This section serves as an introduction to the different categories of financial institutions that exist. It is essential you explore all your options and decide which interests you most and suits your personality the best. We want to help you understand that Finance is a lot more than investment banking. There is a place for everyone.
A central bank is an independent national authority that conducts monetary policy, regulates banks, and provides financial services including economic research. Its goals are to stabilize the nation’s currency, limit unemployment, and keep inflation in check.
Firms hiring Imperial grads include: BoE (Bank of England), ECB (European Central Bank), Your Home Countries Central Bank f.ex. Deutsche Bundesbank
Retail & Commercial Banking:
Retail banking, also known as consumer banking, is the typical mass-market banking in which individual customers use local branches of larger commercial banks. The industry aims to be the one-stop-shop for as many financial services as possible on behalf of individual retail clients. Consumers expect a range of basic services from retail banks, such as checking accounts, savings accounts, personal loans, lines of credit, mortgages, debit cards, credit cards, and CDs.
Commercial Banking offer products similar to retail, but tailored to large corporations. These include Merchant services, trade services, corporate loans, retirement products etc. Usually banks offer both retail and commercial banking.
Firms hiring from Imperial include: HSBC, Lloyds, Santander …
Challenger & Internet Banking
Challenger banks aim to offer similar product pallets to their established retail competitors while undercutting them in price by reducing overhead through internet-only banking.
A start-up environment with large focus on automation and technological innovation.
Firms hiring from Imperial include: Monzo, N24, TSB …
Insurance Firms provide coverage, in the form of compensation resulting from loss, damages, injury, treatment or hardship in exchange for premium payments.
Insurance companies base their business models around assuming and diversifying risk. The essential insurance model involves pooling risk from individual payers and redistributing it across a larger portfolio. Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets. Like all private businesses, insurance companies try to market effectively and minimize administrative costs.
Firms hiring from Imperial include: AIA, AXA, Allianz, China Life Insurance …
A brokerage is a firm that charges a fee or commission for executing buy and sell orders on the exchange on behalf of an investor. When buying securities for personal investment, you likely do so through your personal brokerage account or trading platform. These can be packaged with extra consulting services, or simply a flat fee for carrying out trades.
Firms hiring from Imperial include: TD, IG, etc … Most Invest. and Retail Banks Markets Div.
Market Makers are a more institutionalized version of a brokerage. MM’s are usually hired by the underlying securities provider (i.e. Uber hired Citadel as Market Maker for its IPO) or stock exchange to help ensure there’s enough liquidity (volume of trading) for trades to be executed seamlessly. Market makers act as wholesalers by buying and selling securities to satisfy the market—the prices they set reflect market supply and demand. Most market making activity has been automated but involve complex tech infrastructure on the backend. Certain illiquid securities continue to be traded by desk traders.
Firms hiring from Imperial include: Citadel, IMC, Jane Street, Optiver, SIG, Investment Banks
Commodities and Energy Traders
Commodity traders focus on investing in physical substances like the typical oil, gold, or agricultural products, but also more exotic commodities such as cotton, wheat, corn, sugar, coffee, cattle, pork bellies, lumber, silver, and minerals. Most products you use on a daily basis once had its raw materials passed through the hands of a commodity trader. Most large firms are also liquidity providers i.e. mining the commodity then trading it
Energy Traders act much like Commodities Traders but have a sole focus on the energy sector. Commodities range from oil and gas to kWh of grid electricity on the UK wholesale electricity market.
Firms hiring from Imperial include: Vitol, Glencore, Cargill… BB Investment Banks, Oil and Gas i.e. Shell, BP …
Proprietary trading is an activity carried out by firms or individuals by investing directly in the market rather than earning commission (as discussed above). Prop Traders either trade with the firm’s capital or with their own assets
Many of you likely feel a mystique around trading, having watched movies depicting traders making millions by taking risky positions in the markets. This is far from today’s trading reality. Capital markets are automated, heavily regulated and firms are more risk averse than before following catastrophic events in 2008. Algorithmic (Quantitative) has made markets highly efficient by picking up on mispricing and profiting from spreads in microseconds. The odds of a human ‘proprietary’ trader’s success are ever shrinking. IB’s such as Deutsche Bank have recently shut down these operations for their significant loss making. For short term trading, think of markets as a zero-sum game. Simplified: Every pound you ‘win’ was a ‘loss’ for someone else. There are 3 ways to win in this market: “Be first. Be smarter. Or cheat.” – M.C. Traders spend a lot of time thinking of how to outperform their competitors. It is a fascinating field that continues to demand the brightest minds for search of innovation to be the smartest and fastest while remaining compliant with regulations.
If you are considering day trading with your own capital, keep in mind this is highly risky and WILL lead to financial loss IF you don’t know what you are doing. Do not put any money in the market you cannot afford to live without, and keep in mind that trading on margin/leverage will amplify these losses for you drastically.
There are firms that will offer trading “internships” that cost money. We are in no position to disqualify such companies, but please ensure you are not being lured into a scam by someone trying to make some quick money off an unknowing teenager.
Firms hiring from Imperial Include: Jane Street, Mako Trading… Investment Banks
AM’s manage assets on behalf of others. They are usually in charge of large pools of money i.e. a nation’s pension fund, a university’s endowment, mutual funds (people contributing their savings) … Active Managers fully carry out the research, selection and management of the fund’s assets, putting money to good use and earning a return. Active Managers are often benchmarked to market indices to gauge performance. A more recent phenomenon are passive funds, namely Exchange Traded Funds (ETFs), that aim to cut down on management cost of active management by implementing a simple but diversified strategy i.e. invest in the US 500 largest public companies (S&P 500) theoretically returning larger profits to the investor.
Firms hiring from Imperial Include: BlackRock, Vanguard, State Street… Investment Banks
A hedge fund is a type of asset management firm, albeit one that is often privately owned, relatively unregulated, and open to only qualified investors (i.e. HNIs that can deal with the risk appetite of HFs). HFs are comparatively unregulated and exclusive. Hedge Funds are Asset Manager that charge clients larger fees for taking bigger risks with their money. The ‘hedge’ in the name has little to do with today’s HF strategies.
Wealth management is an investment advisory service that combines other financial services to address the needs of affluent (HNI) clients. It is a consultative process whereby the advisor gleans information about the client’s wants and tailors a bespoke strategy utilizing appropriate financial products and services. A wealth management advisor or wealth manager is a type of financial advisor who utilizes the spectrum of financial disciplines available, such as financial and investment advice, legal or estate planning, accounting, and tax services, and retirement planning, to manage an affluent client’s wealth for one set fee. A lot of time is spent on relationship management, maintaining connections to clients.
Firms hiring from Imperial Include: Coutts, GAM, Aberdeen Standard Investments… Most Retail Banks
A private equity (PE) firm is an investment management firm that invest in private firms (not listed on a public stock exchange). Private equity firms either hold the company or actively get involved in improving operations to add value to eventually sell it off at a profit. This is the most exclusive finance sector. Most jobs only become available after IBD experience at a top BB firm. Consultants from the likes of McKinsey also have a chance.
Firms hiring from Imperial Include: KKR, Carlyle, Blackstone, TPG, Permira, Bain …
Venture capital (VC) is a type of private equity specifically focusing on small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both). Venture capital firms or funds invest in these early-stage companies in exchange for equity in the companies they invest in. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as information technology (IT), clean technology or biotechnology.
The typical venture capital investment occurs after an initial “seed funding” round. The first round of institutional venture capital to fund growth is called the Series A round. Venture capitalists provide this financing in the interest of generating a return through an eventual “exit” event, such as the company selling shares to the public for the first time in an initial public offering (IPO) or doing a merger and acquisition (also known as a “trade sale”) of the company. Alternatively, an exit may come about via the private equity secondary market.
Firms hiring from Imperial Include: VC firms tend to be very small and therefore do not offer internships publicly. You are best off doing your own research and emailing the firm directly through contact email or finding a recruiter through LinkedIn.
Data Providers & Stock Exchanges:
Investors need the latest information in order to stay current with the markets. This data is valuable and can be highly time critical, demanding well-engineered data infrastructure and high degrees of automation. Stock exchanges face the same situation.
Firms hiring from Imperial Include: Bloomberg, Morningstar, Reuters … London Stock Exchange
Financial Consulting Firms
Financial consultants provide internally-focused financial advice to corporations. This allows firms to sell advice without their own ‘skin in the game’. A financial consultant helps a business increase shareholder value and improve capital efficiency. These consultants support the corporate finance division of a business. Firms often focus on a specific area of expertise incl. turnaround, M&A etc.
Firms hiring from Imperial Include: AlixPartners, Alvarez and Marsal, FTI … Most Management Consultancies i.e. McKinsey, BCG, Bain … Most Professional Service Firms i.e. PwC, KPMG, EY, Delloite …
Last but not least, IBs. An investment bank is a financial intermediary that performs a variety of services discussed above, mainly trading. Furthermore, there are Investment Banking specific tasks:
The transactions include:
- Merger: the combination of two or more business entities in which only one entity remains. (Company X + Company Y = Company X)
- Consolidation: a combination of more than one business entity where an entirely new entity is created. (Company X + Company Y = Company Z)
- Acquisition: the purchase of a business entity, entities, or an asset or assets. The acquisition is different from a merger since the acquiring company is typically much larger than the target.
- Divesture: the sale of an interest of a business entity or an asset or group of assets.
- Leveraged Buyout (LBO): an acquisition of a company using a significant amount of debt to meet the cost of the acquisition.
During these deals, Analysts will generate models that financially describe the deal, attempting to predict the outcome based on financial principles.
Firms hiring from Imperial Include:
Bulge Bracket: Goldman Sachs, JP Morgan, Morgan Stanley, Citi, BAML …
Boutique: Evercore, Lazard, Rothschild, Greenhill …