Interview # 6: The Equity Analyst

Interesting People

From being an Architect to an IT consultant and eventually to an Equities Analyst; this dynamo has seen more career changes than most have seen in their lifetime. But what is the driver for change and is it worth it? Here we have Tom who quite candidly provides us with information regarding careers, changing careers, academics, right down to the world of an equities analyst, without too much prodding.

This interview is split in 2 parts.  This part goes through his early days in engineering to the IT switch and the eventual move into Finance.  It is organised as follows:

In part 2 of our interview, we will go in to the world of an Equity Analyst. We will also insert an Excel model on Tom’s journey which will hopefully provide more context and colour to the interview.

Without further ado, let’s hear from the man himself..

IN THE BEGINNING

MMA.  So looking at your profile here Tom, you started your career as a consultant. Can we start off by asking what you did in university?

Tom.  Yes it’s a pretty diverse profile that I have. So in university I was trained as an architect. I studied engineering for 5 years when I realised that my return on investment wasn’t really worthwhile in terms of one has to establish themselves within the profession for a very long time before they can reap the benefits of the commercial part as well as the artistic part.

MMA.  Did you enjoy it?

Tom.  I certainly did, It was my first passion. But I guess that I can still take some of those key learnings and apply it now. So what I mean by that is when a client walks through the door and tells me that this is their constraint, i.e. the budget, and tells me that this is the abstract form I want – you know, it should be ‘like this’, or it should be ‘like that’ – then its up to me to balance the reality versus their imagination or what their dreams are.

MMA.  And that’s the biggest challenge right?

Tom.  Yes that’s the biggest challenge because it has to come through as one output where I have to mix the science and the arts together. I have an engineering aptitude to solve problems and to look at the bigger picture but at the same time I have an artistic side; I used to do sketching and painting.

MMA.  So out of interest, is that the background of your family?

Tom.  No. Not at all. I’m the only architect in my family and even in my extended family. The biggest challenged I faced was “how do I go about establishing it?” One has to have a network of contacts; government agencies and the like to start getting government contracts, you need to be sitting in that kind of circle. Which I wasn’t coming from a middle class family with no prior history.

But you know I’m still in love with architecture. I still love the forms and shapes. I like looking at  the buildings..

MMA.  ..and so you must like Melbourne?

Tom.  Hahaha. Yes I do, I do like Melbourne.

I take interest in plans you know and recently started my investment property. I also have friends who ask me about their property plans and I can provide my input on how they can improvise on that. So even though I don’t do it now as a profession, that dream has not truly ended for me you know.  And in addition there are so many takeouts that I’ve learned that I can apply to this part of my life.

MMA.  So that’s key skills that you can apply to your job now?

Tom.  Yep, key skills and experiences.  The primary one would be understanding the problem.

MMA.  Right, ‘defining the client problem’.

Tom.  Yes.  Then it’s thinking more about thematic solution as in integrating small components to come up with a final design.

MMA.  Ok sounds good. So you were an architect once upon a time, how did you land into IT then?

Tom.  I guess it was a combination of good luck and the timing of the market.

MMA.  So it wasn’t an accident right?

Tom.  Oh no, it wasn’t an accident. Engineering is a 5-year course and in the 4th year I realised that it was getting a little bit slow, and what I mean by that is, I was also working with a group of architects while I was studying. So in essence I was already coming up with designs and the turning point was I was experiencing the process to come up with those designs in practice was very different from my perception.

So the eye-opener was that it doesn’t really go by the arts at all. It goes by the commercial aspect e.g. if you already have a module, then why not just copy and paste it? So certainly from my experience it had very little to do with the arts but more to do with how much revenue, how much money you can bring in and bring in fast!

MMA.  Haha..it’s all about the dollars at the end of the day!

Tom.  Hahah yes. And that’s when I realised, that’s not really what I want to get into.

MMA.  And so you wanted to be an equities analyst to get away from the money?

Tom.  Hahaha^10! You got me there!

But going back to my IT switch, this was around 1998 and IT was running hot. So in my 4th year I asked myself the question, “maybe I should consider this and see whether I really like it or not?”.  And so I bought some books on C and C++ and taught myself from scratch without a computer.

I guess the key point here is analyse “what’s the best path to reach somewhere” as I was making a switch.

MMA.  I am guessing that you also had some peers around you that were considering a change into IT like everyone else did right?

Tom.  Well, not all of us did but certainly some people were. And some of them were studying from the best engineering universities. So my thinking was “if they were willing to forego the sunk costs from engineering thus far, well then so can I”.  “I should really give it a go”, I thought. And out of that I picked up those books and worked through them.  I was quite good at programming I thought and I formalised it by taking a small course on it thereafter.

After a couple of months, I was teaching the language to students at another institute. What really opened my eyes here was students at that institute, were getting jobs overseas based on Oracle and C++ they were learning from me. So I got that kind of confidence boost to leave my architecture studies.  Well not technically desert it, as I did enough in my final year to complete my engineering studies anyway.

MMA.  And so you worked as an IT consultant in..

Tom.  ..In Singapore. And this is also the time where I studied my Masters degree in Computer Science as I wanted to appreciate IT further which was pretty good you know. It taught me things like how search engines work, application of information systems, how username-password and cryptography works,  optimization of the program i.e. how many milliseconds it takes to take you to the whole program, so on and so forth. And so those were the courses I took to appreciate it more.

MMA.  Remind me what was the connection between Singapore and Australia?

Tom.  I was in Singapore for 6 years, working and studying at the same time. I was already out of my own country so while I was in Singapore I just asked myself “where I should ideally be?”. Should I be in the US, UK or should I go to Australia. So I was asking myself, what suits me best? Work-Life balance and worked through all those questions. Obviously Australia came out on top!

MMA.  And this is about the time when we first met..

Tom.  Yes it was around that time. I came here May 2006 but by mid 2007 I learned that I wanted to get into finance.

MMA.  Right, so you stopped working and went the AGSM route.

Tom.  Yes and the same thing happened. I asked myself “What I really wanted to do..what are the best ways to go about it..weighing other options both short term and long term and what really matters to me”.  And I always reflect back on what I’ve learned and that’s key when switching careers.

Mind you its hard to do it in Australia as people here tend to talk more about what you have been doing compared to what you are capable of doing. I knew Australia wasn’t really the best place to make a career change.  But at the same time looking at the markets during GFC I knew I wanted to be in Asia Pac. I could have studied in the US but the good thing about AGSM and an MBA is that it provides you access to other networks which you can rely upon when you need to find out more information.

MMA.  You did a lot of that in your last year when you went to Washington..

Tom.  Not Washington, I went to Chicago for the final term of my MBA at Booth Business School. US Business Schools are highly regarded[1] and initially I wanted to go there for my studies. However, wanted to stay in Asia Pac, so the good trade-off was to experience US B-School anyway by not only experiencing it, but by associating with the world’s best Finance Oriented B-School. It is actually from Booth Business School, that Efficient Market Hypothesis and Black-Scholes models have emerged.

MMA.  Ahh sorry Chicago. Land of Fama.

Tom.  You know if I really wanted to get into finance much quicker then I would do a Masters of Applied Finance. So a lot of people really do tend to bypass the real value of doing an MBA in a good school. Its not about the broad knowledge as you do not really learn about anything specific as it just touches on the surface. Its more about the network opportunities it presents.

MMA.  Can we take a step back a second and ask what was the trigger point in your switching into finance?

Tom.  Sure. Ill take a quick detour myself and try to summarise from the beginning.

Where I come from you either want to be in medicine or engineering. I really wasn’t into medicine so I went into engineering. Then reality hits when 1 million people apply for 1 thousand seats or something like that. The next question then was “what kind of engineering?” so then I went to the architecture route. Then on a personal level I got married and settled down on that front. So I guess what I’m trying to say here is that I didn’t really have the luxury to properly look around, travel and find myself unlike some other people. That was one thing.

Another thing was I would see an uncle of mine receiving money for dividends and compared that to my mother who was working very hard for it. Its one thing to work hard for your money but its not until later that I needed to figure out how I can make money can work for you.

And finally I realised that the pure value-add in IT was in Project Management or Solution Architecture. At one point I was chasing after my PMP certification and MS Architecture Certification as well (which I pursued successfully). But you know given the influx of so many people into IT and the outsourcing impact. Business Analysis is one thing as you have to be stationed close to the  business..

MMA.  But developers and testers, you can ship them out right?

Tom.  Hahaha. You read my mind.

MMA.  Sorry, I interrupted.

Tom.  Yeh, so in short term IT was great as I was getting decent money that I am still not able to make now, but in the long term I just wasn’t sure about it. And it wasn’t getting me excited anymore.

MMA.  I am sure you have worked out your NPV on the spend of your career changes..

Tom.  Yes, you know I have.

MMA.  So as you were saying, your work as a consultant wasn’t getting you out of bed?

Tom.  Exactly. You know working as an IT consultant, you wake up in the morning..you go to work..you talk to your mates and that’s it.  Working in the markets is a little bit different to that. But I always get the question of “what happened to this other career of yours?” when people look at my CV and ask about my prior qualifications and experience. The answer to that is that it is a sunk cost. I don’t really want to keep on investing in something that is not really working for me.

MMA.  Can I ask you, before we switch into your current role at present, what the difference is between an MBA and a CFA is for you. I asked another interviewee this very same question and since both of you have gone through this experience, I would like to compare your experience with both.

Tom.  First of all I think they are very good titles to have under your name and both have their own merits. An MBA will teach you more about networking than the CFA. It also gives you the confidence in talking about a superficial term, like any topic from marketing or operations, to talk to people. And just on this, I believe doing it full time has more benefits than doing it part time as I am constantly surrounded by people who come in with the same mindset.

MMA.  And the same purpose.

Tom.  Exactly. You know most of us didn’t know what the school was after. What we knew was, whatever we were, wasn’t good enough.

And another good thing about our school was the diversity. Out of 65 people in my class, 17 came from other countries. Air force pilots, doctors, sport persons etcetera. You know you don’t have to learn everything from your professor who is there to facilitate the discussion. Say for example, we had this girl from Canada who was a marketing manager and we learned a lot from her experiences with different clients.

So what I am trying to say here is that an MBA will round up your personality and give you that kind of confidence to approach anyone. That’s the key benefit for me.

The cons was obviously the expense from the MBA and foregoing cash flow from giving up work.

MMA.  You could have done it part time..

Tom.  ..I could have but to me the key benefit is the closeness to your classmates from seeing them day in day out. Part time MBA to me is more of a credential. They work their 9-5 jobs and turn up 6-8pm without a lot of energy to participate. Full-time is a whole different ballgame where you can join student clubs and have more interaction. That’s not available in part-time MBA.

MMA.  I know one of our readers is doing his part-time MBA at AGSM too. I asked him why he does not do it on a full time basis. But you know this guy has a family..a mortgage.

Tom.  Alrighty..Sorry. .Let me take a step back then and qualify that. If the person wants the tool sets and skills to progress up the ladder then part-time will certainly give that. But when it comes to career change, which is what I was doing, then I would say do it full time. You will not get that camaraderie or the long hours of starting from 8am in the morning to 10pm at night for some socials you know.

MMA.  ..And the CFA?

Tom.  So CFA is fantastic for very specific finance roles like an Asset Manager[2] for example. People tend to forget that its about analysing securities in the market and coming up with recommendations based on that analysis.

It’s a highly reputable title because of the way its designed. They really want to limit the numbers. Its rigorous, on a relative basis. You know they only pass on a percentile basis in level 1, which is pretty ok..until you get to level 2 and your competing against those people that went through the 1st time.

MMA.  ..Can I interject and say that one of the past interviewee’s mentioned that Level 1 and 2 of the CFA did not teach him anything but Level 3 taught him a lot of new material. Did you also find that?

Tom.  Personally I learned a lot in level 1 and 2 given that I was outside of finance.

MMA.  The MBA didn’t cover that for you?

Tom.  No it didn’t go through that much detail. See the MBA preps you to become a business manager, right? It could be a CFO, CTO etcetera. So that in a boardroom a CTO can understand what the CFO is talking about. It is very generalist.

The CFA is whole different kettle of fish. Its very binary over there; its either you know or you don’t know it. The MBA is more like, “maybe I know it” kind of a thing.   

MMA.  Ok, that’s a good distinction.

Tom.  Just to come back from that comment made by your other interviewee – CFA 1 and 2 prepares you for 3. Coming from an IT background, 1 and 2 were foundational and new to me. I can understand what that that interviewee says about level 3 in the sense that its all about portfolio management and tying all your learnings all together.

MMA.  You know the other reader I mentioned before who was doing his part time MBA thinks he can pass the CFA now based on his MBA.

Tom.  If he is not a security analyst of some sort or does not have that background, then he should reconsider that opinion when he receives the CFA notes…if ever he/she gets to that point.

Part 1 has more emphasis on the journey.

Part 2 will go through the destination; his role as an equity analyst for one of the major banks. This will be published shortly and will include the aforementioned Excel model.

Tom’s identity has been masked upon her request. This blog uses real people who have worked for more than 5 years in the Australian Banking and IT industry.

 

Market Measures Australia


[1] As per the Wiki entry “..ranked 1st in the United States by Bloomberg BusinessWeek in 2006, 2008 and 2010. The program was also ranked 2nd globally in the 2011 The Economist MBA ranking”

[2] An individual that works within Asset Management space.

4 thoughts on “Interview # 6: The Equity Analyst

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