< The Finance Professionals' Post: November 2011

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19 posts from November 2011


Cash Rich Non-Financial Firms Are Luring Financial Pros


Have you ever considered looking beyond the financial markets to find a finance job? No? Well, you may want to think about this. While the financial sector is shrinking in the wake of the economic meltdown, continuing shocks to the financial system from the European sovereign crises, and a complete inability of Washington politicians to agree on anything, cash is piling up on Main Street.

Treasury Strategies, a Washington-based treasury consulting firm, says at the end of the third quarter corporate cash balances grew to $2.05 trillion—a 4.5 percent increase over last quarter. That is $648 billion more than the first quarter of 2009.

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My CFA Exam Study Strategy


I think that pursuing a Chartered Financial Analyst (CFA) designation requires commitment from the candidate along with support and understanding from their family, friends, employers, and colleagues. As a Level I CFA candidate, I started to study for the exam at the beginning of August 2011 by enrolling in the CFA preparation course offered by New York Society of Security Analysts (NYSSA). I find the course helpful and interesting because my instructor was very knowledgeable and has a great sense of humor. Three and a half hours each Monday fly by. I know that all of us candidates worry, and may be nervous ahead of the exam. There are many strategies available, and a large part of them have been covered previously, but here are a few of the study strategies that I am using to get through the CFA® exams.

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Maximize Your Performance on the CFA Exam

CFA San Francisco

If you stay focused and composed, you will maximize your performance on the CFA exam. It’s hard to argue with that! Follow this game plan to minimize stress and increase your chances of success on exam day.

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Financial Collapse: It's Only Natural

What do the collapse of MF Global, the euro crisis, the subprime mortgage crisis, the collapse of Fannie Mae and Freddie Mac, and the 1998 collapse of Long-Term Capital Management (LTCM) all have in common?

Certainly these crises all shared the following characteristics: too much leverage, lack of transparency, inadequate regulatory oversight, agency problems of misaligned incentives, and failures of leadership at the very least. This is what we know, and we’re frustrated watching inadequate public and private sector responses to these problems.

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Video: Sell Yourself in 30 Seconds

When was the last time you updated your resume? A good resume should sell its subject in 30 seconds or less. Amy Geffen, PhD, and CEO of The New York Society of Security Analysts discusses the keys to resume writing here. 


Book Review: Anglo Republic


Anglo Republic is the story of the remarkable rise and fall of the Anglo Irish Bank—once one of the fastest growing financial institutions worldwide, an in-depth review of how, "a small Dublin bank became too big to fail and too rotten to save—and how it dragged an entire country to the brink of bankruptcy." Anglo Irish had a spectacular rise on the Irish property boom, and an equally dramatic fall into eventual oblivion in 2008. Along the way, the Irish government and bank regulators, management, and board appear to have been largely oblivious to the bubble they were riding, and its end result. While the cast of characters may be unfamiliar to American readers, the book is a graphic chronological record of a bank failure, authored by journalist Simon Carswell, Finance Correspondent of the Irish Times. Carswell covered the Anglo Irish story throughout its peril.

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Video: Job Search Techniques

It is a tough market, and it will be for the foreseeable future. Job seekers must be prepared to go up against other candidates that may be more qualified. There are several steps to an effective job search. Your first step must be to actually search. Amy Geffen, PhD, the president and CEO of NYSSA, will offer career advice on what you need to do to maximize your time in your job search and on the job.


If You Want to Work As a Trader, It’s a Lot Less Clear Than It Used to Be That You Should Be Working at Goldman Sachs


It used to be clear that Goldman was the place to be if you’re a trader.

Now it’s not.

Goldman’s traders continued to make some of the biggest money in the third quarter. However, they also made losses on more days than rivals.

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Recent Research: Highlights from November 2011

"Breadth, Skill, and Time"
The Journal of Portfolio Management (Fall 2011)
Richard C. Grinold and Ronald N. Kahn

The information ratio determines the potential of an investment process to add value, and according to the fundamental law of active management, adding value depends on a combination of skill and breadth. Grinold and Kahn use an equilibrium dynamic model to provide insight into the concept of breadth, as well as a refined notion of skill. In equilibrium, the arrival rate of new information exactly balances the decay rate of old information. Grinold and Kahn denote the information turnover rate g. It is relatively easy to measure for any investment process. If the investment process forecasts returns on N assets, the breadth of the strategy i is g · N. Skill—the correlation of forecasts and returns—increases with the return horizon for small horizons, but then asymptotically decays to zero for very long horizons. The authors’ main result is that the ex ante information ratio is Breadth, Skill, and Time , where κ is a measure of skill.

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The Keys to Long-Term Success As an Equity Analyst

James Valentine is a former Morgan Stanley equity analyst, associate research director and author of Best Practices for Equity Research Analysts. He now heads up AnalystSolutions, which provides services to improve the quality of equity research. Valentine will be a featured speaker at the CFA Institute Conference: Security Analysis and the Search for Value, later this month. In the run up to the conference we talked with Valentine about some of the key qualities equity analysts need to cultivate to achieve success over the long term.

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Studying for the CFA Exam: The Final Countdown

CFA San Francisco You’ve studied diligently for the last several months, plowing through endless pages of material, answering countless practice questions, and meeting weekly with your study group. Now what? With less than a month to go before exam day, what is the best use of your time?

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Secrets to Investment Report Writing: What Successful Analysts Know

Your career depends on your ability to communicate effectively.  If you can write investment research reports that your clients find both useful and thought-provoking, you have a powerful career advantage.  

Here are four top tips for you on how to advise your clients on that critical decision: buy or sell?

  • Research widely and deeply.  

    What industry is the company in? Who are the key competitors? How are globalization, technology, demographic trends and competition affecting the industry's future? Is the company well-run? Does it have a smart strategy? Do its products and services meet the needs of today's customers?  Is it an ethical company? Does it have a reputation for integrity and social responsibility? What do its employees say about it? Does its culture foster innovative risk-taking—or is it a culture of fear? Do not fall for the company's self-promoting rhetoric.  

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Rethinking the Role of an Analyst

It is common to question the worth of Wall Street analysts. Whether they love a stock that drops like a rock or are late to the party for one that soars, there are plenty of naysayers. Conversely, many publications analyze recommendations and pronounce certain analysts the best of breed, often using questionable methodologies to do so.

In addition, a huge volume of academic research has focused on the work of analysts, narrowly defining it as crafting earnings estimates and making stock recommendations. All of that is in contrast to surveys of institutional money managers, which consistently show that they place little value on sell-side recommendations versus other factors.

The reality is that far too much attention is paid to an exercise in futility that doesn't really match up to the needs of investors; while stock ratings are fodder for reporting and analysis, they can conceal rather than reveal what an analyst truly brings to the table. But a larger issue is that most analysts are set up to fail.

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The First Activist Congress

LincolnObservers who marvel at the far-reaching nature of the legislation passed by the 111th Congress that met from January 2009 to December 2010 may be even more amazed at the groundbreaking actions of the 37th Congress. 

That group of representatives met in four separate sessions from March 1861 to March 1863, and passed several acts that profoundly changed the federal government’s involvement in many aspects of the nation’s business.The 35th and 36th Congresses had passed 129 and 157 public acts and resolutions, respectively. The 37th Congress passed 428, while its successor extended or passed another 411. Many related not to contingencies of the ongoing Civil War, but to unfinished Republican Party business left over from prewar legislative sessions. Without representatives from 11 states that had seceded and formed the Confederate States of America (CSA), the 37th Congress passed landmark legislation such as the Revenue Act, Legal Tender Act, Homestead Act, Morrill Act, National Banking Act, and Pacific Railway Act, creating what historian Leonard Curry has labeled “a blueprint for modern America” that is still visible some 150 years later.

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Book Review: Great by Choice

Great-by-choiceJim Collins is considered one of the very top management experts, and has written several books that have gained a wide audience. His new book Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them AllGreat by Choice follows in this path. It is carefully researched, clearly presented, and studies a timely topic—why some companies are able to move ahead in times of turmoil and trouble, while others fail to do so.

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A Charterholder's Perspective - Martin Rosenburgh

Curious about what the CFA exam has in store for you? Learn more from a charterholder's perspective. Martin Rosenburgh, CFA, Esq. discusses what sets CFA curriculum apart from other coursework and programs.



Wealth Management Sales Assistants Need to Prospect If They Want to Earn the Big Bucks


Wealth management sales professionals wanting to advance in rank and compensation must be willing and able to take on the nuts-and-bolts duty of prospecting for clients, Florida recruiter Dave Moran told eFinancialCareers.

Moran, a partner with Experienced Advisors Recruiting of Fort Lauderdale, FL, points to a newly-released Registered Rep. magazine survey showing that only a small percentage of advisor sales assistants are interested in becoming full-fledged financial advisors even though sales assistant (SA) pay shrank last year.

The annual survey of sales assistants, client service associates and other support professionals across the country, conducted in August, found that average base pay fell 16 percent to around $45,000 in 2010, while the average bonus dipped 4 percent to around $6,300.

The survey, which was completed by 183 sales assistants, also found that 35 percent of the sample was glad to remain in the SA function. About half of those surveyed said they were interested in graduating to a position with more responsibility, compared with 35 percent who said they were happy staying put. About 14 percent said they wanted to serve FAs with ultra-wealthy clients. “Another 11 percent said they would like to be office managers, while 10 percent were interested in becoming financial advisors," Registered Rep. reported this month.


“Here’s the rub,” says Moran, a former CFP and advice giver himself. “The real compensation comes when an SA becomes an FA. However the trend is that most SAs want to continue to be support driven, working with clients and retaining revenues” instead of attracting new clients and adding to the revenue base.

“In my opinion, good SAs are a farm team for future FAs,” Moran says. "If only 10 percent of SAs want to progress to FAs, then where are these firms going to get FAs of the future? The same way they do now, via recent college grads or career changers who will be spit out of a training program after $100,000 or more is invested in them.”

Frequently, these newbies won’t generate enough revenue quickly enough for their firms.

Talented SAs should learn how to “build a book, run a business and share in the success” of their firms so they can also be included in succession planning, Moran says.

Also, noting that support personnel are not expecting the pay squeeze to last—with 57 percent of survey respondents expecting their total compensation for 2011 to be more than what they got in 2010—Moran says, if an SA is expecting an increase in base pay, then they will have an increase in workload not in proportion to the pay increase.

“And, it's likely to be in areas that they might not enjoy as much as interacting with clients, such as compliance,” given that almost half the survey respondents said compliance duties were up this year over last year.


On the other hand, many advisors will hand you a personality test when you interview for a position at their firm, and not every support staff person has what it takes to be a lead wealth advisor—and vice versa, says Robert Wolfe, Managing Director of United Capital Financial Partners’ South Florida Region.

Those who will be good at prospecting will have a good deal of assertiveness, ego strength and will favor risk taking, for instance, says Wolfe, while those who excel at service will test high for being accommodating and needing external structure rather than independence.

The good news is that there seems to be plenty of work for sales assistants these days, Registered Rep. reports, and ideally, says Wolfe, those with both detail-oriented support skills and sales accument can begin as SAs and be “groomed and mentored” to become wealth advisors.


Russia: Some BRICs Are Different

Russia has always been different from the rest of the world. Even 20 years after the end of the Soviet Union and the Cold War, this author still finds it a little strange to find Russia grouped with other BRICs, or most emerging market countries. The others—China, India, and Brazil—all have very large portions of their populations struggling with poverty, and are characterized by historically limited, but now improving, access to technology. Not Russia.

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Not So Great Expectations

Oddly enough, the day after Steve Jobs died was the first time that I had been in Silicon Valley in decades.  Finding myself with a rental car and time on my hands, I drove to Apple headquarters. The scene was very much like that for other cultural icons that have passed on: a row of TV trucks, a large pile of notes, photos, flowers, and mementos, and the flags at half staff. There were spots available in the visitor parking area adjacent to the building, and people milling around—even going into the building—but I didn’t join them.

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CFA® Level I 4-Day Boot Camp

Thursday November 12, 2015
Instructor: O. Nathan Ronen, CFA

CFA® Level II Weekly Review - Session A Monday

Monday January 11, 2016
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CFA® Level III Weekly Review - Session A Wednesday

Wednesday January 13, 2016
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CFA® Level III Weekly Review - Session B Thursday
Thursday January 21, 2016
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CFA® Level II Weekly Review - Session B Tuesday
Thursday January 26, 2016
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