?

Core competencies are understandably important: strengths like leadershipcommunicationteam work and ethical thinking are a given - I intend on going into a bit more detail here.

As I mentioned earlier, because of the hybrid nature of the role, the skills needed overlap between pure management consultancy and asset management. Depending on the division you work in, the extent of how each skill is used will depend. Here are some of the major skills that will help you succeed on a high level:

Consultant Relevant Skills:

  1. Prioritisation and Time Management

Financial consultants charge per the hour and often take up multiple projects simultaneously. Deadlines are tight and work can vary. Being able to juggle all these tasks, while preparing for contingencies, is absolutely vital.

 

  1. Innovation

Think outside the box. Financial consulting is all about the human resource factor, the consultant, and their ability to problem solve. In this competitive industry, clients go to the consultants who can come up with solutions that work, can be understood and can be implemented effectively.

 

  1. Relationship Management

Projects do not always go smoothly and being able to talk these out with the client, while understanding their needs, is a balance of both negotiation and taking responsibility. This is a situation that consultants cannot avoid but being able to deal with it effectively will earn them kudos.  

 

Investment Relevant Skills:

  1. Analytical

Being able to work through numbers, data and large information while keeping sight of the bigger picture can be a challenge. Excel and PowerPoint skills are essential and consultants often build their own models from scratch.

 

  1. Business Mind Set

At the end of the day, your client will make an investment or financial decision based on your recommendations. They want more than just a “good” outcome – they are looking for the “best” outcome. To do so effectively, you need to place yourself in the clients’ shoes and be able to recognize business and investment opportunities effectively. This involves looking past the glamour of high returns by thoroughly considering the risks involved whilst spotting opportunities that others may have missed.

 

Is it rewarding?

Yes! The work is diverse and the learning opportunities are stellar. My role for example involved meeting up with fund managers, CEOs and CFOs at a very early stage and learning more about their investment decision making approach while, of course, analysing their business, strategy, team and other factors. Alongside this, the networks you build will be extensive.

Financial consulting firms often have a long term career path in mind when they hire and a high emphasis and investment goes into personal development. Funding and supporting you through CFA, Accounting or Actuarial exams is common. Feedback is constant and opportunities to rise within the firm are many; lateral hire is avoided where possible.

Working hours vary but typical days are 10-12 hours. The compensation is in line with other consulting firms and can be slightly higher at times.   

I like it but …. What’s the catch?

To be honest, there are very few caveats, if any, in this industry. Compensation can be an issue in the early stages since the career path is designed for the long haul. This means that bonuses and pay may be on the lower end in the initial years but build up extensively over time.

Travelling is not too much an issue in early years but can become one later on.

The role is also niche - good luck trying to explain what you actually do to your friends and family!

What are the exit opportunities like?

Financial Consulting firms often recruit for the long term but if you did decide to leave, the exit opportunities would depend on the kind of role you were working in.

If your division was focused on the investment side of things, then exits could go into direct asset management in that asset class. Client facing consultants can look to exits in management consulting firms. Joining Investment Banking is also possible.

Final words?

As I said earlier, picking the right career choice is a difficult process. One of the best ways to truly decide is to actually try things in your early stages through an internship or if not, some full time work. I hope this article helps by explaining some key aspects of Financial Consulting. That said, feel free to reach out and let me know if you have any further questions!

Asad Malik's picture

Islamic Finance in Modern Britain

Although the concept of Islamic or Sharia' compliant finance has been around since about 1000 AD, it was only three decades ago, in a small Egyptian town of Mit Ghamr, where the model truly proved successful in recent history. The key ideas behind Islamic Finance are twofold. Loans are equity based, in the spirit of shared risk and profits between the lender the borrowers - this means that interest (or Riba') is prohibited. Additionally, investments must be socially responsibility meaning that arms, tobacco and alcohol industries are inaccessible options.

 

In a historic move, the UK has recently announced plans for a GBP 200 million issue of Sukuk (Islamic) bonds - the first such open initiative by a western, non-Islamic country. A USD 1.3 trillion industry, expected to grow to USD 4 trillion by 2020, Islamic Finance has its allure in the wake of the global financial crisis when unconventional alternatives have been sought to promote growth and investment. The intentions behind such a move are beyond merely capturing a piece of the pie, or so Chancellor George Osbourne and Baroness Warsi assure us, but Islamic Finance is more than just alternative financing; it poses unique challenges that must be carefully assessed if the UK is to successfully reap its benefits.

 

A key issue is the complexity behind making investments "interest free", compliant with Sharia' standards (standards of social responsibility) and competitive in the modern financial industry. These targets can often conflict and indeed, most Islamic products seem to result in an interest based return and risk model despite direct asset investments. Improved legal and regulatory frameworks are essential and while UK has the appropriate resources, this can prove to be a costly process.

 

In my experience of working in Dubai for one of the region's largest provider of Islamic Investment products, attracting enough of the right clientele is also key. The Middle East’s Sukuk and Islamic products are highly demanded by the Muslim community which holds substantial wealth and places great emphasis on Sharia' compliance as a peace of conscience factor. Their risk profiles are often averse and their return requirements, conservative. Whether or not this will catch on with the Islamic community in the UK is to be seen but it is my understanding that the UK should place greater emphasis on foreign investments from the Middle East. Summer time is often ideal for such visitors who, given the intolerable weather back home, seek the relatively comforting haven that UK has to offer. Again, maintaining high compliance standards in a welcoming environment will attract such individuals. In the long run, Islamic investments in the UK must diversify clientele to non-Muslims as well. Malaysia for one has 80% of Sharia compliant investments held by non-Muslims. Current rates on Islamic financing are competitive with their interest based counterparts but more product knowledge will be needed before investors become comfortable with this relatively new concept in the UK.

 

The Islamic Finance industry is unique, complex and competitive - UK has much to catch on before it can take on the industry giants Saudi Arabia, Malaysia and Dubai along with newcomers Luxembourg and South Africa. Since Islamic investments are often structured with underlying commodities, UK has the potential to leverage its exceptionally liquid London Metal Exchange and prime location for competitive advantage.