An Entrepreneurial Journey in Global Financial Services
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Starting a business is a huge challenge, there are many opportunities and risks, all of which I will try to touch upon briefly.
Opportunities in Broad Global Industry
The industry is very large and operates on a truly global landscape. The financial services industry is perhaps the poster child of an increasingly digital world where information is a commodity and borders are shrinking. There are plentiful opportunities to make money! Clients and institutions are always looking to make money and there will always be demand for financial services, especially with volatile markets and economic paradigm shifts.
Challenges are Rising
But it's tough to make a name as a newly minted entrepreneur because competition can be fierce, and one always has to compete with big industry leaders and established firms. Perhaps unlike in any other industry, one must have relevant work experience and ideally a reputation before he/she can branch out on their own. One can't easily be a Zuckerberg or Musk; I have never heard anyone with any success in our industry starting out just out of college with an idea. One can surely start a hedge fund in a garage on a shoestring, but work experience and credibility is essential to adding value and gaining client trust and assets. In addition, without experience one won't have a unique idea or product to bring to market.
Those first few months can sometimes be the most grueling, and it's most important to develop an effective marketing strategy and a unique selling "edge" which will give you that crucial initial visibility. From a personal standpoint I had to make many sacrifices, and travel constantly to "pound the pavement" to meet prospects. Marketing tends to be a numbers game, the more prospects one meets, the more potential clients. Hiring an external marketing agent with existing contacts can be effective and lower the breakeven point.
Positives: Ideas Trump Capital
There are many positives aspects of the financial services industry. One doesn't need much brick and mortar capital at all, but the cost of human resources can be quite steep. You don't need to invest in a lot of staff and that is why it's easier to break even and attain a high ROE, although each professional employee will likely command a premium wage. As I mentioned earlier, it's really a globalized industry and with the free flow of information, and dedicated investment platforms such as Bloomberg or Reuters, one has all the basis ingredients needed. Simply put, and to be very frank, all you really need is a laptop, phone, and decent internet connection to really begin your business as a financial service provider.
Headwinds Despite Robust Markets
Despite stock and bond indices being at all time highs, the industry has several headwinds. Increasing competition from index funds and compression of returns has made active management tougher. There is pressure on both management fees and brokerage commissions. Thus for both money managers/hedge funds and investment advisors, getting incremental customers is more challenging than ever. In India, with a secular shift occurring into financial assets, equities and mutual funds ["mutual funds sahi hai"], there is renewed growth in an industry that was plagued by size and critical mass issues just a few years back.
A Hobby as a Career
The financial services industry is filled with opportunities, and anyone with the right mindset and hard work can become a successful entrepreneur. Getting the first few customers is a challenge because you're dealing with institutional clients and the ticket sizes can be large. Even though capital expenditures may be small, breaking even can still be challenging, and as a new face you have to be persistent to get noticed. One thing I would recommend is that one has a value added strategy in the beginning to attract clients and get higher exposure for your entrepreneurial venture. And one final note, there is an inherent joy about being in this field and I tell others that in our industry one is usually compensated very well for doing what many others do as a hobby in one's spare time!.