Nicholas Colas: What I tell summer interns

What I tell summer interns

by Nicholas Colas, Convergex

Summary: What do you tell a college student considering a career in finance? In today’s note we summarize our annual chats with Convergex’s intern class as well as other conversations with young Wall Street professionals.  Our central message: as you start your career, focus on acquiring skills that drive you to your long term goals.  Implicit in this mandate is the need to think creatively about the future of finance, because a career in this business requires more mental and emotional flexibility than ever before.  Having a mentor is very useful, of course, and we touch on how to get the most from that relationship.  The bottom line is that the requirements for success on Wall Street are the same as any other industry built on intellectual capital: never stop learning, plan to be surprised (for good or for bad), and focus on long term goals.  And yes, those goals will change several times during your career – and that’s OK.

Every year, the folks that run Convergex’s summer internship program ask Jessica and me to speak to the group.  In addition, we get numerous requests throughout the year to meet one-on-one with other college students to answer their questions about a career in finance.

Today’s note is a summary of what we tell them.

Lesson #1: Care about what you are doing.  I always start my intern talk or informational interview with a brief quiz.  It usually goes something like this: Where did the following financial asset prices close the prior day:

• The S&P 500
• The U.S. 10-year Treasury (yield)
• The dollar-euro exchange rate
• An ounce of gold
• A barrel of WTI crude oil
• A share of Apple/Alphabet/Facebook

I am lucky if a few people know 1 or 2 answers.

Then I pose the obvious question: “Why are you here?” The idea behind that gruff start is to introduce the group to the concept that Wall Street – and any knowledge based industry, actually – judges you by what you know.  And if you can’t even rattle off the basics, you are showing that you don’t care about that.

Now, I know that my youthful audience is thinking “That’s dumb – this old guy is locked in a time warp where the Internet didn’t exist.  I can just look that up online.”  So let’s talk about that…

The guiding principle of capital markets is that every asset price relates in some way to every other asset price.  As you watch stocks, bonds, commodities, derivatives and currencies trade you learn those connections.  Knowing where the S&P closed yesterday is, in and of itself, useless.  But if you have been watching – and learning – about how assets trade, you will know where U.S. equities closed as a matter of observation.  And if you haven’t been paying attention, you won’t.

Lesson #2: Think in terms of skills you want to learn, not just jobs you might like to have.  A career on Wall Street is more volatile than most people realize.  Yes, you may start and end your professional life with the same job functions.  But you will likely enjoy your life more – and have more job security – if you keep developing new skills as well.

For a young professional in the business, the list of skills necessary to achieve success includes:

• Basic financial modeling. This means actually reading 10-Ks, 10-Qs and earnings conference calls to develop a viewpoint on the key drivers of financial performance: units, price, mix and costs.  There’s simply no shortcutting this process, and it takes time and practice to develop.
• Efficient writing skills. Wall Street likes to process information in batches of three points – no more, no less.  In securities analysis, for example, it is the evaluation of “Industry, company, and valuation”. The typical person can read 300 words a minute.  Attention spans on the Street run short, so you typically have less than 1,000 words to get your point across on any topic, anywhere, any time.
• Good verbal communications. As with writing skills, getting your point across face-to-face in an organized and efficient manner is also basic requirement.  This extends even to the structure of job interviews, where the ”Rule of 3” also holds true.  In that environment, the three points on the interviewer’s mind are “Why you, why us, and why now?”
• How to find novel information. Asset prices only move when new information comes to light. Since every young Wall Street intern has been tethered to the Internet since birth, this is one area where they can shine.
• An interest in people. Sometimes I add the following questions to the quiz: what is the full name of the receptionist at our firm, as well as the Chief Financial Officer and General Counsel?  Finance, for all its increasingly quantitative tendencies, still relies on people.  If interviewing at a firm, you should know the names and backgrounds of every senior manager.  And if you are lucky enough to have an internship, you should know the entire senior management team AND the person that says “Good morning” as you walk in the front door.

Lesson #3: Mentoring helps a lot, but it is a two way street.  The question I most often hear from interns and young professionals is “How do I get a good mentor?”  My answer: “Consider what the relationship does for them.”  Don’t expect someone to help out just because you ask, or even if they have been assigned to you as a mentor.  Consider what you can actually do for them, too.  Do they have a pet project where you can help?  Or are they involved in a charity that needs a helping hand?  Be creative…

Why even bother with a mentor?  Essentially, they help you develop professionally both more quickly and more efficiently.  They will ask you the questions you don’t even know to ask.  And help you answer them.

Lesson #4: Push back against fate.  A lot of Wall Street interns have family in the business.  They’ve seen their parents make a good living and enjoy the lifelong friendships of other finance professionals. When they get an internship in the field, they figure it’s as good an opportunity as any…

The reality is that Wall Street has changed a lot over the last 30 years.  In the 1980s and 1990s, it was a growth industry; now, it is (for the moment, anyway) largely mature.  Headcounts are, at best, flat overall.  In some areas, they are declining.

The message here is to think creatively about what finance jobs have the most promise, since they will almost certainly NOT be in the areas where your parents’ generation currently works. Technology-based solutions are booming, for example.  So are the number of well-funded startups attempting to disrupt older businesses.  And even if you don’t end up working at one of these firms, you should at least know they exist and how they threaten the existing Wall Street business models.

Lesson #5: Imagine the life you want (professionally and personally) and work backwards from there to develop a plan.  As a starting point, I often ask the interns: “How important is financial success to you, and why?”  There are no wrong answers, of course.  But as young people with limited experience in the real world, they are only just now coming to grips with the intersection of lifestyle and the income needed to achieve it.

Some questions I raise as they ponder their personal career maps:

• Would a master’s degree help you achieve your goals? If so, what kind of job, outside activities and mentorship relationships do you need to get into a good school?
• Do you know other people who have done what you want to do? Mark Zuckerberg doesn’t count… But aside from him, how are you going to meet and talk to those people who are already living the life you want?
• Do you need to work at a specific/small list of companies to achieve your long term goals? Let’s face it: being known as a rising star at Google/Facebook/Apple/other big tech name is going to open a lot more doors than working for a third rate startup.  So what exactly is your plan for getting an interview and getting hired at one of these firms?  Substitute a Wall Street firm’s name in that list, and it is the same idea.
• How do you respond to rejection? At some point in every Wall Street career, you hear the words “You’re never going to make it.”  Most of us hear it many times.  How will you reply?  And will you believe it?
• How are you going to build your skills to achieve your professional goals? It doesn’t matter if you see yourself running a successful startup in 10 years, or being a managing director at Goldman, or running a $1 billion book at a hedge fund.  All those jobs have specific skills you’ll need to acquire over 3-10 years.  What is your roadmap?

In summary, the message I try to impart is simple.  Work towards a plan.  Since that plan will change several times over your career, focus on building useful skills as much as just landing a “good” job.  Wall Street isn’t growing the way it used to, but that’s OK.  For those of use who’ve been at it for 30 years or more, you know that the old musician’s quip about the violin applies to our profession as well:

“You don’t choose it; it chooses you.”

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