Financial Analysis vs. Computer Science

[nike5]

I don't know how related this is to financial analysis, but can anyone offer some insight into what mathematicians do in finance.

 

[ajassat]

I don't know how related this is to financial analysis, but can anyone offer some insight into what mathematicians do in finance.

-Predict the stock market
-Calculate success rate of future investment
-Calculate derivatives
-Predict future economic growth
-Contingency planning (during economic downturn)

Prediction involves use of statistical mathematics and price derivatives. Calculus in multiple variables is used heavily in economics and contingency planning.

For more information on Mathematical Finance see:
http://en.wikipedia.org/wiki/Mathematical_finance

 

[AsianSensationK]

Computer scientist is a better job because it's more creative and much easier to find work.

The problem with a Financial Analyst is that they can do a variety of work. It's a broad term for a number of professions but they all have one thing in common. You will be making in the range of 30k to 45k a year when you graduate and in many cases you will be making nothing. You will be working at the bottom of the pool and the only way up is to prove yourself every day. Here are the only examples that I can think off the top of my head.

After you graduate you can become a financial adviser but I bet you have no idea what they do. Financial advisers are hustlers and they hustle everyday. As a financial adviser you will be required to go door knocking and put your creative skills to the test on how many people you can get to trust you with their money. You will have to convince people to give their life's savings to you. Think about that for one second... You will have to convince people to hand over their entire life's savings to you. This is an extremely hard task and on top of it, you will be making absolutely no money when you start out. None, zip, zipo. Your income as a financial adviser comes form how many clients you can score and there is no chance in heaven that you would be able to live off of 5 clients a year. Most people in this profession do not make it and end up having to hand over all their clients to other financial advisers in the business. They end up working for other financial advisers making 30k or less a year. I've seen it with my own eyes.

The only other option is to work at a bank. At a bank you can make a cool 40k or 45k a year as a loan officer but there is no room for advancement. You'll be competing with other loan officers to get raises and promotions. They're limited.

Lastly, you can move to New York if you are determined to make it big. Also, your education doesn't stop when you finish college as a Financial Analyst. You will be required to take 3 exams if you want to deal with people's money.

Edit: I'm not trying to discourage you from what you might want to do but I'm trying to show you the reality of the situation. As a financial analyst, the only way to make it big is to grow your client base. You will struggle for the first few years but if you make it through then you have the potential to make around 100k a year but that's only if you grow your client base.
The questions that you must ask yourself are...

Can you hustle?

Are you a people person?

Do people trust you?

Can you lie to your clients with a straight face and voice? You will be making up stories everyday. At least, that's what I see the good ones doing. All the nice honest ones are working for the big shots, seriously. This is a scumbag profession and you must be a scumbag to do it. The type of lies you will be telling range from very small to very large but they are still lies. Financial Advisers are cool people but when it comes to money they will say anything, seriously. They put on a face to get you to hand over your money, that's why they seem so cool. Once they have it they will tell you anything to hold onto it. That's how this profession works.

Do you have the ability to sell yourself?

Do you have a large network of rich friends? <<----If no then you should absolutely not do this. Where will your clients come from if you don't know people? Don't expect to land a job at a big investment firm without a client base. They only take people with a proven record.

This is brilliant. The best part is, I know not one word of this is a lie. A lot of kids who study finance wind up as financial advisers. And being a financial adviser these days is no different from selling insurance. It's all bologna.
----------------------------------------------
To avant-garde: I know I've mentioned this in another thread, but seriously, if you're interested in finance, do not study economics or finance. Study accounting and a little bit of finance. Get a CPA. You can have a slightly better job handling people's taxes, bookkeeping for small business, and maybe a little bit of retirement and estate planning. The best part is, you will not be needing to lie through your teeth every day to your family and friends, because you have other means to generate revenue for yourself. If you do well at a notable school for accounting like Texas, you might even land a job as an auditor at the big 4 (in a big city). Then, a world of corporate finance jobs open up to you after you put in your time.

To swerve back on topic, I would probably pick both business and comp-sci if I could've gotten away with it. It's a lot of work though.

 

[Wax]

Yes! They are salesman and I agree with you on getting a CPA instead of a finance degree. You can still be a financial adviser with a CPA and have the reassurance of a steady income if financing didn't work out for you.

I think there is a large disconnect with how the Media portrays what an investor or financial adviser does compared to the real deal. Most of the time the media only spot lights figures such as Bernard Madoff as some glamorous individual, giving the wrong impression in this field.

A financial analyst degree is not a desk job in which a university teaches you a skill and you get to track the stock market all day long. This is a salesman job that does not require a bachelors degree. You will be physically door knocking or cold calling on a daily basis. Researching the market plays an extremely small roll in this field and you will be putting up a face everyday to your clients.

As proof of this, think about the past year. Not one single Financial Adviser in the entire world was able to see this recession coming and capitalize on it. (Peter Schiff doesn't count. He's a permanent bear and his firm still lost money) In fact, every single investment firm in the entire world took a large nose dive in the past year which should be a clear signal as to how much those guys are really paying attention to their client's money. What type of answers do you think they told their clients when they had no idea what was going on with the recession?

 

[TheDoorsOfMe]

I don't know if anybody has suggested this yet or not but I would major in both if you have an interest in them. I say this as a holder of a Finance degree. The degree is not the hardest program in the world and usually not that many credits. Many of your classes will even crossover. Or at least they did at my school. Plus, there is a huge demand for quantitative financial traders called quants who use programing to select stocks. These are some very high paid positions on wall street. So why not have the best of both worlds and get paid an ungodly amount of money!

 

[Wax]

Yeah someone mentioned Quants earlier and it seems to be a viable option if your goal is to make it big. The only problem is that most quants are physics degree holders and not finance.
http://en.wikipedia.org/wiki/Quantitative_analyst

I'm not saying anything is wrong with a finance degree. A finance degree is a good option to find a job but a horrible choice if your goal is to land some big time job making a six digit salary in NYC.Here's a good forum if you are interested. It was my first google search. According to one guy, "Get an MFE or PhD in Quantitative field. Learn about finance and get good at programming (C++) ".
http://www.quantnet.org/forum/showthread.php?t=2187

 

[Wax]

OMG. Quants make a bazillion dollars.

http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-4131

Hemendra Rai, a U.S.-focused recruiter at Huxley Finance, says Wall Street packages for credit derivatives analysts with similar experience average around $450,000. Barry Franklin, of Arizona-based recruiter Integrated Management Resources, put U.S. packages even higher at $600,000 to $700,000. “This is the product everyone is looking for right now,” he says.

 

[Locrian]

I don't know how related this is to financial analysis, but can anyone offer some insight into what mathematicians do in finance.

Quants are primarily involved in pricing derivatives. Derivatives are difficult to price because of the probabilistic nature of their underlying securities. An example of one way to deal with this is stochastic analysis; see the Black Sholes Equation/Formula as an example, but note that modern derivatives pricing moved past it in that form.

Since solving many of these equations (BSE, for example) is essentially solving a second order differential equation, often with boundary conditions, it suits itself well to people comfortable with that type of problem. Some computer programming, especially C, is used, along with lots of excel and probably some VBA as well.

The above is pretty basic and there's lots of cutting edge stuff that goes beyond it, but it should get you started.

For a more formal introduction, you could see the Derivatives Markets text, by McDonald I think.

 

[Locrian]

Yeah someone mentioned Quants earlier and it seems to be a viable option if your goal is to make it big. The only problem is that most quants are physics degree holders and not finance.

Quants come from lots of mathematical backgrounds. Historically physicists were some of the first to be recruited because, as I mentioned above, they deal with similar mathematical problems.

Lots of mathematics PhD's are hired as well though. An increasing number of Computer Science phd's are hired, as well as Masters in Financial Engineering.

Note that the quality of school you get your degree from is critical, contrary to what you wrote earlier in this thread.

 

[Locrian]

OMG. Quants make a bazillion dollars.

True, but they work a kabillion hours, so the ratio isn't as good as it sounds

http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-4131

Okay, but that is from 2005. You may have heard some rumors about little bumps in the financial system since then. The rumor mill has suggested that compensation wasn't hit too hard, but hiring was definitely down, as of recently. It may be picking up as we speak, but has a long ways to go till 2005 levels.

I think people going into quantitative analysis right now should be looking ahead carefully.

 

[Locrian]

Quants are primarily involved in pricing derivatives.

Meh, I should restate that. Quants are traditionally involved in pricing derivatives. They do other stuff - high frequency trading, study price signals, etc. I don't know what they do most these days. I'm betting its still price derivatives, but that could have changed.

 

[Wax]

Quants come from lots of mathematical backgrounds. Historically physicists were some of the first to be recruited because, as I mentioned above, they deal with similar mathematical problems.

Lots of mathematics PhD's are hired as well though. An increasing number of Computer Science phd's are hired, as well as Masters in Financial Engineering.

Note that the quality of school you get your degree from is critical, contrary to what you wrote earlier in this thread.

Okay, that's great but that's a masters degree and not undergraduate. It seems that your undergraduate degree for a Quant can be anything as long as it's related to math so I don't see a degree in Finance being a viable option. From reading the Quant forums, a degree in computer science is a much better choice for an undergraduate degree which is one of the options the topic creator laid out.
Edit: From just doing a quick scan of what the job market really wants in a Quant, you can easily see that an undergraduate degree in finance will do absolutely nothing for you. From all the job listings, the market seems to want strong C++ knowledge and a PHD in a quantitative field.

Quant Job listings
http://www.quantfinancejobs.com/jobs/quant.asp

 

[Niles]

I think it is a good idea to keep in mind that the number of quant-jobs is not very big compared to the number of eligible physicists who can possesses those jobs (at least not; I don't know how it will be in some years). I am saying this because most people I know (including myself) would much rather have a very well-paying job in a bank as a quant rather than jumping from one post-doc to another in hope of getting hired as a associate professor.

Thus keep in mind that if you study physics with the goal of becoming a quant, then there will be many smart guys from MIT, Princeton, Harvard etc. applying for that very same job as you are applying for, and there is a good chance that they will get the job instead of you (unless of course you are one of those guys).

I am not saying this to discourage anyone, but it is important to be realistic.

 

[Wax]

Have you guys ever seen the movie, "The Pursuit of Happyness"? It's about a homeless man named Chris Guardner who made it big in the financial world by becoming a broker/financial advisor without a college degree.



I know I've beaten this topic to death but I came across this guy in an article and I thought I'd show you exactly how he made it big. This is a quote taken directly from his wiki page, " Gardner worked to become a top trainee at Dean Witter Reynolds. He arrived at the office early and stayed late each day, persistently making calls to prospective clients with his goal being 200 calls/day."

linky.
http://en.wikipedia.org/wiki/Chris_Gardner

 

[avant-garde]

Maybe accounting is a waaaaaay better choice. lol

 

[Locrian]

Okay, that's great but that's a masters degree and not undergraduate.

Read the OP - it makes no such distinction. You're narrowing to your field of knowledge again.

 

[Locrian]

I am saying this because most people I know (including myself) would much rather have a very well-paying job in a bank as a quant rather than jumping from one post-doc to another in hope of getting hired as a associate professor.

Wow, that's not something you hear every day in this forum.

 

[Locrian]

Maybe accounting is a waaaaaay better choice. lol

Accounting would be the choice if you were looking for consistency and flexibility.

Compared to things like quant or actuarial work, accountants have a much larger number of companies hiring, a much broader list of geographic locations to work (what % of US quant jobs aren't in NY or Chicago?), and possibly more flexibility in working hours. They also deal with more competition in the job market, typically lower pay, and less prestige.

 

[kote]

http://en.wikipedia.org/wiki/Financial_analyst

Advisers are not analysts. Most companies have the job title "Financial Analyst" in addition to banks having various particular types of analysts.

If CS is an option and you're worried about your career I'd recommend EE if it's not too late. Starting salaries for EEs (and other engineers) are high 50s out of undergrad, and an engineering degree will open doors in other industries that value quantitative skills (think finance, management, consulting).

Very few recruiters in any field will turn down an accredited EE with proven quant skills and work ethic for a business major who may or may not have had a fluff undergrad program. Show leadership and social skills through extracurriculars, a soft double major, minor, or just extra humanities courses, and the interview.

 

[avant-garde]

Locrian, how much less prestige does an accountant get?

 

[Locrian]

Locrian, how much less prestige does an accountant get?

That's a great question. How do you measure it? What made me believe that's true? And most importantly - to whom? Thank you for calling me out on that.

I'll actually stand by the statement (and can even give reasons, though I'm not sure how convincing they are), if people really cared. However, I encourage people to assume I'm wrong and go try and pursue the question on their own, instead.

 

[kote]

That's a great question. How do you measure it? What made me believe that's true? And most importantly - to whom? Thank you for calling me out on that.

I'll actually stand by the statement (and can even give reasons, though I'm not sure how convincing they are), if people really cared. However, I encourage people to assume I'm wrong and go try and pursue the question on their own, instead.

I think the US economy has answered part of the question for you:

"Median annual earnings of wage and salary accountants and auditors were $54,630 in May 2006."
"Median annual earnings, including bonuses, of wage and salary financial analysts were $66,590 in May 2006."

http://www.bls.gov/oco/ocos001.htm
http://www.bls.gov/oco/ocos259.htm

See also related titles like "budget analyst" and "financial manager" which are more closely related to financial analysis.

 

[coldmountainr]

This thread may be old, but is surprisingly relevant to my life situation. Maybe I can offer a bit of insight when it come to the analyst/accounting career path, at least as it relates to corporate analysts and corporate CPA's. I took an undergraduate physics major, then decided to pursue a career in accounting/finance. So I got a masters in accounting (MPA) from Texas and slid in for a quick 15 months of work experience as a big four auditor. Was laid off last April and am now a Texas CPA. I really love finance and particularly enjoy the mathematical and statistical problem solving that relate to the various financial instruments. Currently, I am a CFA level II candidate for next year.

I can attest to the fact that trying to get in as an entry level corporate analyst isn't really happening now. The number of general accounting, auditing, and financial reporting roles available is quite large despite the economy. Corporate analysts, in comparison, are much more expendable and are currently very top heavy with applicants who have tons of experience. Just look at the size of a corporate finance division compared to the mass number of accountant roles.

I spent seven months looking for any comparable finance position and could not land one. I didn't even get a second look despite pertinent academic background and a CPA. I decided to look at financial reporting roles about two weeks ago. I have my first job interview scheduled for next week as a result.

Unless you end up knowing someone or have an 'in' otherwise, job hunting will largely involve recruiters and hiring managers with eyes glued to your resume. They really do not look at anything else other than your work experience followed by your academic background and other relevant professional achievements.

My thinking way back a long time ago was that I wanted to learn business and eventually start another firm on my own (ran small blue collar business earlier in my life). My idea would be to eventually create freedom of time to pursue my studies as I see fit without the need for a standard job (as mentioned the mundane daily tasks in most fields are not terribly interesting, but end up taking up so much of your valuable time).