Google the most-asked interview questions and you’ll get a really long list. There are two I would like to highlight: why do you want to work for this specific company and why do you want this specific job?
It is impossible to give a compelling (or believable) answer unless you have at least an interest in learning what the company, and industry, does to serve its stakeholders. There are people who not only have no idea of what the financial services industry does but have no interest in knowing. People feigning interest to get a job who see the industry as a money printer fitted with a perpetual motion machine.
Financial freedom is important. It provides the means in which we can support both ourselves and the people we love. Its absence is the source of immeasurable suffering across the world. However, there is a difference between money being a means to an end and it being the end itself. The financial services industry is a means to an important end. An end beyond money.
There is a difference between money being a means to an end and it being the end itself.
The heart of finance
Imagine a small society of a few people. They all depend on one another. One farmer within the society provides food for its inhabitants, including his children and himself. However, as the society gets bigger, more food is needed to feed the growing population. Sadly, the farmer does not have the money to expand the farmland he currently possesses. The newborn babies and families in the society may starve and pass away if nothing is done.
There is a person who lives in this society. This person has more than enough money to take care of himself and his family. Seeing the farmer in distress, and understanding the importance of the farm to the society, he makes a deal with him. He would allow the farmer to use his money to expand the farm and in exchange the farmer will pay the person back the money with interest. This is so the person can lend the money again if there is another need in the future. The person will be able to put his money to good use. The farmer will be able to feed the men, women, and children in the society now and in the future. It’s a win-win.
However, societies not only need food. The providers of these goods and services will inevitably need capital: to expand and support a growing society, to handle its day-to-day operations and to bridge the gap between the money they have and the money they need.
[People need a way to] bridge the gap between the money they have and the money they need.
There are many people like the person who lent to the farmer. Realizing this need, these people understood that they can better help the providers of goods and services by working together. These people would combine their money and shoulder the risk of lending their money. If the money lent is not repaid, they would lose only a fraction of their total money. They shared knowledge and expertise with one another. Society, initially, could trust them.
As the society prospered, the providers of goods and services, as well as the inhabitants, began to have more than enough money to meet their needs. They needed a safe place where they could store their money in case they needed it in the future. Given the trust between the people and these lenders, they allowed the lenders to keep their money for them. Thus, the lenders became a kind of bank or financial institution.
It should be noted that this oversimplifies reality. With complex challenges comes complex financial products and solutions. Also, laws and regulations need to be in place. Nevertheless, this is how I see banking. Whether investment banking, retail banking, or even investment management. At its heart, it’s being a bridge between those who have money and those who need it. Providing the financing solutions that providers of goods and services need so that the society can continue to function. The heart of banking and finance should be to serve clients and, therefore, the wider society.
Covid-19 and the financial services industry
This past year is a prime example of banks serving society. During the Coronavirus pandemic, countless businesses and organizations were at risk of bankruptcy. From our local supermarkets and restaurants to hospitals and charity organizations. When lockdowns emerged, people in general stopped visiting supermarkets. Hospitals were at full capacity and in desperate need of financing to stay operational. Businesses needed financing, liquidity, money. This is where banks come into the picture.
Providing short-term financing solutions, providing capital to those who needed the most, they were able to prevent the collapse of essential businesses during a time when societies needed them the most. According to HM Treasury within the UK alone, the UK banking and financing industry supported over 1.6 million businesses with £75 billion government-backed coronavirus lending schemes.
The heart of banking, just like the human heart, is not invulnerable.
Getting back to the purpose of banking
There is a need that the financial services industry meets. A need for a trustworthy custodian to safeguard the money of people and organizations. The need for help when there is not enough money coming in at the right time. The need for advice and support when organizations want or need to grow and expand their operations. A need for help with making financing and investing decisions.
The financial services industry’s purpose is to provide all the above services to clients they are responsible for. Private banks, investment banks, retail banks, asset management firms, insurance companies. These and many other organizations have a responsibility to act within the best interests of their clients—some of those clients being the organizations we depend on.
Unfortunately, the heart of banking, just like the human heart, is not invulnerable. There are many accounts in history where banks failed to meet the people’s expectations. Some people believe these failings are inevitable—an inherent feature of the banking system. Whether this is true or not is something I can’t say with certainty. But what I do know is that banks are necessary.
Sadly, a lot of smart and talented people have lost touch with this greater purpose. The banking sector is seen as nothing more than a breeding ground for greed and vanity. A place of hubris and self-interest. A place simply to make lots of money.
Nevertheless, one step at a time, one conversation at a time, we can get back to this purpose. And this includes showing a real interest in the purpose of the industry you are interested in.
Find out more about Hult’s Master’s in Finance, designed in collaboration with leading CFOs.