Interview with a Top Ranked Wall Street Analyst (and Business School Professor)

The following article is sponsored by the
F.W. Olin Graduate School of Business at Babson College.

Check out their MBA programs.

Mark D'Annolfo has over 20 year of investment and operating experience, having worked on 30-plus transactions valued at over $4 billion. He is currently the managing irector of the Stephen D. Cutler Center for Investments and Finance and teaches a graduate-level investments course at Babson College.

1.    Why did you decide to teach at Babson?

When I was with the investment banking firm Adams, Harkness & Hill, now Canaccord Genuity, we had several of our investment conferences at Babson, so I knew Babson from our conferences, as well as by its great reputation as a business school. Being on campus, I also knew that Babson had a long history in finance, dating back to its founder, Roger Babson, who was an investment professional,  to the present day, where on average a quarter to a third of Babson students accept positions in the finance area.

After leaving investment banking, I wanting to try teaching and called Mark Potter, the chair of the finance division at Babson at the time. As it happens, the professor teaching equity portfolio management was going on maternity leave and Mark was looking for a replacement. After meeting additional times, Mark offered me the opportunity to co-teach the course with him. I would focus more on teaching equity analysis and stock selection and he would focus more on portfolio management theory. I accepted and really enjoyed the experience.

After teaching at Babson for several semesters, I taught equity analysis at my alma mater, Boston College – the ‘other BC’ – for several years. When Babson was looking for a director for their Stephen D. Cutler Center for Investments and Finance, I knew them and they knew me and I started shortly after. The fact that Stephen Cutler of Essex Investments, the main benefactor, was also a client when I was in investment banking probably also helped seal the deal.

2.    How does your experience as a Wall Street analyst inform your teaching?

The courses I co-taught and taught in the past, equity portfolio management (at Babson) and equity analysis (at Boston College) were very closely related to what I had done for 15-20 years as a senior equity analyst. I designed my classes, which were electives, around what students needed to know if they planned to go into the investment management business. The classes provided a practical understanding of equity analysis, which is as much an art as a science. Students were taught basic valuation techniques and their application, industry, strategic and competitive analysis, modeling income statements and balance sheets to project earnings, how to write research reports, and how you add value in equity research – in other words, what I did when I was an analyst. I taught the classes through a combination of lectures, case studies, guest speakers and class participation.

I am currently the faculty advisor and teach the Cutler Center Management Consulting Field Experience (MCFEs) classes, which involves overseeing, guiding and grading teams of three to five graduate students who perform semester-long consulting projects for companies in the investments and finance area. I also draw on my experience in investment banking to coach the students doing these real-world projects. When asked, I also provide input on the broader finance curriculum at Babson.

3.    Could you talk a little about the Cutler Center at Babson?

Founded in March 2000, the award winning Stephen D. Cutler Center for Investments and Finance is an academic center that is part of the highly regarded finance division at Babson College; Babson was ranked #11 in financial management by Bloomberg Businessweek among undergraduate business schools. If you were to sum the center up in three words it would be: thought-leadership, education and mentoring. 

Through areas like funding technology resources, the center supports the finance faculty and its valuable research, which allows both individuals and executives to make better decisions. Through support of the ‘live money’ Babson College Fund, we help train future investment managers. We help develop student leaders in investments and finance by sponsoring a number of student-led organizations, such as the Babson Investment Management Association. The Cutler Center promotes thought-leadership through hosting leading speakers, from academia to government to investment management, who present and interact with our faculty, students, alumni, and business leaders. Dr. Eric Rosengren, President of the Federal Reserve Bank of Boston, for example, was recently at Babson for a Cutler Center event and his remarks were picked up by over 50 publications, including the Wall Street Journal.

The Cutler Center also has a great advisory board of leaders in the investments and finance sector, such as Bruce Herring, chief investment officer of equities at Fidelity Investments. We believe the Cutler Center is unique among academic centers and is a differentiator for Babson.

4.    Babson is known for integrating entrepreneurship into all aspects of its MBA program. Did you find the investments sector to be entrepreneurial and how does Babson uniquely prepare students in the area of finance?

I found the investment sector to be very entrepreneurial. When I was a managing director at Deutsche Bank Securities, for example, I met twice a year with my boss, the Director of Research. It was really up to each equity analyst to create a business plan on how he or she was going to build their business. This was similar to other areas of investment banking and in other areas of the broader investment sector, such as in hedge funds or wealth management.

Babson uniquely prepares students in that our finance curriculum is a blend of theory and practice. Babson’s finance faculty members also possess a wide variety of academic, government, and business experience. Eric Sirri, for example, was the director of the SEC Division of Trading and Markets from 2006 to 2009. Rick Spillane held numerous senior investment and management positions at Fidelity Investments. Michael Goldstein, chair of the finance division, is one of the most prolific authors at Babson. Laurie Krigman is one of the foremost experts on IPOs. Richard Bliss consistently wins teaching awards, and so on. Finally, Babson’s approach to teaching entrepreneurship prepares students to be action-oriented and to find opportunities in uncertainty – which is more and more becoming the norm in business.

5.    Are there some quotes that influenced you that you would like to share?

There are two that come to mind. One is from John Maynard Keynes who said, “The market can stay irrational longer than you can stay solvent,” which sums up what happened to Lehman and other investments firms a handful of years ago. Something to keep in mind when managing your own or other people’s money.

The other quote is by a Morgan Stanley trader who stated, “(In trading), some days you’re gonna be the windshield and other days you’ll be the bug.” Sort of says it all…

6.    How do developments on Wall St. affect small business owners on Main Street?

If the 2007-08 financial crisis has taught us anything, it is the importance of understanding how global capital markets operate, and just how interconnected Wall Street and Main Street really are. There are dozens of examples of Wall Street affecting Main Street, just one being that when financial institutions freeze up and stop lending or providing investment capital, small businesses often don’t have the capability to expand, or in some cases even stay in business, which directly impacts employment, which impacts consumer demand, which impacts business investment and so on.

Beyond that, as hundreds of millions of people globally emerge from poverty to middle-class status and traditional pensions give way to defined contribution plans such as IRAs and 401(k)s, making good investment decisions has become even more critical. And, as governments rack up more and more debt, funding it  can be increasingly costly and it can create a drag on private sector growth and job creation. Making poor investment and finance decisions can cost society dearly. Hence, we believe our Cutler Center mission – “to advance the understanding of investments and finance in our global economy” – is an important one and fits with Babson’s philosophy of creating both economic and social value.

7.    What advice do you have for students who are getting an MBA in finance?

There are typically two concentrations and career paths in finance. One is corporate finance and the other is investments. Given my background, I’ll stay with what I know and focus on the investments sector. Even though you’re seeing some retrenching in financial services, I believe it is still a great business – for the right person. Compensation is attractive, it is very entrepreneurial, and the work is often highly interesting and intellectually challenging. Since these jobs often involve a great deal of travel and long hours, though, students should really love what they do, or go into something else.

Positions such as equity analysis, venture capital, and so on, are highly sought after and the sector is resultantly often very difficult to break into. You typically have to be in the top tier of your class, have some experience and show a passion for the work, among other things. If you don’t have experience, get some either through internships or a course like the Babson College Fund, where students manage a portion of the Babson endowment.  Having a CFA or other designation is helpful. Networking is also very important. Put another way, these jobs often pay 20% to 50% more than other finance jobs, which tend to pay more than other business jobs. Hence, students should prepare well in advance and be prepared to demonstrate why they are worth $20,000 to $50,000+ more than their peers. You really have to differentiate yourself.

8.    Is there anything you would like to add?

I really enjoy my work at Babson as the managing director of the Cutler Center, teaching and mentoring students and interacting with the finance faculty and other personnel at the college. It’s a dynamic and special place that puts students first. I love the investments space and loved my work in investment banking when I was in it. But, Babson allows me to continue to work in the investments sector, but without the daunting hours and travel schedule of being in the investments industry. It’s a great fit, especially with a family. Hopefully, my daughter Christine, who is now in high school, will also take a hard look at Babson!