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The Route is Rocky, but the Rewards Are Rich

The Route is Rocky, but the Rewards Are Rich

00:00 01 October in In the News

by Julie Bennets and featured in The Wall Street Journal Financial & Financial Advisor Careers Section
October, 2007:

Marlene Mazur, of Colts neck, N.J., started her financial career 30 years ago, right after she graduated from high school.

She passed the Series 6 and Series 22 exams required by the national Association of Securities Dealers to sell financial products and started selling mutual funds to her friends’ parents.

Today, Ms. Mazur is a broker/dealer representative, affiliated with WRP Investments in Youngstown, OH, doing financial and retirement planning and tax work for a long list of clients.  She won’t reveal how well she’s doing, but says that she and her husband own a 15-acre horse farm and an office building in Colts Neck.

In a few years, their son Ken, 22, will take over her business, but he’ll get there via a different trajectory.  Ken graduated from college this June with a financial degree and took a job with a mutual fund company where he will continue to work while earning his M.B.A. degree.  By the time he takes over, “He’ll know the business from the inside out” Ms. Mazure says.

Some of the people earning top dollar in financial careers have followed an unconventional route, just as Ms. Mazur did.  But for young people today, who dream of getting wealthy before they’re 40, the paths to the top are clearly market (?) and the rewards are worth the effort.

The Bureau of Labor Statistics reports that the investment banking industry employed almost 175,000 people in the first quarter of 2006 and they earn an average salary of $8,367 a week.  That’s 10 times the income of the average private sector worker.  The most recent Investment Management Compensation Survey by the Chartered Financial Analyst (CFA) Institute in Charlottesville, VA and New York-based recruiting firm Russell Reynolds, reports that experienced mutual fund managers earned an average $482,000 in 2005 and salaries have since gone up.  The business press reports daily on the millions earned by partners in private equity firms.  The 2008 Hedge Fund Compensation Report released this month by Glocap Search in New York, Institutional Investor News and Lipper Hedge World says that an experienced manager of hedge funds of $10 billion or more will earn $2.35 million this year.

More people than ever are investing in the stock market and the country has 60,000 broker/dealer representatives like Ms. Mazur who place their trades through about 5,000 national or regional broker/dealer firms.  Jonathan Henschen of St. Croix, MN, a recruiter who specialized in placing independent representatives says that traditional brokerages, called wirehouses, allow their financial advisers to keep about 40% of the commissions earned from selling stocks, mutual funds, annuities and other financial products.  Independent representatives keep 90% but are responsible for their own overheads.  These independent contractors can also earn money by charging fees for services like financial planning and doing client tax returns. To enter the field, Mr. Henschen recommends getting an undergraduate business degree and learning the business “from the inside out,” by working for four or five years in a wirehouse or by joining the staff of an independent financial adviser/representative.  To ready the top, you also need one of these certifications in the financial arena – the CFP or CFA.

The CFP, or Certified Financial Planner, designation is awarded by the CFP Board of Standards in Washington.  The rigorous requirements include at least 15 post-college semester credit hours of approved coursework at CFP-designated institutions, three years of relevant work experience and a passing grade on the DFP exam.  This isn’t an easy task.  Of the almost 70,000 people who have taken the exam since 1991, only 57% passed.

Earning a CFA is just as tough.  Only 42% of the 72,000 world-wide candidates who took the Chartered Financial Analyst exam in June passed.  Requirements include four years of work experience in the investment industry and at least 250 hours of self-study preparing for each of the certification’s three exams.

If you’re looking for a job with a mutual fund, a CFA is a stronger credential than an M.B.A., says Simon Lewis.  Lewis is head of the banking and financial-services division of Michael Page International, a recruiting firm based in New York.  “To qualify, you should earn an undergraduate degree in finance or accounting at a top university,” says Mr. Lewis.  Go through the training program at a leading investment bank and earn your CFA.  “Our clients want to hire candidates with a proven record of managing money.  To earn an M.B.A., you have to be out of the markets for two years You can get your CFA while you’re working and, because so many applicants fail, clients know those who pass are strong, bright candidates.”

A professional credential such as a CFP is important if you want to be a generalist relationship manager.  These are one of the people who earn $300,000 to over $750,000 a year, helping individuals invest their personal fortunes.  Chuck Daggs, National Sales Manager of the Wealth Management Group of San Francisco-based Wells Fargo Bank, says the path to such a position begins with joining the wealth management group of a prominent bank or investment firm right after college.  Mr. Daggs says  that once you’re established within wealth management,  you can indicate your interest in various career paths within the business.

To gain the credibility and trust necessary to handle a client’s wealth, Mr. Daggs recommends earning a CFP or CFA and an M.B.A. is also helpful.  He says, “You must also communicate well and have good problem-solving and people skills.”

Personal attributes are also important if you’re hoping to snag one of the highest-paying jobs in finance, partnership in a private equity firm or managing a hedge fund.  Alison Seanor, senior vice president of the hedge fund practice at recruiter Glocap Search, says aspirants to both positions usually start along the same route, by earning an undergraduate degree in finance from a “top-tier school, Ivy League or equivalent.”  “You should hold internships at top investment banks or strategic consulting firms, like McKinsay or Bain, while in college and take a job for two or three years at such a firm after graduation,” she says.

If you’re seeking a career in private equity, you need a broad understanding of how business works and a strong network, two things you can gain from an M.B.A. program at a top business school.

Ms. Seanor says, “Hedge funds prefer CFAs to M.B.A.s and want candidates who are calm under pressure and can work at a fast pace.”  Despite the turmoil depicted in the media, hedge fund jobs are still considered “a very sexy option right now” for people from all walks of life.

The jobs – and their paychecks – are so hot that Ms. Seanor is fielding calls “from people like lawyers or doctors with wonderful resumes who now think they want to go to work for a hedge fund.” But they lack the one qualification that is vital to anyone seeking a high-paying financial career – a genuine, long-time interest in the financial markets.