Finance
If you have a passion for math and a knack for Microsoft Excel, then a career in finance could be a perfect match for you. While that’s a significant simplification, being adept at handling numbers is crucial for success in this arena. With a PhD, you stand out as a prime candidate in one of two key roles: as an equity research associate focusing on a specific industry, or as a quantitative analyst.
Equity research associates specialize in particular sectors like biotechnology, energy, software, or communication, which makes candidates with PhDs in relevant fields particularly desirable for these roles. Conversely, quantitative analysts, or "quants," are valued for their exceptional math skills and programming expertise. They don’t focus on specific companies or industries; their primary task is to create mathematical models and software that price stocks and bonds while executing trades seamlessly. Generally, quants hold PhDs in mathematically intensive disciplines such as statistics, physics, or engineering and carry extensive programming experience.
Entry Points
Most PhD holders enter equity research as associates. It's important to clarify that, unlike investment bankers and quants who move from analyst to associate, equity research operates differently, with the analyst role being the more senior position. Consequently, quants typically target analyst roles.
Another crucial distinction in finance is between sell-side and buy-side positions. Sell-side jobs primarily focus on gathering data to create reports and make recommendations on whether to buy, hold, or sell stocks—often found within larger investment banks. On the other hand, buy-side roles involve the actual buying and selling of stocks, typically located in smaller asset management firms and hedge funds. While subjective elements exist, buy-side positions tend to be seen as more desirable and offer greater profit potential. However, due to their limited availability and the high demand, securing a buy-side role usually necessitates prior experience as an analyst, making it less feasible to pursue without a finance background.
Application Process
Numerous large banks and firms feature career sections on their websites, allowing you to explore job openings and submit applications. In contrast, smaller employers such as hedge funds can be more challenging to approach for employment opportunities. These elusive targets often demand strategic networking to access. Don't hesitate to reach out to alumni from your university, participate in career fairs, join relevant LinkedIn groups, and tap into your personal network (asking friends and family for connections that might facilitate an informational interview can be invaluable).
Preparation is key for any interviews you manage to secure. This becomes especially crucial if you obtain informational interviews, as various banks and firms have distinct expectations regarding finance knowledge in their interview processes. While it's rare for employers to hit you with an expert-level finance question immediately, be ready for scenarios like being asked to "pitch a stock," which necessitates a solid understanding of the stock market and fundamental financial concepts.
Career Progression
Within equity research, you would typically start out as a research associate and look to move up to equity research analyst, and perhaps equity research senior analyst. This can be a bit confusing since the typical order of progression within investment banking is analyst and then associate. The timing for these promotions has many variables, not the least of which is your performance. Generally, high performers can expect promotions within 2-3 years and lesser but still competent performers within 4-5 years.
Work Hours
Equity research associates and quantitative analysts may not endure the brutal hours of investment banking, but don’t be fooled, this isn’t a standard 9-to-5 gig. Typically, the day begins early to ensure readiness before the market opens, leading to an expected commitment of around 12 hours per day, often from 7 AM to 7 PM.
Compensation
Compensation, including salaries and bonuses, significantly varies based on the type of firm you are associated with. The highest-paying firms, often referred to as bulge bracket, encompass names like Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, and UBS. Following these are the middle market firms, and then there are boutique firms.
Generally, expected pay would be
~$70-120K salary and $40-100K bonus for a bulge bracket associate
~$60-90K salary and $10-50K bonus for an associate at a smaller firm
Salaries and bonuses for entry-level quantitative analysts are comparable to those of equity research associates; however, they can vary significantly based on the specific job responsibilities and the nature of the position.
Reasonable estimations of pay at more senior level positions within finance would be in the range of:
~$175K salary and ~$300K bonus for VP
~$200K salary and ~$500K bonus for senior VP/director
~$300K salary and potential for astronomical bonus (10’s of millions of dollars) for managing director/partner
Exit Options
The landscape is largely uncharted for PhDs emerging from finance. Typical career paths include transitioning to managerial roles in the industry they specialized in, management consulting, business development, venture capital, and private equity.