Fund Accounting

This post is in response to a large amount of PMs I have received since commenting on this thread:

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The info below is to the best of my knowledge - please correct anything you see that you disagree with, and salary data is about a year old. The information below applies to State Street (SS), but is probably relevant to other large fund accounting operations (although they pay a bit better). I am writing about this since I worked at SS for 1.5 years as a workflow automation specialist (VBA developer) and my job consisted mainly of rotating between different groups, shadowing fund accountants and looking for ways to automate their daily work.

My general stance on the topic is that anything whatsoever is better than SS.

What are the possible reasons one would work at SS? (1) cash (2) learning about finance and (3) exit opps.

(1) Below is (what I believe to be) a fairly accurate salary schedule for State Street:
Associate 1 - 33K
Associate 2 (aka senior) - 40K (at least 1 year to get there)
Senior Associate (aka manager) - 48K (at least another year, probably more)
Officer - 60K (at least another two years, and then only if lucky)
AVP - 75K (another 3-5 years, once again need luck)
VP - 100K (hopefully quit before this time)

Enough said about comp. The amounts above don't include bonuses, but until you reach AVP level, these will not exceed 7K, so pretty irrelevant.

(2) You may learn some very technical things about finance at SS. In training, you will be taught to calculate accrued interest for a variety of bonds, with a variety of day-count conventions, payment frequencies, etc. This is not going to be useful outside of fund accounting. Other than that, you will learn when trades settle, but thats about it.

Also, a recent push within SS has been to centralize operations by very specific functions - that is, whereas before, a fund accountant may have done all the work related to a fund (booking trades, cash management, settlement issues, pricing, interest accruals, reconciliation, reporting, etc) each of those functions is now being done by a specific group. That means that you will be doing one of those items, and will likely not even see how it all comes together. The problem with this is discussed below...

(3) Exit opps - About the only thing one can do after SS is either move to a different fund accounting company (BNY, JPM if lucky) or to move to a client. Moving to a client is the dream of many fund accountants, but unfortunately due to the centralization described above it is becoming increasingly difficult. The client typically needs to oversee all aspects of the fund, and as such, assuming you were repeatedly performing a specialized task at SS, you will not know enough to transition. Note that of course, you would move to the BO of the client, and hence even if you are lucky enough to do this, it is only half the fight, if that. I have seen 2 people make this transition, out of about 60 who I would have known about.

I should also mention that a large portion of fund accountants at SS are interested in AM, and frequently apply to all the Boston area shops. As I was once told by an MD at an AM shop, once you have done a year at SS, your resume goes in the trash. The way he described it, the mistake of joining SS can be forgiven. You then have 6 months to figure out how bad it is, and another 6 months to get the hell out. If you haven't, he doesn't want to talk to you. I have heard similar thoughts at other AM shops in Boston area. I am not in AM, perhaps someone who is could comment on this?

Now, what is the upside of SS?

Well, you MIGHT be able to squeeze in fund accounting as work experience for the CFA designation. Say what you will about how that's not possible, but I have seen it done. You will also be surrounded by a culture of "do the min, and go home" which might allow you to advance (somewhat). Of course, such a culture is tough to abstain from, and many previously-motivated individuals get sucked into it. The salary schedule above assumes an individual of above-average motivation, and no matter how good you are, you will not advance much faster than that. But it might be good enough to show leadership for b-school apps.

Job security? Kind of. I think the majority of "centralizing" has been done, and most groups will see little downsizing, although as these "centers" (which they call "center of excellence" lol) become efficient I suppose there could be a few lay-offs. However, the one thing I would stress is DO NOT BELIEVE WHAT THEY TELL YOU. When I was still there, they were introducing the idea of centralization, and promising to all the fund accountants that no jobs would be cut. Now, half of the people in the room that day have been laid off. I was pretty surprised by this - I really believed them. In all fairness though, VP level management genuinely was not aware of what was coming.

So what should you do, if SS is your only offer?
Keep looking. I suppose SS might be better than a gap on your resume (assuming its not a gap between FO jobs). It can also be a way to get by for the time being. But I would suggest that even working in industry would be more relevant to finance than SS, and certainly better for b-school apps.

One last thing - the idea of moving to a MO or FO position within SS. I have NEVER, NEVER seen this happen, and people sure have tried. I am sure it has happened at some point, but don't count on it. Fund accountants at SS have a reputation (within SS and outside) for not being the brightest, and I would say this is 75% correct. It is just a bad brand to have.

Once again, please disagree with any of the above if you have any better/more up-to-date info. I hope this helps those who hope to break into finance via SS.