Last updated: June 22, 2011 6:24 pm

Financial Training 2011

Q&A: Masters in Finance

The past year has seen a surge in demand for financial training, most notably from emerging economies such as China.

What does this mean for the world economy, financial training companies and business schools, as well as for the students studying for financial qualifications?

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IN Ask the Expert

On Wednesday June 22 a panel of experts answered your questions about studying for a masters in finance or other financial qualifications.

On the panel are:

Alastair Matchett, chief executive, Adkins Matchett & Toy, an international financial training group

Michael Jacobs, statistician and project manager for business school rankings, Financial Times

Julie Strong, senior associate director admissions, MIT Sloan School of Management, in the US

Estrella Frutos, masters in finance programme director, London Business School, in the UK

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When it comes to studying finance, is location important? For example would it be more beneficial to study in London, New York and Hong Kong since they are major financial hubs. I am looking to study a full-time masters in finance, but the problem is that London has a high cost of living.

Alastair: The quality of education is much more dependent on the institution than the geographical location. However, being in or very close to a financial hub, is helpful to get internships. Major firms recruit approximately 80 per cent of full-time hires from their internship programmes. So for getting a job the answer is yes.

Michael: It may make sense to think about where you would like to work first, and then opt to study at an institution near this location. A good school will most likely have established networks with employers nearby, making it easier to get the job you want once you graduate.

The opportunity to complete an internship in your desired field of employment, as well as location, could also help. Of the 30 programmes listed in the 2011 ranking of pre-experience programmes - those aimed at students with little or no prior professional experience - 18 programmes offer the opportunity of internships to students. It is definitely worth speaking to any schools you are currently considering to find out more about the types of jobs graduates go into and with which companies.

You do not mention where you are currently based but another consideration might be obtaining the appropriate visa to work and study in your preferred location. If you are thinking about studying in the UK and you are from a country outside of the European Union it would be a good idea to have a look at the UK Border Agency’s website for more information. This is something a school can offer advice on before you apply as well.

As somebody who lives in London, I can confirm that it is not a cheap place to live, but if a job in the city is what you are after, then it might just be worth the expense.

Estrella: Yes, location is definitely an important consideration. Studying in a global financial centre has the advantage of having a much bigger exposure to key industry players who come on campus as guest speakers, lecturers, panelists or for recruitment purposes.

Broadly speaking these global financial centres attract the best talent in the industry and it is in those financial centres where the most sophisticated products and cutting edge ideas tend to emerge. Consequently, the opportunity to learn from the best finance professionals and even being recruited by their organisations is greater in places like London, Hong Kong or New York.

Julie: Location matters to the extent that it affects access to the potential employers. On that front, things like the reputation of the programme, the quality of training, the strength of the alumni base all matter. One needs to consider all of these factors when deciding on the programme, and location is only one of the variables to consider and not a primary one.

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Is there really a point in studying for a masters in finance when you can spend much less on getting a CFA? Are not employers today keen on having investment managers, bankers and so on to have a CFA?
Nguyen Hoang, Ottawa, Ontario

Alastair: The CFA curriculum is more focused on skills for investment management/ research, although much of this is useful for corporate finance/ investment banking. I agree it is cheaper to do a CFA, but you will not get the ability to build such a strong peer network as you would in a business school/ university setting. Plus, there are many “flavours” of finance masters (with many different electives), whilst the CFA is a “one size fits all” qualification.

If you already have a strong network, and are looking for an investment management focused qualification then I would choose the CFA, if not you might do better with a masters which is focused on the area you want to specialise in.

Julie: CFA is not a substitute for a high-quality masters programme. The best masters programmes offer training that cannot be replicated through self-study. Moreover, besides their academic content, there are many additional benefits of going through formal programmes, such as opportunities to cultivate professional relationships with your peers and the alumni of the programme and access to industry leaders and a broad network of potential employers.

Estrella: The CFA designation is a well-regarded qualification in the financial industry with some bias towards the asset management industry in particular. A significant number of our masters in finance (MiF) students at London Business School (LBS) are CFA charter holders or half way through the process of becoming charter holders, having passed levels one or two of the examinations. Moreover, London Business School is a programme partner of the CFA Institute. Our view is that these two qualifications are complementary and this view is shared by the LBS alumni who completed both the CFA examinations and the MiF programme.

Having said this, the experience of undertaking a masters in finance is radically different to the experience of studying and passing the CFA examinations. While the latter is mainly driven by self-study of a pre-determined set of materials followed by a sit-down exam, the former is experiential.

At London Business School in particular, you will be learning from a group of leading finance academics and from other finance professionals who come from all over the world and who will share the classroom with you. You will be discussing theories, frameworks and tools and you will leverage from business cases to learn the limitation of those tools. This makes the learning very rich, dynamic and interactive.

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As an international student I have some questions about the system of financial education.

a) On average, how many types of masters of finance programme are there and what are the most significant?

b) How much maths knowledge does the masters programme require and what is the level of maths needed. For example, integrals, derivatives or something more complex like the theory of complex functions.

c) On average, how much self-study is required for each programme? Does it require a lot of literature study or internet study?

d) Is it possible for an international student to receive a scholarship before entering a programme?
George, Ukraine

Alastair: There are many institutions offering a masters in finance. They usually attempt to give students a thorough understanding of the basics in finance, including economics, accounting, financial analysis, financial maths and statistics. In addition there will be a series of advanced topics - often structured as a series of electives - such as risk management, corporate finance, quantitative finance, real estate finance etc. There might be a project/ dissertation. If the programme is two years you will be able to do an internship in between. It is difficult to say which programmes are the most “significant”. Do you mean by reputation or by curriculum?

Many programmes will require some financial experience, which assumes you will have solid maths skills. I do not think you will need a knowledge of complex maths, but you will need an ability in maths. A solid grounding in algebra and foundation financial maths will help enormously. Try reinforcing your maths skills by hand, that is using algebra, rather than through a calculator at the beginning as you will get a much better grounding in the fundamentals.

For c), do you mean study at home or distance learning? The amount of distance learning will depend on the programme. There are distance learning masters which are nearly all self-study courses.

You will be required to do a substantial amount of study outside the classroom on most masters programmes. A ratio of at least 2:1 between home study and classroom hours is normal. The amount you need to do will understandably depend on your pre-existing knowledge.

There are scholarships available on many masters in finance programmes. Some will be based purely on ability, others will have specific geographical requirements, including that the student is international.

Julie: Finance is a relatively quantitative field, and one can never know too much mathematics. I would include among the core mathematical subjects calculus, linear algebra, probability theory, statistics, stochastic processes and some familiarity with numerical methods.

At MIT Sloan, the master of finance programme is considered full-time. Students typically spend most of their time on campus in class, working on projects/ homework and then have evening events such as campus speakers, companies presentations and social events. Our full-time students may also be a teaching or research assistant, but typically do not hold outside jobs.

At MIT Sloan, financial aid and scholarship awards are granted after an applicant is admitted to the programme. However, many organisations, employers and governments grant scholarships or sponsorship before being successfully admitted to a programme.

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Some people think a masters in finance has less value than an MBA just because it is shorter and you get less offers from investment banks. Could you tell me the three main jobs that a masters in finance graduate would be better trained for than an MBA graduate?
Jos Carlos, Madrid

Alastair: I think the main value in an MBA is the development of a very strong peer group network. The masters in finance will give you better traction in the short term for your career, as the skills will be immediately useful if you choose a targeted programme, for most financial jobs. MBAs give benefit that will be apparent in the long term rather than the short term.The issue of offers I suspect has more to do with which programmes/ educational institutions are “targeted” by companies.

Michael: The FT recently surveyed more than 1,200 masters in finance alumni from the class of 2008. The results were used to inform the new rankings, published this week. Amongst the data kindly provided by respondents, we gathered information on the jobs currently held by graduates. A quick comparison with similar information provided by MBA graduates, surveyed for the 2011 Global MBA ranking, show some differences between the two groups

Not surprisingly, masters in finance graduates were much more likely to be working in the financial sector - 86 per cent of respondents, versus 28 per cent for MBA graduates. The most frequently mentioned job types for finance graduates were investment banking / M&A ( nine per cent), accounting (eight per cent), asset management (7.6 per cent), consultancy (6.9 per cent), trading (5.6 per cent) and corporate banking (five per cent).

Overall, MBA graduates earned more than their masters in finance counterparts and tended to be more senior. However, this is largely a function of age and professional experience. The finance graduates surveyed were predominantly from pre-experience programmes and the median age on entering the programme was 24. This compares with a median age of 28 for MBA students.

Julie: At MIT Sloan, the master of finance and the MBA are two different degrees. Companies, typically, recruit M. Fin graduates and MBA graduates for different positions. The applicants they attract are also different. Our M.Fin. programme tends to attract undergraduates with intern experience or early career professionals who want a deeper understanding of finance.

M. Fin. applicants also seem to be more focused and are less interested in taking a course across the business school curriculum such as marketing or operations. Examples of the areas in which M.Fin. training is likely to have an edge include sales and trading, quantitative asset management and research plus risk management.

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In this age of austerity, is it really worth spending £20,000 or so on a masters in finance. How can one justify this?

Alastair: Good education is expensive. If you attend the right school - with a good reputation and good access to employment opportunities - and get the course which matches the skills you want to learn, then the investment is worth it. Do not underestimate the benefit of developing a peer group and access to employment opportunities, as well as developing your skills.

Michael: According to the data we gathered this year from schools offering a masters in finance the average cost of a programme was $21,500. There was quite a range in costs though, with the most expensive costing closer to $50,000. When you factor in living costs and loss of earnings during the masters then this price becomes higher still.

Despite the expense the vast majority of graduates we surveyed felt that their programme was worth it. For example, when we asked masters in finance alumni about their motivations for studying the degree, increased earning potential and career progression where high on the list of priorities. Three years after graduation 88 per cent said they had achieved their aim of better earnings, while 90 per cent said they had furthered their career, and 83 per cent achieved both.

Julie: Investing in a good education is something that I doubt you will ever regret. You are investing in your future and hopefully in a long and productive career.

If you think about the complexity of the financial industry and the sophistication required to be an effective finance professional in an increasingly competitive market, acquiring a solid finance education is not only justified but a must.

One can argue that as the industry grows in size the level of responsibility that finance professionals hold in their hands is becoming larger and the damages that their actions can cause, if they are not based on sound knowledge and right behaviours, could be substantial as we have seen in recent times.

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Seeing that the east is rising, I am trying to progress my career into finance from the research sector. Hopefully I will get a job there. The financial systems in the Far East are rather different and therefore, certain skills are specifically needed. The best way for me to land a finance job is to equip myself with the much needed specific skills. Without taking the CFA, how can I get access to useful financial training on general or specific financial subjects that are recognised by major companies?
Sheng, London, UK

Alastair: You are right about Asia being the educational growth area. Business schools are starting to have satellite campuses in the region (INSEAD in Singapore, for example), which gives you better access. Many schools will have a distance learning option for a masters in finance, or diplomas. The programmes will generally include a mixture of e-learning, and self study as well as periodic seminars/ meetings.

If you want a recognised qualification you could do a distance learning programme at a well-known institution. However, if you were currently working in research, I would suggest doing the CFA. The CFA is good at building strong finance foundation skills as it is very focused on the investment side of the business. Many firms encourage their research analysts to do the CFA.

If you want the programme to lead into a job, I would encourage you to do a full-time programme either a masters in finance or an MBA. Good schools have very good careers services and are linked to the major companies.

Estrella: I may be stating the obvious but you may want to consider a masters in finance. Be mindful that in order to work in Asia, speaking the local language is key in some countries so if you do not speak Mandarin, it will be very difficult for you to land a job in China. If you do not speak foreign languages, you may be more limited to work in places like Singapore where English is the business language. Also, the quality of the institution and the programme will make a big difference if you are aiming to work at top tier financial institutions.

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Would studying financial analysis online be beneficial prior to taking the CFA exams? What is your take on getting a masters in financial analysis vs being CFA certified?
Gian , NYC, US

Alastair: The CFA route is more usual for people working in the business. It is better for people on the investment management / research side of the business. You would rarely see an investment banking analyst do a CFA while they are working (they just do not have time). The masters in finance will allow you to get a much more focused qualification than say an MBA, plus it is a good way of getting a job in finance.

The choice of doing your study online or in the classroom should depend on your own preference. The former will tend to be cheaper, but will also require more discipline from you.

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Do you think an MSc in Islamic Finance is a good choice for working in investment banking?

Alastair: Islamic finance is a growing area of the finance world. Predictably most of the Islamic finance jobs are in the Middle East or jobs which are servicing Middle Eastern clients. If the Middle East interests you, it would be a very useful skill to have. If by investment banking you mean M&A and advisory, then Islamic finance will be useful, but not as useful compared to working in a issuance role (debt capital markets or credit, for example).

A lot of the smaller universities in the UK offer specific degrees in Islamic finance (Aston, Durham, Salford, for example). Many of the major business schools will offer Islamic finance electives, but are not so focused on this topic. I would expect the entry requirementsto to be similar to a more general masters in finance.

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First I like to congratulate the FT for their first masters in finance ranking.

I am a level II candidate in the CFA programme and I am waiting for my exam results. Whatever the results, I am planning to pursue the designation. However, I have also thought about enrolling on a masters in finance programme and/ or an MBA with a concentration in finance.

Although there will be a duplication of effort if I studied for a masters in finance, my primary goal is to join the financial sector in New York or London. I come from an engineering background and work as a full-time engineer.

Bearing in mind that I am located in Egypt, I am facing difficulties in applying for jobs internationally.

I will also start studying the Financial Risk Management (FRM) programme and the Chartered Alternative Investment Analyst (CAIA) programme.

I am asking for your advice. Would you encourage me to apply for a masters in finance or is my current track sufficient? What are the additional benefits that I will gain from enrolling on a masters in finance programme?
Michael, Egypt

Alastair: The programmes you are studying for (CFA, FRM, CAIA) are all “practitioner qualifications”. If you are looking for a job in New York or London, I strongly encourage you to look into a full-time programme. Unfortunately, just getting a CFA, would not set you apart from the crowd when job hunting (although it is an excellent qualification for people working in investment/ asset management or research).

Attending a school which is a feeder for firms in London and New York would be a better strategy. It will be more time consuming and expensive, but you will meet your goals faster.

Julie: The best masters programmes offer in-depth training that cannot be replicated through the channels you describe. Moreover, besides their academic content, there are many additional benefits of going through formal programmes, such as opportunities to cultivate professional relationships with your peers and the alumni of the programme and access to industry leaders and a broad network of potential employers.

Estrella: If I understood correctly, you seem to have some work experience as an engineer and you are trying to switch your career into finance with a major financial centre.

The CFA designation is a good starting point, which on completion will send a signal to the world that you are serious about working in finance. As you have some work experience but you are trying to change your career, you may want to consider pursuing an MBA with a concentration in finance to accomplish the double jump that you are seeking, this is, a career change and a geographical move.

Attaining this double jump with the CFA designation alone, although not impossible, may be significantly more difficult. Applying to a business school as a CFA charter holder will add weight to your candidacy.

If your work experience is very short, you may also want to consider a pre-experience masters in finance to carry out this career transition.

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