Have I ever explained what I do for a living?

Hi everyone, for today's post, I thought I'd tell you a little about corporate finance and what I do on a daily basis these days. I am really getting into my new job now and am pretty excited - I don't think I've ever mentioned anything about what I do at my company since I've only been in this job since September last year, so if you'd indulge me a little in this post, I'd be talking about myself for a change today. Allow me to explain a little bit about the world of corporate finance and how I fit into what my company does - hopefully it'll be interesting for those of you interested in working in finance.

Time for an economics lessons

There are medium sized companies which are successful businesses and these people need money to scale up. We are not talking about start ups here - rather we are looking at companies which have a proven track record of generating healthy profits for at least a few years and have substantial assets that can be used as collateral. Such businesses have the potential to grow and expand even more aggressively if they have the capital, but when they approach the banks for a loan but the banks either refuse them outright or offer them loans at such a high interest that they is obliged to say no. This is where they turns to the world of corporate finance - we step in and help him create a structure that enables him to raise the finance, but we go further than that: we help him raise the finance so he can focus on the one thing that matters the most: running their successful businesses. A man running a successful bakery chain wants to be able to focus his efforts on his cakes and not worry about raising finance.

So instead of individually asking people to invest in his business, we do that on his behalf by creating a corporate bond to raise that amount for him. We can raise anything from £10 million to £100 million - anything less than £10 million is too little for us to bother with.  You see, such clients falls into a crack between big and small - big businesses who want to raise over £100 million have far more clout with financial institutions and have far less trouble trying to obtain credit from the big banks. When they do, they get far better deals at the negotiating table. Much smaller businesses (such as start ups) can obtain grants from the government or obtain smaller, more modest amounts of money through schemes like crowdfunding. Where does that leave businessmen who are somewhere between the two extremes? There is a gap in the market - traditionally such people would rely on their connections, their relationships to attempt to raise the money but that would mean them spending a lot of time and effort persuading people to invest in their business.

Money makes the world go round.

So we create a corporate bond for them: we create a 'bucket' whereby investors can invest an amount of money (we usually set a minimum, either £50,000 or £100,000 so we are only dealing with serious investors and we don't waste our time with people who are not prepared to commit to a sizable investment) and we go round approaching financial professionals (anyone from IFAs, DFMs, private bankers, fund managers, institutional investors but never individual private investors) and persuade them to invest in the corporate bond. We structure the product in a way that it pays a fixed rate and market it as a fixed income product, so the investor gets a guaranteed return regardless of how well the business performs. Typically, such corporate bonds pay out between 5% to 8% - that's far more lucrative than anything you'll get from the high street banks when interest rates are stubbornly low. Welcome to the wonderful world of securitization, whereby credit is obtained and secured against assets that generate a source of income. We draw up a water-tight legal agreement whereby if the business fails, his business and personal assets will be liquidized to repay the investors of his bonds first before he even sees a penny of it - such legal agreements are enforceable by law and they allow the investors peace of mind when committing to the investment. We do this for clients all over the world.

Now that we have created this 'bucket' in the form of a corporate bond for client, that's when I step in: I am not involved in creating the bond per se, that's mostly for our lawyers. To be honest, the structure for such bonds are fairly standard, they merely take a template and replicate it - it is so straightforward you'll be amazed how easy it is. But here comes the hard part: I have to go round persuading financial intermediaries to put in sizable investments into this bucket - I have to go round selling client's success story. So for example, I have recently convinced a distribution agent in Kent to work with us and he is going to tell his brokers to flog our corporate bonds: each time we manage to get some money for a bond, both the distribution agent and I get a cut - that's when it starts getting interesting for me. I do not deal with private investors: it makes no sense at all for me to do so. My distribution guy in Kent has relationships with over a thousand IFAs in the country, that is why I want to work with him because all I have to do is convince him to use my product and he will then tell his thousands of IFAs all over the country to use my product. So the moment I have a good working relationship with him, I don't have to even lift a finger and my commission will keep flowing.

We are helping successful companies raise finance to expand.

Think about it this way, let's deal with something that everyone can relate to: cakes. Mr Baker clearly makes delicious cakes, would he want to go door to door, trying to sell one cake to one family at a time, or would he rather negotiate a deal with one of the country's biggest supermarket chains with thousands of stores all over the country? If he has such a deal with a big supermarket chain, then just that one client will place an order for thousands of cakes everyday. Mr Baker than doesn't have to worry about trying to sell the cakes to individual customers - he simply focuses his energies on fulfilling the orders for that supermarket chain. Likewise for me, I am trying to get my bond products into the equivalent of 'supermarkets' in the financial services world. I'm not interested in individual investors, because I know that one big distributor will be able to channel millions of pounds of investments my way every month. I manage those relationships - these distributors are constantly be pitched for new products all the time, so I have to make sure that I do not slip to the bottom of their lists, that they are constantly using my bonds instead of my competitors'. That's what I do - I do a mix of business development, sales, marketing and relationship management. My company rewards financially me each time I establish a new relationship with another distributor by giving me a cut of whatever investments they make. And yes, this is potentially very lucrative if I can get my company loads of distributors.

The corporate bond products my company produces are sound and water-tight, I guess the biggest challenge for us is that there are bigger players in the market and we are much smaller than some of the well established players out there. Corporate bonds are nothing new. Imagine if you are a small soft drinks manufacturer, even if your soft drinks taste amazing and you have the most attractive packaging out there, consumers are still used to drinking the big names when it comes to soft drinks like Coke, Pepsi, Fanta and Sprite. Trying to fight for a share of the market when you're up against big names like that is a challenge, but that's when I have to pick my battles. But here's the best part about my job: I only need to negotiate distribution agreements, yet I get commissions on whatever investments are made through those distributors whom I have brought on board. I think the hardest part of the equation would be to persuade the individual investor to make that commitment and invest a sizable sum of money in the bond - well, I don't have to do that thankfully, that is done by somebody one or two links removed from me in the distribution equation.

Hopefully this job will turn out to be very lucrative when the commissions add up.

I know that some distribution relationships will be more successful and lucrative than others - some will bring in a lot of money, others will bring in little or none. As long as I manage to maintain a healthy number of distributors, then I know I will do well out of this as long as some of them bring in some money. The longer I do the job, the easier it will become because I'm like a farmer trying to persuade fruit trees to grow in my orchard: the more fruit trees there are growing, the more likely I am to be able to be able to harvest some fruit. When I first started last September, my orchard was completely empty - now 5 months in, I have a few trees growing. Hopefully by the end of this year, I would have figured out how to do this better and I'd have an orchard full of trees, their branches heavily laden with sweet fruit. There is a steep learning curve of course and I've come an awfully long way in 5 months. My bosses have been quite satisfied with my progress so far, so whilst I do want to prove myself, I don't really feel like I'm under too much pressure at the same time - it's ideal. Even when we have to work to deadlines, nobody has lost their temper yet!

A downside of my job is that we're dealing with so many different bonds - I've had to deal with bonds in very different kinds of sectors. Every time I get a new bond to flog, I have to learn the A to Z of that sector - some are more familiar than others, but still I have to accumulate a vast wealth of knowledge in a very short period of time. From green energy to mining to hotels to tourism - I'm expected to have understand all of these sectors I have to deal with. Once we have raised the full amount for a bond, that's it - it's finished, we've raised our target, we move on to the next project. So all that knowledge that I have accumulated for that sector is suddenly rendered useless the moment we move on to the next bond where I often have to start from scratch. Some people become experts at what they do because they are dealing with the same product for many years - well I don't have that luxury, I'm dealing with a bond invested in a different sector every few months in my job. I constantly have to learn, it's like a learning curve that I can never totally climb - I get to the top of one and then there's yet another one to climb for the next product. Fortunately, I guess that's where the geeky Asian student in me kicks in and I suppose I do know how to study/learn very quickly.

I feel very much at home in the banking world.

So there you go, that's where I am at with my new job. I am enjoying it because I have a nice team and they treat me very well. I actually get along pretty well with everyone! I am grateful for having had this opportunity and I know it is really up to me to make it successful. There is much to learn but I feel confident in my ability to adapt and pick things up quickly enough to do my job well. My bosses do have quite a hands-off approach when it comes to my work, it's very much "get it done soon, let me know if you have any questions" and I'm pretty much allowed to work in peace with very little scrutiny. On one hand, yes I'm grateful I don't have a boss breathing down the back of my neck all the time, on the other hand, I'm 40 for crying out aloud. If you can't trust someone as old as me to work independently, then who can you trust?  Another key reason why I am happy is because I am not trying to do something crazy or try something that I have little experience in - rather, I'm sticking to exactly what I know I am good at and have loads of experience in. Please let me know if you have other questions about working in finance. Many thanks for reading.