Angela LaGamba: Welcome to Northeastern University’s online Master of Science in Finance Innovation in Finance webinar. My name is Angela, and I will be your moderator for today. Before we begin, I’d like to go over a few logistics for the presentation and address some commonly asked questions. The first one is that all participants today, including yourself, are going to be in listen only mode. We will be recording the session for future use, and we just want to minimize the background noise. To ask questions, feel free to type your questions into the chat box that’s located on the right-hand side of your screen. Feel free to type in the question, then hit enter, or simply hit the word “Send” beside the box, and that will come through.
We will be addressing your questions throughout the webinar. We also have a dedicated Q&A at the end of the presentation. Your panelists today are Robert Mooradian and Khurshid Iqbal. Robert is a professor of finance and faculty director of the Master of Science in Finance program at Northeastern University D’Amore-McKim School of Business. In the online MSF, he is lead faculty for the international financial management, financial risk management, and finance seminar courses. Khurshid is an enrollment advisor on Northeastern University’s online Master of Science in Finance. His role is to help prospective students through the application and admissions process. Let’s get started. I’m gonna hand it over to Professor Mooradian to talk a little bit about the Masters of Science in Finance program. Go ahead, Professor.
Robert Mooradian: I first want to start a little bit to introduce the D’Amore-McKim School of Business at Northeastern University. I want to start by saying that this school has been a real leader in program and curriculum innovation. One of the great things about Northeastern and the D’Amore-McKim School of Business is that faculty have a nice balance of teaching and research. The faculty are very much engaged in applied research, and they’re pursuing, largely, real-world, practitioner-oriented problems. The nice thing that I’m going to do for you with this webinar is give you a chance to see how some of my research relates to real-world issues in finance.
What’s great about the online Master of Science in Finance program is that it’s really targeted both for prospective student’s already in finance, as well as to students who, perhaps, want to change to a career in finance. You can complete the degree in as few as 16 months. As I’ve said, you’re working with instructors with real world experience, both in terms of research and consulting. May of your instructors are CFAs, so there is overlap, in terms of the MSF curriculum and what you need to know to prepare for the CFA exam. It’s not a CFA prep program, but there’s overlap in what you need to know. Then it’s also possible to do this program joint with the MBA, online MBA.
You can get a joint degree, as well. The way the program is structured, there’s a set of required courses, but there are also elective courses that allow you to do a little more specialization in corporate finance or in investments. Examples of electives that would fit into corporate finance would be courses in mergers and acquisitions, a course in evaluation and value creation, and then courses specifically directed to people interested in investments, there’s a course in portfolio management and fixed income securities and risk, and in real estate finance and investments. Then we have other courses that really fit in either specialization.
There’s a course in investment banking, and there’s a course in financial risk management. That helps students who have – they can specialize more in corporate or more in investments. There are a number of potential career paths for MSF graduates. Some of the students in the program are already along a particular career path related to one of these positions that are listed here. The program is great because it can advance your knowledge in your current career path, but it also can be used for people interested in a change, so learning skills on a new career path, as well. What I want to do now is move toward the presentation that I prepared.
As I said, I’m not covering everything in financial innovation. That’s a huge topic. But I’m focusing on some examples that relate to some of my own research to give you an idea of some of the applications of my research and to see how it fits into real-world problems that people are interested in right now. I’ve been a professor of finance at Northeastern University now, this is my 20th year. I have a variety of publications from very academic journals, like the Journal of Finance, which is the association journal of the American Finance Association, to more practitioner-oriented, high-quality journals, like the Financial Analyst’s Journal.
I’m teaching in a number of different areas, and specifically in the online MSF program, I’m teaching in the international financial management class, the financial risk management, and the finance seminar. The international financial management and the seminar are required courses, and the financial risk management class is an elective course in the program. What I want to start with now is the presentation that I prepared for you. Really, the question here with financial innovation is can it be beneficial to financial market participants, or can it be also detrimental? I’m gonna give you some examples where innovation can be beneficial. It can be helpful.
It can correct a market inefficiency, some kind of market imperfection. In finance, there’s a lot of research about how financial institutions are created to try and mitigate conflicts of interest because there are always conflicts of interest when money is involved. Everybody is looking to make more for himself. How do we mitigate some of these conflicts? Then also, just for full disclosure, I want to be up front that there are areas, as well, where one would argue that these innovations are detrimental to investors, that there’s a dark side, as well. As I said, I’m not gonna cover everything in this area, but I’m gonna try and give you enough so that you get a sense of how my research relates to some of this.
Recently, if you’ve been looking at innovations in finance, you see all these acronyms, CDOs, collateralized debt obligations, structured investment vehicles, residential mortgage-backed securities. The argument is that these are oftentimes just set up to exploit investors, that you hook investors that don’t really understand what they’re getting. For example, the investment banks that are creating them, they make a lot of money, but the investors end up taking a lot more risk than they realize and getting a lot lower return than what they had expected. One example that I’m gonna give you, from 2001 to 2005, Morgan Stanley issued about $2.2 billion of stock participation redemption quarterly pay securities.
These sparks have payoffs that are tied to the stock price of major listed companies. No advantage, as far as hedging is concerned. They weren’t particularly liquid. If anything, there was a tax disadvantage the way they were set up. Yet, they were issued at an 8 percent price premium, so they did worse than riskless investments. You would have been better off to just put your money in a bank CD. This isn’t the only security of this type. These kinds of structured equity products also became very popular in Asia and Europe. At their peak, they reached about a total outstanding of over $5 trillion. These structured equity products were often over-priced, and they just looked like ways to extract money from investors who don’t understand what the alternatives are to what they’re buying.
This is clearly in the area of the dark side of financial innovation. One more area that is gonna be on the minds of a lot of individuals interested in finance is the recent financial crisis. What role does financial innovation play in this recent financial crisis beginning in 2007? There are a number of people who argue that financial innovation contributed to this. Some might even argue that it caused this. But if we look at the Rheinhart and Rogoff work that was published in 2009, what they do is they look historically at financial crises. They show that, in general, financial liberalization and credit expansion precedes most financial crises. They really tie this more to real estate booms and busts.
That’s really the heart of many financial crises. The idea here is that prices of real estate and other assets increase significantly, and then the bubble bursts and these markets collapse, and then banks and other financial intermediaries, where a lot of their lending is tied to, say, real estate, they’re over-exposed to the real estate market bust and a banking crisis follows. The take-away from Rheinhart and Rogoff is that probably, it’s financial liberalization and credit expansion that credit is more readily available for, say, mortgages, that plays a big role in explaining the recent financial crisis. Others have argued that an innovation securitization may be a cause, as well.
What I’m gonna argue is it’s probably not a cause, although one could argue that it may have exacerbated the crisis that began in 2007. What we saw during the time period leading up to the mid-2000s was that mortgage debt, as a percentage of GDP, was increasing. However, contrary to the – blaming it on securitization, really, securitization started becoming significant much earlier, as early as the 1960s, and it still wasn’t that big in the mid-2000s. It’s existed for a long time, but this is really the first time it’s been blamed for any financial crisis. For example, in the 1980s, it was the S&L, savings and loan sector that suffered in the crisis during that time period.
If we look at subprime mortgages, in particular – many would say it may be the increase in the number of subprime mortgages, particularly the securitization of subprime mortgages, that may have caused this real estate bubble that led to the crisis. What we see here is that it really isn’t until 2004 that the subprime mortgages almost reach 20 percent of all home mortgage originations. Prior to 2004, it was well under 10 percent of all home mortgage originations. Yet, much of the real estate appreciation that we saw occurred before 2004. This is before the subprime mortgages really took off. Then another bit of counter evidence is that France had a huge price increase in real estate, but had almost no securitization.
It’s difficult to say that securitization is the cause for this particular real estate boom. What I want to talk a little bit about – get at is where some of my research relates to securitization and relates to this question of whether securitization could have exacerbated the crisis. I’m talking about the crisis largely beginning in 2007. What we have seen recently is a very large number of homes going into foreclosure. Over 5 million homeowners lost their homes to foreclosure during this time period. Foreclosure can have a contagion effect. You have homes going into foreclosure because real estate values have dropped, and then with foreclosure, that has a depressing effect on real estate values, and it leads to more defaults, and then more foreclosures.
Foreclosure leads to a drop in real estate values, which leads to more foreclosures, and so forth. What you’ve seen recently is quite a bit of discussion about loan modification. You’ve seen a number of government promoted programs to modify loans, so the loans are modified so that the borrowers can remain in their homes. The terms of the mortgage are somehow altered, so that instead of the lender foreclosing on the property, the lender offers some concession to the borrower, so the borrower is able to stay in his home and avoid the costs of foreclosure. What my research has shown is that when you have securitization, it makes this kind of modification difficult.
What I show is that there’s a conflict of interest here. Perhaps the investors, who are essentially – they’re the providers of the financing for these mortgages – they may – it may be in their interest to have this kind of loan modification, but the borrowers don’t have direct contact with the investors. The idea here is that some party originated these mortgages, and then pooled them. When they pooled them, they raised funding from investors. This pool of mortgages essentially is owned by these pool of investors, but the investors don’t interact directly with the borrowers. There’s a servicer who’s the agent of the investors, who has direct contact with the borrowers.
Typically, these servicers hold what we call a first loss position. When there are defaults, they incur the losses associated with the default, at least up to a certain amount of defaults. When you have subprime mortgages, and you have as many defaults that we experienced recently, what you see is that these positions have little or no value. They’re underwater. Now, they don’t have any incentive to do these types of modifications that I’ve been discussing with you. It’s costly to them to do a modification, and they don’t get any direct benefit, so they just foreclose on borrowers who are in default. This is evidence consistent with the idea that particularly with subprime mortgages or mortgages where there’s a higher probability of default, that securitization can make a crisis worse.
It can have a detrimental effect. Consistent with this argument, there’s another paper that shows that securitized mortgages are less likely to be renegotiated than bank-held loans. The securitized mortgages you have the separation that I discussed with you. You have investors, and then you have the servicer. Whereas, the bank-held loans, the bank is the provider of the funding, and the bank has direct contact with the borrowers. In that case, there seems to be a greater willingness to renegotiate these mortgages. As I said, the securitization may be making modification more difficult and, therefore, it may play a role in exacerbating a crisis. Now, I’ve sort of covered the bad.
Now, I’m gonna focus more on some of the benefits of financial innovation. I’m gonna start by focusing on private equity. This is an innovation that becomes very important beginning in the 1970s. Venture capital, this is private equity financing for new ventures, and then leveraged buyouts, these are – this is where debt financing is used to take a large public company private. Then a third – and this third type really got started in the 1980s and early 1990s, which was the last big economic downturn. Then it reappears once again in the 2000s, with the recent financial crisis. This is something that – these are really the worst companies, worst performing.
They’re financially distressed. May not necessarily be bankrupt, but they definitely have difficulty meeting their debt service. As I said, these are some of the worst companies. These investors play a role in bringing about improvements. These are things that I want to discuss with you, as far as the benefits of innovation. The first innovation in this area that I want to discuss with you is venture capital. This is funding for – what you may be thinking of are startup companies. These are new ventures. Many of them are technology-oriented companies. These are definitely companies that we want to encourage. It’s an important part of our economy. They’re innovative companies.
They’re largely private companies. They’re very young. These companies have limited access to capital initially because initially, they don’t have positive cash flow. They’re still doing a lot of investing, and they’re not making very much money, if any, initially. It requires a specialized type of provider of financing that a traditional bank loan wouldn’t work for these companies because they don’t have a lot of assets. Their assets are intellectual capital, in most cases, so they don’t have the kinds of assets that a bank would look for to do lending, and they aren’t earning money yet. So again, a bank wouldn’t necessarily be interested in making them a loan.
This is where venture capital comes in. These are private companies, so it’s equity financing, but we call this private equity because it’s not traded. There is no public market for this stock yet. Where this started to take off is it really started, initially, after World War II, but it wasn’t until the ‘70s that the innovation came in. This is where venture capital moved to the limited partnership organizational form. It’s largely provided through limited partnership. You have the venture capitalists who are the general partners, and the limited partners provide the financing. The VCs, the venture capitalists, who are the general partners, they’re experts in terms of selecting investments.
After funding, they get involved in the governance and management of these companies. Selection of investments is important, and then monitoring of these companies is also important. You have these experts. This organizational form provides better incentives. One of the benefits here with a limited partnership is that the performance-based compensation is much stronger than, say, if you set this up as a mutual fund. After World War II, the first of these were closed-end mutual funds. It really didn’t work. There weren’t the right incentives. It didn’t work very well. This organizational structure works much better, in terms of providing incentives for selecting the best investments, monitoring these investments, and then exiting these investments is very important, too.
You have to get your money out, and that’s where the initial public offering market becomes very important. There’s also a regulatory change in the late ‘70s that allows pension funds to invest both in these venture capital funds and in IPOs. It’s the combination of the regulatory change and this innovation, the limited partnership organizational form, that really makes venture capital take off. By 2008, you see the impact of this – 13 percent of U.S. public firms are venture backed firms that had gone public. They’re prior venture-backed firms. Now they’re public companies. Venture capital’s responsible for only 3 percent of corporate research and development, but responsible for 10 percent of innovation.
Clearly, this is a big benefit of this financial innovation. The next type of private equity is leveraged buyouts of large public companies. Again, the idea here is creating the right incentives. These are public companies that perhaps are not the best performers. They generate a lot of cash, but in terms of operating efficiency, they aren’t performing that well. What these leveraged buyouts do is they use debt financing to take these companies private. As a result of the LBO, these companies have debt to capital ratios of about 90 percent. What this does is it makes it possible for managers – because the equity financing is relatively a small percentage of the total financing of these companies – makes it possible for managers to have a sizable equity stake, 15 to 20 percent of the equity of these companies.
Managers’ compensation is very much tied to the firm performance, the performance of the firms that they’re managing. These leveraged buyout organizations, these buyout funds, they’re also active in monitoring these companies. What we see here is that in studies going back to the 1980s, these leveraged buyouts are very successful, in terms of returns to investors, and in terms of improvements and operating performance of the firms that they target. It’s improvements in incentives, improvements in monitoring of these companies, the buyout fund has board seats, and they’re active in governance, and they’re active in management of these companies.
That brings about these improvements in performance. The last of these ties more directly into some of my research. This is investing in distressed companies. When you think of financially distressed companies, you should be thinking about these are some of the worst-performing companies. They have high leverage. They’re having – either they’re not able to meet their debt service, or they’re having difficulty meeting their debt service, and buying the stock in these companies is generally not wise because if the firm goes into bankruptcy, for example, the stock may be wiped out. What we call vulture investors – and many of these are private equity firms, or they’re hedge funds.
What they do is they don’t purchase stock. They purchase more senior claims. When the company goes through a financial restructuring, they frequently gain control. In the financial restructuring, much of the prior debt is converted into stock. These vulture investors then end up with big blocks of stock in place of the debt that they had purchased. What we find, and what I find with my co-author, Edith Hotchkiss, is that just having vulture investors involved or buying claims, we don’t detect improvements in performance. It’s when they become active in the governance of the companies that they target that we see the improvements in performance. Again, it’s incentives.
It’s becoming active in governance and management of target firms that there’s an improvement in the performance of these companies. As I said, these are some of the worst companies. Yet, these investors – clearly, this was an innovation going back to the ‘80s. These investors are able to make a big difference, in terms of performance of these companies. Some of the vulture investors are hedge funds. Some of my more recent research deals with hedge funds that are becoming more active in the firms that they target. These hedge funds are buying blocks of stock in firms. What they’re doing is not necessarily – although in many cases, they do get on the board.
They do become active in governance of target firms. But in some cases, it’s just the threat to become active and target firms that brings about an improvement in target performance. What I have found with my colleague, Nicky Boyson, who – Professor Boyson also teaches in the online MS Finance program. What we find is that these firms that are targeted by hedge funds, we find improvements in operating performance of these companies. What’s interesting here is that this type of activism, in general – not necessarily by hedge funds, but, for example, you may be familiar with pension funds, such as CalPERS, that have also been activists.
They have bought blocks of stock in companies and tried to influence management. But the evidence on target performance is very mixed. What I attribute the difference here with hedge funds is that hedge funds have – hedge fund managers have strong performance-based incentives. Again, I’m tying this to creating the financial innovation that creates the right set of incentives, so the improvements are related to the innovation of creating the right incentives, and then the hedge funds then monitor these targets and, in some cases, they become active in the governance of firms that they target.
In conclusion, while I’ve given you some examples where financial innovation can have detrimental effects, it can be used to exploit investors, it may have exacerbated the recent financial crisis, but I’ve also given you a number of examples where financial innovation can create value, in particular, with hedge fund activism and private equity, financial innovation can create value. These improvements are often due to improvements in incentives, monitoring, or governance structure. These are the areas where financial innovation can be very beneficial, both to target firms and investors.
Angela LaGamba: Thank you very much, Professor Mooradian, for walking us through that content.
What I’m going to do at this time is before we open the question and answer session, we do always like to ask our audience what they thought of the webinar and the presentation that was presented today. We do have poll that we’ve opened up on the lower right-hand side of the screen. The question we’re asking is how did you find today’s session? Did you enjoy the webinar? If so, perhaps you would like to see future topics covered in other webinar sessions. You’re more than welcome to share your feedback with us. That poll will remain open until the end of the webinar. Let’s move on to our question and answer session.
The first question that we have for you, Professor Mooradian, is around the topic that you presented. One of our audience members wanted to know what your thoughts were on whether or not the securitization of mortgages would be likely to continue, even after the 2008 economic crisis? Go ahead, Professor.
Robert Mooradian: Yes, they will continue. They are continuing. But one of the things that – if you can see in the chart that I showed you, the number of subprime mortgage securitizations has dropped considerably.
There’s a big dropoff. Subprime mortgage securitizations as a percentage of all mortgage securitizations has really dropped considerably. It’s a very small percentage now. I would expect, as mortgage originators have increased their standards, as far as providing credit, that this will continue for some time.
Obtaining credit is more difficult, and the requirements, in terms of borrower qualifications, are going to remain strict for some time, both because the banks, and also because of the recent history _____ wanna work through the defaults and the problems that we’ve recently experienced. For this reason, I see that it’s gonna be difficult for some time, particularly in the subprime area, to obtain financing.
Angela LaGamba: Thank you, Professor. The next question that we have is for Khurshid. Khurshid, one of our audience members wanted to know about the admissions requirements. He has an engineering background, with a Master’s of Science in Engineering. Would that help with the admissions requirements for this program? Go ahead, Khurshid.
Khurshid Iqbal: Thank you, Angela. Yes, to answer that question, you do certainly qualify to apply with that academic background. We look for people who have demonstrated numerical and mathematical skills. Definitely, that is reflected out of your engineering background.
Angela LaGamba: Thanks, Khurshid. The next question that we have for you, Professor, is a follow up. One of our audience members wanted to know if we had actually started along the path again of creating a risk for ourselves, as a society, of a housing bubble that we won’t be able to overcome in certain markets?
Robert Mooradian: That’s a good question. I think that there are some who would argue that the availability of credit, the expansion in money supply, and the low interest rate environment that we have right now, there’s some who are arguing that’s gonna lead to the next crisis. I don’t know that I would attribute that to securitization, as much as one might attribute that to credit becoming more readily available and the money supply being increased. I’m not seeing it quite yet with real estate prices, but in terms of other assets, such as stock prices, there are a number of economists who are saying look, we’re already seeing what could turn out to be the start of a new bubble.
Angela LaGamba: Thanks, Professor. The next question that we have is for Khurshid. The question is how much interaction do students typically experience when they’re in the online classes? Go ahead, Khurshid.
Khurshid Iqbal: That’s a great question, actually, Angela. The way the program is structured, you are required to be participating and interacting at all levels. You’ll be getting immense opportunities to network with students, faculty, as well as your instructors. Throughout the program, you will find that you are gonna be interacting at all levels, including chat sessions and group discussions and class discussions that we have on a weekly basis.
Angela LaGamba: Thanks, Khurshid. The next question that we have is for Professor Mooradian. The question is around the venture capitalist section that you covered. That was a great section, by the way. That was the comment by our audience member. She wanted to know should public firms actually seek out venture capitalist backing to help enhance their innovation? Go ahead, Professor.
Robert Mooradian: Typically, what public firms have been doing is they’ve been buying these innovative companies. Two ways these private innovative companies – two ways that the VCs exit their investments. I should put it that way. One way is to do an initial public offering. Once they do an initial public offering, then the stock has a public market, and the venture capital firms are able to exit their investment, so they get their cash out. The other way – and this is, for the VCs, their second choice, is for these companies to be acquired, these private companies to be acquired.
What we see is more of the big companies acquiring these smaller private companies to obtain their technology, to obtain their business model. This is more common because what we’ve seen is that these big corporate structures don’t do as well, in terms of getting these new innovations started, in terms of developing these new innovations. Most of these public companies are very active in seeking out these kinds of targets.
Angela LaGamba: Thank you, Professor. The next question that we have is for Khurshid. The question is around how the classes last? Is it a few weeks? Do you get any breaks in between? Our audience members wanted to know if you could just expand a little bit about that structure? Go ahead, Khurshid.
Khurshid Iqbal: Sure, Angela. The way the program is structured, you’re gonna be required to complete ten courses. You’ll be expected to complete one course at a time. Each course will be five weeks, and you will get a one-week break between courses. The break is longer during the holiday season, which could be two to three weeks, but on a normal – on a yearly basis, it’s a week break between every course, and each course will be five weeks.
Angela LaGamba: Thanks, Khurshid. The second to the last question that we have is for Professor Mooradian. The question is should any government legislation, in your opinion, change today, or perhaps in the next five years, to help protect the consumer against the dark side of financial innovation, and if so, what legislation should change?
Robert Mooradian: That’s a good question. I think that any kind of legislation of this type has to consider two things. One is that these financial innovators are very smart. If legislation keeps them from going in one direction, often they’ll figure out a way to go in a different direction, so it has to be very carefully thought out. Even then, it’s difficult because, as I said, there’s always a way around some new regulation. That’s difficult. I think this is where, say, Congress has had a hard time figuring out what is an appropriate response, in terms of new legislation. It’s a difficult question to address. I’m not sure –
I think there were two parts. Was there another part for the question?
Angela LaGamba: The second part was just more of a follow up. What part of the legislation, specifically, would you like to change?
Robert Mooradian: I’m not a legislator, so that’s a difficult one. I think that providing investors with better disclosure. For example, with the sparks that I gave as one example, investors should have known, but perhaps didn’t know well, what it was that they were buying. Making sure that investors have good information with which to evaluate these investments, I think, is very important. Then in the area of mortgage securitization, and in terms of originating mortgages, again, the borrowers need better information to evaluate what it is that they’re agreeing to with a mortgage. There are many that argue that the borrowers didn’t know what kind of mortgage they were taking out and what the implications were. This is one area that I would strongly recommend that there be improvements.
Angela LaGamba: Thank you, Professor. The final question that we have for today is for Khurshid. One of our audience members wanted to know if students would be able to attend graduation on campus? Go ahead, Khurshid.
Khurshid Iqbal: Basically, by you being an online student, you also do get access to many on-campus features. You will get an option to come on to the campus and audit lectures, meet the faculty. You’ll be able to take access to career services, library services, as well as you can come in for your graduation ceremony and walk the same ramp as anybody else, simply because the curriculum that you’ll be doing is the same as on campus. The faculty that you’re gonna be interacting with will be the same as on campus, as well, and the degree will be the same. It will not be stating whether you earned it on campus or online. You’ll be earning the same degree as anybody else that’s in the finance program. So yes, to answer your question, you’ll be able to come to the campus and attend your graduation ceremony.
Angela LaGamba: Thank you, Khurshid. That’s all the time that we have for today, everyone. I do have a couple of closing thoughts before we finalize today’s session. A recording of the webinar will be available on our website in the next few weeks. If you have any additional questions, please feel free to reach out to Khurshid directly, via phone or email, or even through the website. We’ve listed that information on the slide in front of you. Again, thank you to everyone, including Professor Mooradian and Khurshid, for walking us through this riveting session on innovation in finance. This concludes our webinar, and have a fantastic day, everyone.
Evelyn Liougas: Thank you for joining us for Northeastern University’s Master of Science in Finance faculty spotlight webinar. My name is Evelyn and I will be your moderator today. Before we begin, I would like to go over the logistics of this presentation and address some common questions.
To cut down on background noise, you are in listen only mode so you can hear the presenter but they cannot hear you. If you have any questions during the presentation, just type your question in the chat box in the right window of your screen and hit enter. Please feel free to ask your questions as you think of them but note that all answers will be held until the end of the presentation and will be available online for review. Within the next few weeks you will receive an email letting you know that the recording is available on our website.
The panelists for this webinar will be Emery Trahan, professor of finance and finance group coordinator, Rishi Sethi, enrollment advisor, and myself Evelyn who will be your moderator. Professor Trahan, I’m sure the attendees of today’s webinar are interested to learn more about your background. Tell us a bit about your educational background.
Emery Trahan: Sure. I actually started out in accounting. I have an undergraduate degree in accounting and worked for Pete Marwick Mitchell on their audit staff. They’re now KPMG and got my CPA designation. And then worked for one of their clients as a CFO. And then liked all that so much I went back to graduate school at the University at Albany in New York and got a Ph.D. in financial economics.
Evelyn Liougas: Great. And how long have you been with Northeastern?
Emery Trahan: I came to Northeastern actually from my Ph.D. program and I’ve been here for 25 years full-time where I teach and do some consulting work and research in finance areas.
Evelyn Liougas: Tell us one thing and one thing only that you personally like about Northeastern.
Emery Trahan: Well, there’s so many, but if there’s only one and I think I’m a little bit biased on this but I think it’s relevant to our discussion is that I really do like the faculty here in general and in the finance group. In 25 years, I’ve been able to contribute to recruiting faculty and helping develop the faculty and we’ve really been in an upward trajectory in terms of the faculty we’re hiring and what they’re doing.
But I really like them. I think we’ve got a faculty that does have strong academic research interest and records, but most of us also have some significant real world experience that we can bring to bear to research and to the teaching. And it’s a very collaborative group. They’re very committed to teaching and I think the faculty is really helped to contribute to the development of some unique online programs that we’re doing.
Evelyn Liougas: Great, thank you so much. I would like to now turn over the presentation to Rishi, our enrollment advisor. Rishi?
Rishi Sethi: Thanks Ev. So, the online MSF program is actually really good for people looking to get a lot of depth in this industry. We’ve got two tracks of study, so you can do corporate finance or investment finance. On the investment side you’re looking at things like portfolio management, investment or commercial banking, security analysis, mutual funds and even personal financial planning. On the corporate site, you can look at financial reporting, budgeting and project decision making.
You can complete the degree in as few as 16 months, so it’s really flexible. You can take up to five years if you need to. The instructors have real world experience, so the faculty’s excellent, like Professor Trahan explained. So, again the program’s very flexible. Entirely online, so no residency required. And there’s a lot of overlap between the courses that we’re offering in the CFA. So, for people looking to do the CFA down the road, it’s good prep. And you can actually combine this degree with the MBA. So, for anybody looking to get even more depth out of it in a broader managerial degree you can definitely do that. Next one please.
So, we’re gonna take a quick poll question and that is what’s concerning you most about starting an online program? So take a few minutes just to get your answers.
Evelyn Liougas: So just to add, a poll should have popped up on the right hand side of your screen. You can select your answer there and then I’ll be sharing the results with you in a few minutes. Thank you. I would like to now turn it over to the professor.
Emery Trahan: Okay, well some of this we covered, but again, a little bit on my career path before coming to Northeastern. One of the things I do and I’m actually the department head right now in the finance group here and do teaching both on the ground and online and still try to keep some research going. And I’ve been fairly active in research over the 25 years and I’ve got a couple of recent projects here in publications and just talking those for a minute, but Rishi mentioned the investment track and I do some research that’s more on the investment side.
One of them is actually a couple of papers that we’ve published over the last couple of years on Jim Kramer. You may be familiar with him, he’s a fairly popular show on CNBC about stock picking and investments. And we thought he’s kind of a popular controversial guy and we thought it would be interesting to do really kind of a scientific study on how his show impacts the stock market and what kind of portfolio returns you might get if you follow his advice. So, we publish these papers and I have to say some of the research that we do in academics, it doesn’t get read by a lot of people, but these papers were very widely read. They were cited in the Wall Street Journal, in the New York Times and the Atlantic. And my co-author and I were interviewed on National Public Radio about the work. Jim Kramer actually talked about us on his show for about five minutes about the research.
So this was interesting and important research. It was of interest to academics and it was of interest to the investments community and analyst and what was fairly well received. And we had presented this at a conference, a practitioner conference out in Chicago and there were a lot of Morningstar People there and we made a contact with their director of research at Morningstar and we’re sort of doing a similar analysis now using some Morningstar data that’s interesting.
And just another recent project, a lot of my work is more in the corporate finance area, looking at companies and corporate financial decisions. And I’d been interested there over the last few years, there’s a lot of talk and controversy about companies focusing on this objective of maximizing the value of the company to the shareholders and what does that mean for society and for other stakeholders in the corporation? So, we did a paper that looks at if you’re objective is to maximize shareholder value as a corporate manager what does that mean for the employees of the corporation?
And what we find is that companies that treat their employees well and have good records and reputations of treating employees well actually do better for their shareholders. So there doesn’t seem to be a disconnect there and there’s actually a common interest in what’s good for the employees of the company is also good for the shareholders.
So that’s a couple of recent research pieces. And I, as all of our faculty, try to keep active in the research area. In terms of my specific interest in both teaching and research, I’m really more on the corporate side in terms of my teaching, but I do corporate finance and general valuation, mergers and acquisitions and some work on how new information impacts the stock market and shareholder value. And that’s reflected in some of the, like for example, the Kramer paper.
I can talk a little bit about one of the courses I’m teaching in the program. There’s a spotlight here in the valuation and value creation course. And this has been a pretty popular elective that I’ve done for a number of years in our on the ground program and then in the online program as well. This is a course, it’s an elective course in the MSF, so it builds on some of the early required courses. And I do teach one of the foundation courses as well. So, I’m kind of familiar with what’s covered in the foundation. And this is an elective that builds on the foundation. It covers some analysis and valuation and how you value companies or pieces of companies. And then really focuses on not just the mechanics of the valuation, but understanding the decisions that you make and whether they make sense or not from a strategic and a value creation standpoint.
So, for example some of the things we do in this course are analyze and negotiate a private equity deal, develop strategies to increase a company’s value and talk about ways of implementing those strategies, valuing and acquisition target. The emphasis of the course is very much in applications. There are some new theory or new financial concepts or extensions of concepts from other courses that we get into within the course, but the main focus is really on applying the concepts and there’s a lot of applications and financial model building and spreadsheet work and so on.
I think in the online format, there’s really some kind of neat online learning tools embedded in the course to help teach modeling and spreadsheet modeling and so on. This is a course, I’ve developed it over many years, there’s no textbook for the course. It’s some individual readings. There are lectures in the online program, there are online lectures. And then it kind of gets brought to life with a variety of consulting projects that are worked on in the course.
And many of these are group projects. And there is an opportunity in this course to work in teams and to discuss the analysis with other students and then to have interaction with the instructor for the course. And the way our programs are formatted you do work kind of on a day to day basis with an instructor who works for me. And then I’m, as the lead faculty, also available to work with you and answer questions on a daily basis if needed. And also we have a weekly chat time where we can interact.
And as I look at this course over the years, I mean students have kind of used this – some of them have gone into investment banking jobs. I have a student who got a job at a valuation firm, a private equity firm, some with consulting firms. I would view this as more as a corporate finance course, but it is also one of the courses in the investments track and over the years a lot of the students have found it very useful to do equity analysis and security analysis as well. So, it kind of bridges both the investments in the corporate side. So, that’s a little bit about one of the courses in our program. And again, this is an elective course that is available in the program.
In terms of, there’s a slide here on career outcomes and this slide, there are a lot of bullets here and sort of specific jobs that an MSF degree might be helpful in helping you prepare for and grow into. And I think it would make sense to skip onto the next slide to talk a little bit more general about the MSF and how it fits into the industry.
And as Rishi noted, there are two tracks in our program: there’s a corporate finance track and an investments track. The corporate track is really dealing more with managing the financial activities and capital decisions within a company or corporation. It could be a large or small company. The corporate stuff is also very relevant to careers in investment banking and private equity firms. It might be leading to director of business development or chief financial officer, those kinds of positions.
And then on the investment side, it would be more preparing for careers in money management, valuing different financial instruments, stocks and bonds and derivative securities. And then building and analyzing portfolios of securities. And these two tracks are by no means mutually exclusive. It’s all finance and if you’re in a company, you’re managing the company with the objective of improving the value of the company. If you’re on an investment’s firm, you’re looking at investing in companies or assets that are going to go up in value. So, in some ways these two tracks are two sides of the same coin. And many of our elective courses, they’re not unique to one of the tracks. Many of them bridge the two tracks.
But on the investment side, Rishi noted earlier too, the chartered financial analyst, the CFA designation is becoming almost a requirement to work in the financial services industry and money management industry. And that’s something that we’re not a prep program for the CFA designation, but our program helps build a very strong foundation that would support taking the CFA exam and I’m a CFA charter holder and we have a couple of other CFA charter holders on our faculty that teach in the program. So, we’re very familiar with that designation and have worked with students to help them prepare and be successful at that.
In fact, I just heard from – I worked with a bunch of students over the last several months preparing for the June exam and I heard from two of them yesterday and they both passed. So, I haven’t heard from all of them, but we’ve generally had pretty good success with people getting started and getting through level one of the CFA exam.
Rishi Sethi: It can be a real nail biter waiting a couple of months for that decision.
Emery Trahan: Right, right. And it’s a tough exam. The pass rate for level one, someone sent me the letter was 38%. So, it’s not an easy exam, but I think having Charter holders on the faculty and developing some of these courses, it helps build a good foundation for studying and preparing for the exam. So that’s a little bit, I think about the industry and the two tracks and how they map into different types of opportunities and jobs in the finance industry.
Evelyn Liougas: Great, thank you professor. Before we go on, I would like to conduct one more poll. What types of webinars would you be interested in attending in future, program information ones, application process, student or alumni spotlight, faculty spotlight, a particular industry topic or other, please specify? Again, please take a moment to select your answer and I will share the results with you in a minute. Now, I would like to turn it over, back to Rishi who will share some additional information with you about the program.
Rishi Sethi: Thank you. So, a little bit about our university. The school’s been around for over 100 years. The business school itself has been around since 1922. So, we have a long standing history and it really is a history of excellence. If you look at our professors that are teaching this program, the MBA program, the MS finance program, these are all our online programs. But they also teach on campus, so that’s really important to know. You can look at our faculty description page and just see a little bit about the type of work that they do, not just at the school, but also in industry.
As far as accreditation is concerned, AACSB in most cases is the standard that people are looking for. So, we certainly meet that accreditation. It is a testament to adhering to a very strict standard for education. The alumni network for this program is quite extensive so for the whole business school it’s over 40,000. The university itself has an alumni network of over 200,000 people. So, where you’re really gonna see a lot of value initially in the class, even though you’re doing an online program, there’s a great degree of interactivity with other students. You’ll be engaging in discussions both in the forms and in the weekly sessions with your prof and your course facilitator. So, there’s a lot of connectivity with some very, very bright people.
We’re quite choosy about the people that get accepted to this program. It’s not just do we wanna make sure that do you have certain set of qualifications that you’re gonna be able to do the work, but how are you going to interact with other students and how are you going to benefit each other. That’s also something that’s very important.
In terms of getting this done and really this is why most people are looking at an online program, all of you are working, you need a way to further your education, sharpen your skills a little bit – well, in this case it’s sharpen your skills a lot. But you have to keep in mind that you’re working full-time so how are we gonna manage work and school and life? So, the program is highly flexible. You’re taking one class at a time. You’re looking at a time commitment of somewhere around 20 hours per week.
So, not to say that you’re just gonna be able to kick your heels up and push through the program, you are going to have to work. It’s going to challenge you, but our goal is to challenge you academically and not for your time management skills. When you start a class, everything’s gonna be laid out for you. From the beginning there’s no surprises. Unfortunately, we won’t give you the questions that will be on the test, but everything else we will give you. So, you’ll be able to see all the deliverables that are required of you, what is due, when it’s due and you’ll have a very clear understanding of what is expected of you and you can plan your time accordingly.
To apply to the program, it’s actually really straightforward and simple. So, first of all we don’t require a GMAT. All applications are considered on a case by case basis. So, even if you’re worried that you think you may not have a certain qualification, speak with an enrollment advisor and they can better advise you as to whether or not you would make a reasonable candidate for the program.
The baseline requirements are an undergraduate degree with a 3.0 GPA. We’d like to see some quantitative skills demonstrated either on the academic side or on your resume through whatever work you’ve done in your career. So, if you’re putting together an application we require five things. We need the application form, we need your current resume, we need a statement of purpose, we need transcripts from all the schools you’ve attended after high school and three professional recommendations.
Evelyn Liougas: Great, thank you. I would also like to let everyone know that the D’Amore-McKim School of Business also offers the following online business programs: MBA with eight specializations, the MS in finance MBA dual degree, a master of science in taxation and most recently a graduate certificate in supply chain management.
We would like to now begin the question and answer period. Just a quick reminder, if you have any questions simply type in your question in the chat box on the right hand corner of your screen. So, the first question is for the professor. What’s involved exactly in the MBA, MSF dual degree? For example how many more courses, length, time and cost?
Emery Trahan: The dual degree is – if you do the MBA it’s actually – and you take the right courses, it’s four additional courses get you the dual degree. So, I guess it works the same way. If you do the MSF, you can get the MBA and you’re really doing just four additional courses. So, out of the 10 courses for the MSF, six of them are counting towards that MBA degree.
Rishi Sethi: The total would be 18 MBA courses, or 18 courses is normal for the MBA and then you add the four on and then you would be using the elective courses from the MBA to count towards the MS in Finance courses. So, yeah it’s four additional courses. And that’s what the price which is, it’s currently $1,385 per credit.
Emery Trahan: And that’s something, to my knowledge, you don’t have to decide up front on that. So, you can start an MSF program and then as you get closer to the end of it, you can decide do I wanna finish the MSF or do I wanna continue on and go into the joint degree programs? So, there’s some flexibility there. You don’t have to make that decision up front.
Evelyn Liougas: Great, thank you. Professor, next one’s for you as well. How do you find the interaction works in an online course? Is it more challenging to interact with your peers and your professors or is it easier?
Emery Trahan: Well, it’s different, but one of the things I really like about our program and I think it’s somewhat unique is with the setup of small class sections with a lead faculty and then with an instructor working with smaller subgroups of students, there’s a lot of resources to help facilitate interaction. And I know in my and really both of my courses there are case projects and consulting projects where students collaborate and work in teams. There are weekly discussions where they get on in post discussions and those are moderated by the instructor. So, it’s not a program where it’s just a bunch of canned material and one instructor and many students and you’re just reading and taking exams.
The design of the program really does a very good job at simulating the classroom discussion element of the education in an online setting. And I think most of the MSF students, they tend to be very well prepared, serious students. They’ve got significant work experience and are pretty tech savvy. Where today, working collaboratively with people not in the same room seems to be something that many people are used to anyway. And I think as Rishi said – I want the student’s time to do the academic stuff. I don’t want them spending time figuring out how to get into a chat session and things like that. But I think you guys do a great job really freeing up the student’s time so that they’re available to do the coursework. And with the Blackboard platform and the support, I think it works pretty well. Again, it’s a little bit different than showing up for a class and sitting in a room, but I think it’s really a very good substitute the way the program is structured and with the technology that we have available.
Rishi Sethi: I’m a student in the MBA program myself and I’m nearly done. And actually before I came to Northeastern it was one of the concerns I had about doing online learning. Having completed my bachelor’s degree on campus, I tend to have presence in a classroom. So, I was worried that in this environment I’m gonna lose a little bit of that ability. And what I found was the communication across all students actually improves in the online program.
So in a classroom if someone tends to be dominant or if there are a few people that tend to have a dominant presence, those are the people that tend to carry the conversation. In this environment what I find is the communication is designed in such a way that you get a very good amount of participation from everybody. So, you’ve taken away that ability to be domineering by certain people which, unfortunately I was one of those people. But it’s helped me to get a better understanding of the subject matter because everybody takes a little bit of a different viewpoint on things and together you collectively get a better understanding of the subject matter.
Evelyn Liougas: Great, thank you.
Emery Trahan: And we also have as part of the program too, just to close that, we have at least two hours of week of chat time, the instructor has one hour a week of scheduled chat time and the lead faculty has an hour a week of chat time. So that there’s also that opportunity to – if you wanna be on, there’s also a video component where you can see the person talking and everyone can hear the conversation. So, that sort of simulates – it’s an open discussion usually and we can’t require everyone to show up at the same time. But if you can’t show up at that time, they’re recorded, so you can go on and review them later. But if you do wanna talk to people once in a while and hear someone else’s voice or see their video on the screen that there’s at least a couple hours a week built into the course of that opportunity.
Evelyn Liougas: Great, thank you. Next question is there – for the professor – is there a lot of group work involved?
Emery Trahan: Well, it depends on the course, but I know in my two courses there is group work. It’s not all group work. The exams are individual. There are some individual projects, but there’s at least a couple of projects that are group projects. And we have a lot of experience with that in our on the ground programs as well as online. It’s always been a big part of the business school here at Northeastern. And it generally works very well. You know, in theory a group brings together people with different skills, different viewpoints and you get a better end result when you bring together a group of people rather than a bunch of individuals working on a project and that’s kind of how most decisions work in the real world.
So, we really get pretty high marks from people who employ our students that it’s something we’re very good at is developing people who can kind of hit the ground running and work as part of a team. So, I think it’s not just my course. It won’t be every course here, but it’s part of the culture here, I think that most people do have group work in some of these graduate courses.
Sometimes there are frictions. Sometimes somebody isn’t pulling their weight or – again, ideally, I think it makes – if the group is functioning well, it actually makes you more efficient. You can spend less time and get more out of it. But sometimes there are frictions in groups and I think that’s part of the learning process and I think those are – the majority of the time, I think the people find the group effort works well and increases the learning and makes things more efficient. And we try to do what we can to minimize the frictions and work with them and we usually allow students to evaluate other members of the group to kind of give everyone an incentive to contribute to the group projects. But there’s a fair amount of it, I guess bottom line, there is some of it anyway, some group projects and –
Rishi Sethi: I find that, and I’m not sure if it’s because it’s online or because of the demographic in the program, it could be both, but in my experience with the MBA program and I use it interchangeably with the
MSF because they are similar demographics and obviously the platform is the same. I haven’t experienced group friction at all since I’ve been in the program. I’ve got one more class. The attitude that I find of people in the program is very good and the people are always willing to kind of go that extra mile to really make a great project together. It hasn’t been a problem for me whatsoever.
The attitude is good and really part of the reason for that is when we interview students initially, I think we were putting a lot of energy into trying not just to, like I said before, identify people on paper that have a good set of skills. But we’re also trying to identify how you’re going to interact with other people and this is exactly one of the reasons why because we wanna make sure that your educational experience, though it is online, is an excellent one. That is going to give you a complete set of skills that re going to help you in your careers.
Evelyn Liougas: Great, thank you. The next one is for the professor. Aside from the optional chats you just mentioned, are there any other specific times that you have to be online?
Emery Trahan: No. The program, just because of people’s schedules and people in different time zones, it’s totally asynchronous. And again, the chats are not required either. The way we designed these, it’s not mandatory that you show up for a chat. So, they’re really for most people like faculty office hours. We’re there, we’re available during that time. Some people will have – if no one’s there even I do this once in a while, they’ll record something, have a discussion with themselves but maybe lay out the week or summarize the week before and then students can go back and listen to the recording of that chat.
But there’s really no required time where everyone has to be available at the same time. You know even with exams, we have a window for the exam, so it might be – an exam is open Saturday and Sunday and once you log in you may have two or three hours to take the exam, but it’s not like everyone has to take the exam on Friday from 2-4 eastern time. So, I think as Rishi said, we try to make it a flexible program, just realizing people are in different places, they’re traveling, they’re in different time zones, they’re on different schedules and it’s really difficult to ask everyone to be in the same place at the same time.
Evelyn Liougas: What type of school work will I be doing each week and for how many hours?
Emery Trahan: Well, it depends on the course. I think most courses, there is some reading. There’s a textbook or some other kinds of readings. And then we have online lectures. And I think the quality of those online lectures is very strong. The people like me, the professors are really the subject matter experts and kind of designed the course and the curriculum and the materials. But then Pearson Embanet developers really take it and kind of bring it to life in these, I call them online lectures.
So, in a typical week – and the whole course is laid out for you up front. Week to week is laid out for you up front, but they’ll be assignments and maybe go read an article, a teaching note. And then walk through the online lecture. They’re often interactive activities in those online lectures. The course I described, they’re actually annotated Excel models where they kind of walk you through building a spreadsheet model. So, there’s sort of a core of material reading in these online lectures.
And then typically there’s taking that and applying it. So, you may have a case study or some kind of project that is laid out for you and that’s related to that reading and that online lecture material. So, you’ll take some time maybe reading the case, thinking about what the issues are. If it’s a group project and you’d be reading it and then getting into a discussion with other people in the group and there may be a deliverable, a short write up on the case with some analysis.
Sometimes it’s not uncommon, so you’ll turn in an analysis and then all the groups will post their case analysis. There may be two or three or four groups in the course and you might look at some of the other group’s analysis and then get into a discussion and post some comments of what you think of what the other groups did and what you did and so on.
So, it’s really a variety of materials. We try to have different materials and different deliverables. But it’s very much like a classroom. There’s some reading to prepare, some lecture that in this case is delivered online and then some application, some kind of case study or project within application and then some discussion of that. And then there may be one or two, depending on the course that usually – I think in my foundation course there’s a couple of exams. One at the end of the third week and then one at the end of the fifth week. In the elective course that I described, there’s just one exam at the end of the fourth week. So, I think most of the finance courses, there’s probably at least one examination that gets built in there.
Evelyn Liougas: How is this program and degree received by others, specifically potential employers?
Emery Trahan: You know, it seems to be pretty well received. And again with the work requirements, we’re not taking people into this program right out of an undergrad program or without some meaningful work experience. I think most of the people coming in have some significant experience. Many of them are in some kind of finance industry job now. Some of them are looking to change careers, but they’re fairly mature students and have developed other skills that we’re honing and enhancing in the program.
But from our standpoint, the degree you get in this program is a master of science and finance from the D’Amore-McKim School at Northeastern University. It’s the same degree that someone going through the on the ground program in the MSF would get. There’s no distinction in the program or on your diploma. We try to make it a comparable experience to the on the ground program in terms of the courses and the curriculum. So, if you go through this program you should be as well trained and get the same degree as someone who went through an on the ground program.
I certainly see the students going through the program. Some of them are already in interesting jobs and some of them have advanced or gone into new jobs after the program. So, I don’t know that it’s the case that no one ever kind of looks at this and says, gee you went to an online program, but I don’t have any evidence that it’s counting against people either. It seems like our alumni are getting value from this degree.
Evelyn Liougas: How do I receive my course materials?
Rishi Sethi: So I guess course materials come in two parts. So, there’s the actual lecture component and all the classroom stuff which is presented to you through one location, which is called Blackboard. So, that’s your portal to your classroom, to your lecture slides, to your assignments and all course related work. The supplementary materials, which are your textbooks and case studies, anything like that, are available through the NEU bookstore and they’re all digital. If you don’t want something in hard copy you don’t have to order it by hard copy, you can just get the digital textbook and download it directly onto your computer.
And that’s something that student services will help you with. So, as you move forward in this process and let’s say you apply and you’re accepted to the program, they’re going to have actually two phone calls with you before you get started on class to make sure that you’re prepped and ready to go. And one of the things that they cover is how do I go about registering for classes, how do I order my course materials among many other things to make sure that you are properly prepared.
It’s a very high touch program. This demographic, even though you’re away from the school, we don’t want you to feel as though you’re isolated. So, there’s a lot of involvement from your enrollment advisor initially when you’re inquiring to the program. Student services, there’s 24/7 tech support. You reach out to your prof, you reach out to your course facilitator. The turnaround time for communication with faculty is generally very good. I haven’t encountered a program where it is this good. It’s designed to make you as comfortable as possible. So, I know I kind of expanded a little bit there, but the course materials, yeah just right through the school bookstore, right onto your computer, no problem.
Evelyn Liougas: If you would like to contact an advisor immediately, you may reach us at this information on the slide. Thank you everyone for attending. This concludes our webinar. Have a great day.
Angela LaGamba: Thank you for joining us for today’s Northeastern University online classroom demonstration webinar. My name is Angela, and I will be your moderator for today. Before we begin, I’d like to go over logistics for this presentation and address some commonly asked questions. As an attendee for today’s webinar, you’re currently in listen only mode. We ask that throughout the presentation that you listen through your computer speakers, or if you would like to call in, ensure that your phone is muted, and also please don’t place your phone on hold, as the hold music will interfere with the background noise with our presenters today. Throughout the presentation, you will be hearing from our panelists.
They will be talking about the course demo. If you have questions, we encourage you to send it through the chat box, which is located on the lower right-hand side of your screen. We will be addressing questions throughout the presentation, but we also have a dedicated Q&A that we will have our full panel available for. This session will be recorded, and that recording will be available in the future. Let’s get started. I want to introduce our exciting panel today. You have Christopher Longtin, who has over five years of experience in the area of student support services exclusively with online students. He is currently the associate director of student support services of Northeastern’s online programs and works hard with his team to guide and coach students to academic success.
He enjoys working in an ever-evolving field. We also have our full panel of enrollment advisors who work with prospective students for the Northeastern online MBA, the Master’s in Finance, the Master’s in Taxation, and the graduate certificate in supply management programs. Your advisors today are Michelle Yan, Ashley Bacon, and Rishi Sethi, in addition to myself, Angela. I will be your host and moderator throughout today’s webinar. I am going to hand the presentation over to our enrollment advisor, Michelle Yan, to talk a little bit about the School of Business. Go ahead, Michelle.
Michelle Yan: Thanks, Angela, very much for the introduction. I hope everyone can hear me properly. The D’Amore-McKim School of Business, Northeastern University, was established in 1922 and has a rich history, a strong reputation for scholarly research and teaching excellence. We are accredited by the AACSB international. It’s one of the highest business accreditations worldwide. The main campus is located in Boston, Massachusetts, but we also have satellite campuses in Charlotte, North Carolina, and Seattle, Washington on the West Coast.
Building on high academic achievements, wide-ranging work and consulting experience, rich diversity, and our extensive corporate ties, the D’Amore-McKim School of Business faculty members are leaders in their fields and regularly receive worldwide recognition and awards for their contributions to theory and the practice of management. We do have a global network of over 200,000 Northeastern alumni, spanning more than 15 countries, like China, Canada, India, England, Russia, and even Australia, to name a few. Almost 90 percent of our students pursuing graduate business degrees do have work experience, so our programs are very accommodating and flexible to working professionals.
The D’Amore-McKim School of Business does offer the following programs, amongst others. We do have the online Master of Business Administration. This program is approximately two years, and there are 50 credits. We also do offer the online Master of Science in Finance program, as well as the Master of Science in Taxation. Both these programs are 30 credits, and you can complete them in a span of 16 months. We also do offer the graduate certificate of supply chain management. This is four courses, 12 credits, and it can be completed within about eight months or so.
Angela LaGamba: Thank you, Michelle. What we’re going to do now is encourage our audience to participate in a poll that we have for today. The question that we’re asking is what concerns you most about starting an online program? Some people are concerned about the unknowns of the online classroom environment and technology. Sometimes it’s finding the time or balancing school with other obligations. Maybe it’s just having what it takes to succeed, or perhaps it’s around affording or qualifying for financial aid. Feel free to fill in that poll. It’s located on the lower right-hand side of the screen.
If there’s other reasons, you can also feel free to submit that, as well. While we’re waiting for your responses to come in – we’ll discuss that in a bit – I’m going to hand it back to Michelle to talk about the benefits of online learning at Northeastern University. Go ahead, Michelle.
Michelle Yan: Thanks, Angela. The benefits of online learning – I know there’s a lot of students who may be a little bit hesitant in terms of jumping back to a program like this. You’ve never done an online program before. But we do have a lot of flexibility. You can access your courses any time during the day or night. Most of the students in our programs are working professionals. They have full-time jobs, family, kids. It does allow you to do your work during the lunch hour and the evenings, or even after you put your kids to bed. We do have small group sizes. Usually, every course, you’re only ranging from anywhere between 12 to 15 students, so it’s a very intimate group.
Your instructors, they give very good feedback. By phone, email, they’re very responsive. Of course, we do have a lot of networking opportunities, as well. We do have working professionals coming from all over the U.S. and outside of the country, as well, with different backgrounds, professions. Many of our students have been in the business for quite some time. It is a fantastic opportunity to collaborate on projects, trade ideas, and also learn from each other. We do have a vast variety of resources available for you to succeed. As I mentioned before, the faculty members within our programs are not only educators, but they’re also practitioners in the field, so they bring in a lot of real-life case studies to help you with your learning.
We also do have optional residencies available. We recently introduced campus-based residencies on all three of our locations in Boston, Charlotte, and Seattle. Of course, we do offer optional international residencies, as well. This past May, we actually had students, they were able to travel to China, India, Russia, and, I believe it’s Brazil, in South America. As I mentioned, like I said, most of the students in our program, like I said, some of them have been out of school for quite some time and not sure about what is available for support. We feel, at Northeastern, that not only is it important to choose a great program, but you also want to know that if you need the support, it is readily available.
For example, we do have very strong levels of support within our programs. Your personal enrollment advisor, they’re the individual that provides you all the information you need to know about the program. They’ll help you compile the application for admissions. We have a fantastic student services department, works with you once you’re in the program, helps to set your schedule, individual schedule. They’ll customize it for you. They’ll help keep you on track. They are available seven days a week. Of course, our tech support team – as we all know, with our computers, sometimes we do get technical difficulty, so they are actually available 24/7 to help you with any type of password.
If you forget a password or login information, they’ll help you reset everything. Of course, with our faculty support, we do get very quick responses. If you have any questions regarding course information, the lectures, you can contact faculty by phone or email. They also do host live chat sessions every week within your courses, so you can communicate to the professor directly. They’ll use a webcam or a headset. I think Chris will go into a little bit more detail once we get into the online course demo section. They do provide you a lot of information on lectures and answer questions you have in conjunction with the rest of your classmates. Rest assured, with Northeastern, we do help you make this transition into online learning very simple and as easy as possible.
Angela LaGamba: Thank you, Michelle. I think that’s an excellent segue into our next section. I’m going to bring Chris Longtin onto the line to talk about the online virtual campus. He will actually be doing a live demonstration. Chris, I’ve handed presenter controls over to you. While we’re waiting for that to be set up, what I’d like to do is share some of the poll results that have come in. Of those poll results, you will notice that finding the time to balance obligations seems to be the biggest area that students are looking at or concerned about when starting an online program. Michelle, I was wondering, is that a common concern that you hear from prospective students when you’re talking to them about the program, around balancing obligations?
Michelle Yan: It definitely is a concern with a lot of the students I speak with. Like I mentioned before, most of the students have very busy schedules. They work full time. They’re working professionals. They have family; they have kids. It is sometimes very difficult to say am I ready to make that commitment to be able to jump back into a program after this many years that I’ve been out of school? With our programs now, with Chris – I think he’s about ready – he will give you sort of an outline in terms of how it is possible for you to be able to do online learning, as well as commit to all the other obligations in your life. Because we are a very flexible program, and I think Chris will get into that a little bit more, as well.
Angela LaGamba: Thank you very much, Michelle. I’m going to hand it over to Chris now to give us our live classroom demo. Go ahead, Chris.
Chris Longtin: Thank you, Angela. I’m going to walk you through the learning management software and the way the courses are designed. This here is Blackboard Learn. This would be your main login page. You would enter your user name, your password, and be taken right to your main portal. The main portal has a few key areas. You will notice, on the top here, there is “My Announcements.” Any of your course announcements in the past seven days would be listed there for you to see upon entry. You’ll also notice my courses. Courses where you are enrolled will appear here. Today, we’ll be looking at Marketing 6200, which is also the entry point for the Spring 1 students.
Finally, there’s a “My Organization”. Students in the online MBA MSF and MST would have access to the online graduate business student resource center which, A, provides you an overview and orientation to Blackboard, so you’re not expected to jump right into a class. There are a number of modules that will allow you to try out different aspects of the platform and interact with it. Finally, there’s also a networking feature, so students can connect with other students in their state, for example, or maybe states they’re going to for business, and begin those conversations early through that networking center. Let’s go into the course today. The first thing you’ll notice once we enter the course is the announcements page.
Faculty and instructors are encouraged to always post any of their email correspondence to the announcements page, as well as emailing it, so that there’s a record of it, and it’s easily available to you, so that you don’t miss something in your everyday. In this case, we see two announcements. One is about technical support. The program does offer 24/7 technical support. If you’re like me and maybe you wait until the last minute sometimes, it’s very nice to know that if it’s 11:30 at night and you can’t seem to get your assignment submitted, someone’s there to answer the phone, walk you through how to upload, share screens with you, and make sure that you can get it in on time.
There’s also an announcement about deadlines in this course. In this case, the end-of-day deadline refers to 3:00 Eastern time the following morning, which would be midnight Pacific time. Let’s look at three areas of the course. I wanted to look at course materials, so how and what will I learn, assessments, how and what will I be graded on, and communications, how do I interact with my faculty, with my classmates, with my group, perhaps, and how will that shape my day? Students always have access to a course overview one week before their class begins. If you’re beginning class on January 6th with us, you would have access on December 30th.
One of the concerns was time management, and I think that this is a real benefit for you because you’re able to get a head start on your Week 1 reading, at least, one week in advance, and get a sense of what the course is going to offer you. In this case, you’ll see that the overview provides you a list of the goals, the different resources, what textbooks you may need, as well as a schedule, what’s due and when. We know in Week 1, we have a discussion, a number of readings, and you begin to work on your group assignment, as well as some discussions. That helps you plan your time. If one week is heavier – sometimes in a five-week course, Week 3 might be the heaviest.
You’ll know that a week before the course begins, so you might be able to – a lot of students will take a day of vacation every third week, just so they could buckle down and get their work done – as well as a biography of your instructor. When your course begins, all of your material is housed in the course material section. It is organized by week. If you want to know what’s due in Week 1 or what you need to learn for Week 1, you just click on Week 1. Then we have a series of slides that are presented. In this slide, we have a video of our lead faculty introducing us to the course. There’s also a video transcript that you can download. Maybe you are more of a highlighter when you’re learning.
You can highlight the important parts of the video transcript, so that you can retain that information. Then as you move through the slides, you’re really moving through the lessons. Here, we see Week 1 learning activities. One thing I always encourage people to do is print this page out. You can then cross out everything as you do it. If it’s a five-week course, and you have five outlines of what’s due each week, you’ll know how much of your work you’ve completed just by crossing them off. There’s an introduction to the Week 1 discussion board, which we’ll discuss in a moment, an introductions forum.
One thing that’s really neat is when you see another student in the program from maybe the same city or state as you, and another thing that’s also very neat is when you see someone that’s very far away, so maybe in another country, and the idea that you’re all together in that one classroom, learning the same material, across oceans, really, is a unique experience of the program. There’s information about your sign-up, and then it jumps into the lessons. The lesson is presented in this course as a text-based lesson. For some individuals, that is preferable, and in other cases, your instructor will provide a video lecture. They might provide a voice-over or slideshow presentation.
In other ones, they’ve developed interactive slideshows, so you’ll go through and you’ll have to click and do test-your-understanding activities throughout the slideshow as the material is presented. There is a very diverse means of presenting the information, depending upon the faculty member, but this would be the standard way of presenting it. Having talked about the material, let’s briefly touch on assessments. There are a number of ways that you might be assessed. There might be weekly quizzes. In this case, Week 1 of marketing does have a Week 1 quiz at the end of it. This professor has been kind enough to provide a study quiz in advance of the Week 1 quiz.
In this case, you can just drag your terms to connect them to the definitions, and then you would test your understanding and see how well you’ve done. Another way of being assessed is through discussion forums. If we click on discussions on the left-hand side, we will see a number of discussion boards here. In Week 1, there’s a case discussion. You would simply enter that, case discussion. You’ll be presented with a question, and then you would just reply to the question. One interesting thing here is that because of the diversity of students in the class, you’re going to have all different types of responses.
You might have someone that’s really heavily experienced in operations, and they’re going to maybe answer the question thinking about operations or supply chain; whereas, someone else might come from a marketing background, and their solution might not be to optimize the supply chain. Their solution might be to present or sell the product in a different way. That diversity of experience really leads to a healthy discussion, and you’ll find you’re learning just as much from your peers as you are learning from your lead faculty member. Then the final way of being assessed is assignments. We’ll just leave this page. In this case, I have enabled Week 1, Assignment 1.
There is an assignment due in Week 1. The directions for the assignment were in the course material. In this case, we would just upload our assignment. It doesn’t look to be friendly because the course isn’t active yet, but when you are in the course, it will allow you to upload that, just like you would upload something to Dropbox or your email address. Again, if you ever have any challenges, you are able to contact technical support. Having talked about assessments, let’s briefly move to communication. There are a number of ways that you might communicate. With most people used to an undergraduate or a campus-based environment, they are most concerned about communicating with the lead faculty member.
You are able to email your lead faculty member at any time, but they’re also going to hold a weekly live session. They do that using a platform called Blackboard Collaborate. It’s very similar to the platform we’re using right now for this presentation. It allows audio and video, as well as teleconference, so you can interact in that way. There’s a white board, and instructors have the ability to upload slides, as well. What you might find is your instructor will be talking on the video and the audio and have a slide presentation. They might also share their screen. If you’re doing a heavily quantitative course, like statistics, instead of a white board here, you’ll probably have Excel loaded and the instructor walking you through their spreadsheet, sample demo problems, and how they were able to get there.
There are different ways of using this live session, in order to maximize the learning. In some cases, the instructor will email and say, “I think that this would be best used if I answer the questions that are most important to you, so let me know what you want me to focus on, and that’s how I will present my information.” In other cases, they might have taught the course for a number of years and found that there are a few concepts that students are having challenges with, so they will present a formalized presentation, and then ask for questions at the end. Then finally, in some cases, they have invited guest speakers into the classroom.
We had a case where the lead faculty member knew one of the individuals involved in the case study they were working on, and the individual who had actually written the case study, so they asked them to come in to discuss the case and get a response to how students had responded to the case and solved the case, as well as the bigger picture because there’s sometimes only so much you can say in a case, so they provided a little bit more context. Another item that comes up is how do I communicate with my colleagues? Again, the key way to meet your colleagues is through the discussion. In this case, there’s an introductions forum, which will give you a really good sense of who’s in the class with you.
Just so you’re aware, the maximum section size for a class is 20 students. Should you enter a classroom, the maximum number of people that would be involved in this discussion forum would be 20. We tend to be more around the 15 student mark, but the maximum is 20. If you are in a group, you’ll also have a “My Groups” area. You’ll see it here on the bottom left of the page. In this case, there’s a final project that is a group assignment and a Week 4 assignment that is a group assignment. There’s a group discussion board here if you wanted to discuss on the discussion board. You could also send an email. If I press, “Send email,” it’ll email everyone in my group, and everyone will have it.
There are different collaboration tools. One thing that I think is very useful is that you, as a student, also have access to Blackboard Collaborate. There are open rooms that you can go into at any time. If you need to work on something, you can use all the collaboration tools here. You could share your Word document and go through the paper. You can talk to each other, if you don’t have access to a conference line. If someone’s unable to make it into the room because they don’t have voice over Internet, they can just dial in. You can share the dial-in information with them to use the telephone for conference audio. You can really make use of this tool to almost be right there with another.
One last means of communication I wanted to touch on before wrapping up was Blackboard Instant Messenger. All students who have a Blackboard account also have a Blackboard Instant Messenger account. It’s a separate platform that you would download onto your computer, and it allows you to interact with everyone else in the course or the school who has downloaded Blackboard Instant Messenger. You’ll see here, I have my team on my quick contact list. If I go to the classmates tab, all of the courses I’ve ever been enrolled in are available here, and I can expand them and see who’s in the class, how I can contact them, and add them to my quick contact list.
There’s also the school tab. That allows me to get in touch with my student services group. The individual that mans the desk is on lunch right now, so not available, but you would be able to go directly to this, if you wanted to, and ask a question, or your advisor would share, perhaps, their user name, so you could message them right through here. Same with your colleagues. Again, you can use voice, so you can call them for voice over Internet and engage in a collaboration call, a Blackboard Collaborate session, straight from Blackboard Instant Messenger, and have that collaboration in real time. You could do a group chat.
If you wanted to add individuals and have a running commentary, you can also do that. That’s really nice, especially if you’re conscious of what you’re working on and you need a quick answer right away, there’s always someone to message there during business hours. There’s a link here. That’s how you would download it, just straight through the course space. You’d download it from here, then you would have it for the length of the program. That summarizes my presentation. I wanted to go over course material, which we did, course assessments, which we also reviewed, and communication.
It was a high-level overview, so if you do have any questions, I would encourage you to enter them into the chat box, and we will be able to review them as part of the question and answer portion. I’m going to now transfer this back to Angela.
Angela LaGamba: Thank you, Chris. Thank you for walking us through the live classroom demo. I think in my mind, as well, I’m able to visualize that experience as an incoming student, and it gives me a better understanding of what to expect in the program. What I’m going to do now is we do have another poll for our audience today. We want to hear from you to know what kind of webinars you’d be interested in attending in the future. Maybe you’d like more program information or application process, maybe a spotlight with our student alumni or faculty. We’d love to hear your ideas. We’ve also left an “other” section, so go ahead and take a few minutes to fill that in.
While you’re doing that, we’re going to move directly into our question and answer session. I can see, through the chat box, that we have quite a few questions from our audience. I encourage you to continue sending those in, and our panelists will be more than happy to answer that. The first question that we have is for our admissions team. The question is what is the average age of the students currently studying in the online graduate programs? Go ahead.
Ashley Bacon: Hi, Angela, thank you. It’s Ashley, here. The average age is between 35 and 45. Although we only require five years of full-time professional work experience, we find that most of the students that come into the online MBA program do have around the ten-year mark.
Angela LaGamba: Thank you, Ashley. The next question that we have is for Chris. The question is when are assignments typically due in an online course?
Chris Longtin: One of the nice things about the online course is that you’re provided with almost all of your materials right up front, so you have access to what’s due when right from Day 1. Your assignments will vary, depending on the course. In some cases, you will likely see your initial discussion post due maybe on a Thursday, and then a response to a colleague due on a Sunday, so there’s that back and forth. Then your assignments and exams are most often completed by end of Day 7, which would be end of day on Sunday, but that does vary course by course, depending on what the learning objectives of the lead faculty are.
In some cases, the lead faculty will think if I make a highly structured course – if I have clear deadlines for all of my assignments, I am helping the student out because I am telling them, “You don’t have to manage your time; you just have to meet these deadlines.” That will sort of push them along and keep them on track. Whereas, other faculty members might take an approach that the student knows best, so I am going to make all of the deadlines on Sunday, and I trust that he or she will be able to manage their time and not push those deadlines right to the last minute. It varies, but it is spread out throughout the week, with a heavy emphasis on the end of the week.
Angela LaGamba: Thank you, Chris. The next question that we have is for our admissions team. Earlier on in the presentation, we talked a little bit about the optional residencies. One of our audience members wanted to know more about the optional residency or the international field study. I’m wondering if you could just talk a bit more about how that works?
Ashley Bacon: Absolutely, this is Ashley again. For the MBA, some of the optional residencies are on campus; however, the international residency is an eight to ten-day period overseas, depending on the location that you decide to go. It does work towards your credit hours at three credit hours. It also works towards an international business specialization. In regards to the campus-based residencies, they are a week long on campus, as well as working towards your credit hours at three credit hours. Just to reiterate, these are optional residencies and will not hinder your degree if you cannot afford the time to do them. They are just available for individuals who would like to be a little bit more part of the community base on campus.
Angela LaGamba: Thank you, Ashley. The next question that we have is for Chris. Chris, the question is in general, what is the average amount of time, so hours per week, that is customary for a student to study to be successful in the program? Go ahead, Chris.
Chris Longtin: This will depend upon your background. If you have a strong finance background, you’re not going to spend as much time in the finance course as someone who might be new to finance. It is another one of those questions that’s really difficult to give an actual amount. I would ensure that you have 15 to 20 hours a week that you can dedicate to your studies. Again, that’s something that will fluctuate through all five weeks. You might find Week 1 is a little bit lighter, and Week 2 goes up. The content, again, might change that. If I was considering a program, I would look at my schedule and say, “Do I have 15 to 20 hours a week that I could dedicate towards this, and how can I fit that in?”
It seems a little bit overwhelming, but there are ways to do it. We have students that have said, “I didn’t know how to do it, but what I ended up doing was ensuring that I take my lunches alone and doing all of my readings on lunch, so I have five hours of reading that I get done on my lunch every week that I otherwise would have spent socializing in the lunchroom.” We have other students that when their son or daughter sits down at the kitchen table to do their homework, they take advantage of that time and sit down and do that, as well. There’s a large number of students that have changed their commute.
They’ve moved from being the driver to being the passenger, so that they can do work on the road, or commuting through transit, so they can get that reading done. There are other students who, they’ll wake up an hour earlier or stay up an hour later, in order to work it in. It’s an MBA program. It’s not easy. There will likely be a few sacrifices over the two-year period, but we’ve found that students have been creative and have been able to find that time.
Angela LaGamba: Thank you, Chris. The next question from our audience is for the admissions team. They would like to know how long the graduate programs are from start to finish, and if the courses are done in a continuous block or if breaks are available throughout? Go ahead.
Rishi Sethi: The MBA program is about two years in length, and the MSF and MST programs are about 14 to 16 months, in total, depending on when you start. It’s important to note that you’re only taking one class at a time. Most of the classes are about five weeks, and there are a few shorter ones. There is a lot of flexibility. They are 100 percent online, as we’ve explained. I just missed the second part of the question, there.
Angela LaGamba: Sure, the question was – for the first part, it was how long are the courses, typically, from beginning to end. Then the second part from our audience member was are the courses usually offered in one continuous block, or do you usually get breaks in between courses?
Rishi Sethi: That’s right. The courses are, like I said, one class at a time, and then you typically get a one-week break in between. You can do the MBA, for example, in two years, but if you need additional time, you can spread it out over a little bit longer period of time. You do have up to five years to complete the degree. The same goes for MSF and MST.
Michelle Yan: I do want to speak regarding some of the students that are considering the MS Tax program. I know that there are a lot of students who go through different busy seasons throughout the year. We certainly do accommodate for that because, like I said, we do understand students, their busy seasons and so forth. If students do need breaks, perhaps, during the tax season, we can certainly accommodate for that, as well.
Angela LaGamba: Thank you both, Michelle and Rishi. The next question that we have is for Chris. Chris, you’re getting quite a few questions from our audience, and they’re very good. I encourage our audience to continue sending those in. Chris, the question is for the Blackboard system, does that run on a tablet, for example, an iPad or an Android system?
Chris Longtin: Blackboard does have a mobile app, which you can download, and the Blackboard Collaborate also has a mobile app, which you can download. I actually argue that I like the Blackboard Collaborate app on the iPad better than the desktop version. I feel like it’s simpler. It uses a little bit less bandwidth. It’s not as feature heavy, so everything just seems to move faster. If I have a weak Internet connection, I find a better experience. So yes, you are able to access the platform from your mobile device. That does not mean that you can get away with not having a computer. You will need a computer in order to upload your assignments and draft them, and it’s always recommended that when you are completing a test or an exam that you do so from an actual computer, just to ensure your best setup for success.
One other thing to note is that a large portion of the course materials, so your textbooks, are available on digital providers, so you can download them and take them with you, as well as course packs, which are a collection of articles, are available for download – are all electronic, all course packs, so you would have access to those from your – whether you download the course pack app or just download the PDF file and open it on your device. So your reading, you can take almost all – a large amount of your reading you can take with you. There are some courses that do use hard copy books, but the majority are offering both options.
Angela LaGamba: Thanks, Chris. The next question that we have is for the admissions team. It’s specifically around the online MBA. The question is there a distinction on the diploma that says that you’ve completed the online MBA versus the traditional on-campus MBA? Go ahead.
Ashley Bacon: There’s no distinction. The degree, itself, is 100 percent the same that you’d obtain on campus. So upon completion, you’re actual degree does not state online MBA. We actually encourage our online students, if possible in their schedules, to come and walk with our graduating class.
Angela LaGamba: Thank you, Ashley. The next question is a follow up for our admissions team. The question is around all three online graduate programs. The question is what is the tuition and other costs for the program? Go ahead.
Rishi Sethi: Tuition is currently $1,385.00 per credit. As I said, the MBA program requires 50 credits, MS Finance and MST require 30 credits each. That’s it.
Angela LaGamba: The next question that we have for Chris from our audience is are the Blackboard platforms Mac compatible? We talked a little bit about tablets, but is Blackboard compatible with a Mac laptop or a Mac desktop? Go ahead, Chris.
Chris Longtin: Blackboard is a web-based system, so you are able to access it from your browser, whether you’re on Windows or a Mac. One thing to note is that different browsers play with Blackboard differently, so we do encourage students to have a variety of browsers. Firefox is usually the most Blackboard friendly, but I would encourage you, if you are using a Mac, to have both Firefox and Chrome, just because some pages do render differently.
Angela LaGamba: Thank you, Chris. The next question that we have is around the ranking, specifically for the online MBA program. Ashley or Rishi, this question would be for you. Can you tell me a bit more about how the program is ranked, and also how it’s accredited? Go ahead.
Angela LaGamba: What I’ve also done, as well, through the chat box, is I’ve shared a link with our current rankings and accreditation for the online MBA, so go ahead and click on that link if you would like a detailed listing with both of that information. We do have a follow-up question for our admissions team. The question is does the five-week course program, or does the online graduate business programs, do they qualify as full-time for financial aid? Go ahead.
Chris Longtin: This is Chris. The program is – students need to complete six credits per semester in order to qualify for financial aid. If your schedule is such that you have six credits each semester, and that is the way the program is designed, if you are on the two-year track, you will have the required credit amounts in order to qualify for financial aid.
Angela LaGamba: Thank you, Chris. The next question is for our admissions team. The question is when does the graduate certificate in supply chain management, so what are the start dates, and what are the entry requirements? Go ahead.
Rishi Sethi: The next start for supply chain management is, I believe, March 24th. If you interested in that, it is kind of a unique offering that we just launched recently online. I would definitely encourage you to speak with your advisor for more information on that. It’s really a great offering, and we’re just excited to launch it this past year. We’re getting a lot of positive feedback on it. I’d be happy to speak with anyone directly or speak with your respective advisor on it.
Angela LaGamba: Thank you. The next question that we have is for Chris. That’s around a group project. One of our audience members wanted to know how do you participate in group projects in the online classroom? Go ahead, Chris.
Chris Longtin: I think that group projects are one of the most exciting elements. One of the ways that I work and learn is best in collaboration, so the ability to meet someone and work with them on a project often fosters a better relationship between me and them than just reading their discussion board posts. The most often, what you’ll see for group work is there will usually always be someone that is very motivated and sort of Day 1, Day 2, will reach out and say, “Hi, let’s arrange a call and go over the project requirements and figure out how we’re going to split it up.” Then depending on the project, different people split it up different ways. If it is a two-part project, one person might do the first part, and the second person review it, and then for the second part, someone else would take the lead on the first draft, and then the partner might do the review.
In other cases, if you’re doing a marketing plan, for example, the marketing plan might have multiple parts, so you would divide that up and say Person A will take Part 1, 2, 3, Person B, 3, 4, 5, and then Person C would take whatever was remaining, depending on the length of the project. The smallest group is a partnering of two people, and your largest group would probably be around five people. Then depending on class sizes and the particularities of the class, the average is usually around a group of four. They’re not so large that you can’t coordinate with one another, but they’re not so small that it’s a one-man show. It’s a good opportunity to meet people. As long as you’re organized, you should be all set.
Angela LaGamba: Thanks, Chris. We do have a follow-up question for you. During your demo, you were showing our audience today what assessments and quizzes look like. One of our audience members wanted to know how are those quizzes or tests administered?
Chris Longtin: The way it works – because we’re in a live course, I couldn’t actually launch the quiz for you have a little bit of extra insight into the Spring 1, Quiz 1, but it would, in most cases, appear on your screen, and you would complete it similar to a survey that you might do online. There will be some multiple choice questions, where you select the one that you think is the right answer. There might be some short answer questions, where the quiz will ask you to input in a text box, and then some of your quantitative courses, you might download a problem set, and then upload your Excel file afterwards, within the time period, and you would be marked or reviewed on that.
One thing to note is that the online graduate student resource center has a really good section on quizzes and assessments that takes you through that, so you would be very familiar with what to expect before Day 1 of your course, if you complete the recommended orientation.
Angela LaGamba: Thanks, Chris. The next question that we have is for Ashley. The question is when, for the online MBA, is the next start date after January? Go ahead.
Ashley Bacon: After January is February 17th, which is Spring 2. Because of the holiday season, we do strongly encourage that students that are looking for any of the start dates in spring submit their documents as soon as possible, especially your transcripts. But certainly, if you are looking to begin the process, we have a start date, as mentioned earlier, it’s Spring 1, January 6th, and then the following one is February 17th.
Angela LaGamba: Thank you, Ashley. The next question that we have is for Michelle around the Masters of Science in Taxation program. The question is how long does the process usually take for this program for admissions? Go ahead, Michelle.
Michelle Yan: The admissions process – like I said, with the MS Tax program, we usually have six start dates throughout the year, so very flexible starts. Again, just like Ashley had mentioned, a lot of times, when you do begin the application process, we do – especially coming up in the January start, with the Thanksgiving holiday weekend, the Christmas holidays coming up in December, we always do encourage students to submit their documents early, and then the earlier you submit your documents, hopefully you’ll hear back from the admissions committee as well. Usually, we give students – a good time frame to work with is about a month or so.
But like I said, I’ve had students come to me within a week and a half and had their documents, transcripts, recommendations within a week and a half. It can be done if you’re motivated. Like I said, usually, we do give students about a month’s time to put everything together. Again, you do want to make sure you get your documents in early, so that they can be reviewed quickly, as well.
Rishi Sethi: That’s for all programs. It’s not just the MST, just to clarify. A reasonable turnaround time to expect to get your application done would be about a month, but we do have students, from time to time, who’ve come in kind of last minute, and they do – they are able to complete their application in a week. It’s really a pretty straightforward process. There’s five requirements. The application form, it’s an online application form. You create an account, and you’d fill out all your personal, academic, and professional information. You’ll also provide a current resume, a statement of purpose, which is 500 words outlining what you’re doing now, where you’re headed, and why you’re looking to do the degree with Northeastern.
We will need a transcript from every school you’ve gone to after high school. Even if you had transfer credits, we would need those, as well. Then lastly, your recommendations, we need three of them, and they must be professional. Even the recommendations are submitted directly online. In your application account, you just fill out each reference’s information, and they get an automated email with instructions to submit. It is a really straightforward and simple process. We are taking – we’re actually taking applications now, so do feel free to reach out and start the process, if you haven’t already done so.
Angela LaGamba: Thank you, both. The next question we have is for Chris, and the question is are all course materials available online, so electronically, or do students need to purchase hard copy textbooks and materials?
Chris Longtin: Different courses engage different materials. All of the course packs are 100 percent electronic, but the textbooks, there are some textbooks, the Statistics course, in particular, has a custom textbook that students find very useful. It’s not in print. It’s only available as a hard copy. The lead faculty member will select the materials that are best suited to achieving the course objectives, and in some cases, they are only available via hard copy, but the majority do have an electronic counterpart.
Angela LaGamba: Thanks, Chris. The next question that we have is for Ashley. Ashley, the question is for the online MBA, is there a requirement to have a business background to enroll in the program? Go ahead.
Ashley Bacon: Not from your undergraduate degree. If there is some concern from some of the attendees about what they studied in their undergraduate, that is not necessarily important. I would employ that – if you are concerned whether it is with your undergraduate, as well as your professional background, that is a more individual topic with your advisor. I would definitely get in touch with them. But if you did study something outside of business, that’s absolutely fine. In regards to your professional background, there should be some level of leadership that has taken place within the minimum of five years that is required.
Whether that leadership is a team lead, a supervisor, or managerial experience, it is important to display that throughout your application. But again, if you have some concern regarding your professional background or your undergraduate degree, it is best to have a one-on-one conversation with your enrollment advisor.
Angela LaGamba: Thank you, Ashley. Rishi, a follow-up question from our audience is are the courses within the online MBA different from the on-campus program? Go ahead.
Rishi Sethi: With all these programs, they’re rooted in the curriculum from the on-campus programs, so it’s the same professors that have worked with course development for the online program to modify their classes to make them deliverable in this format. Fundamentally, yes, we’re communicating the same things. It’s just the mode of delivery that differs.
Angela LaGamba: Thank you, Rishi. The next question is for Chris. The question is does the online MBA program work with a specific cohort for group projects throughout the two years?
Chris Longtin: There are a number of ways to complete it. If you being the program and work with a group that you would like to remain with, you can make that request of your student advisor, and they will work with you to identify how you could remain with that cohort. Because of the way the program’s set up where you complete core courses, and then move into electives, you’ll likely find that a lot of – you’ll see a lot of familiar faces in your first few classes, but as people diversify and move into their areas of specialization, you might lose track of some individuals, and then you’ll all come together closer to the end of the program, when you finish off your core courses.
Angela LaGamba: Thank you, Chris. We do have a follow-up question for you, Chris. You mentioned earlier about live sessions that are offered for some of the courses. How is that handled, given that some students are in different time zones, they have different work schedules? How does that typically work? Go ahead, Chris.
Chris Longtin: That’s an excellent question. All of your live sessions are recorded. If you are unable to attend a session at any time, you’re able to watch the recording of the next day. The sessions are not required. There’s no new material introduced in them. If you’re unable to make it, or it doesn’t meet with your timeline, you’re able to watch the recording the next day.
Angela LaGamba: Thank you, Chris. The next question that we have is for our admissions team. The question is when was the online MBA program introduced online? Go ahead.
Rishi Sethi: This is actually one of the first accredited programs online. We’ve been around for about seven years now on the marketplace. We have a pretty strong track record and a good reputation for an online business program. Of course, the school, itself, has been around over 100 years. Northeastern’s definitely been around a long time, and we’re certainly not going anywhere any time soon.
Angela LaGamba: Thank you, Rishi. The next question that we have is for Ashley. The question is what about the GMAT and the GRE examination? Is that a requirement for the online MBA? Go ahead, Ashley.
Ashley Bacon: The GRE is not accepted with Northeastern University. However, you can use a GMAT if your GPA score was a bit low. It does not fill the gap if you do not meet the minimum professional work experience requirement. However, if you do want to take a GMAT, the admissions committee will accept scores of 590 plus. If you’re worried about, again, either your professional or educational background, I would implore you to talk to your enrollment advisor before taking a GMAT to see what options are available, but it is not a requirement.
Angela LaGamba: Thank you, Ashley. The final question that we have for today’s webinar is around the deadline to apply for the January 6, 2014 start date. I’m wondering if you’d like to talk a little bit about the deadlines for each of the online graduate business programs? Go ahead.
Rishi Sethi: We have the same expectation with regards to deadlines for all the programs. We’ve got a start coming up of January 6th. To be realistic, a lot of universities are – they’re reducing staff because of the holidays. If you want to be considered for the Spring 1 start, regardless of program, I highly recommend getting going on your application and submitting it no later than December 1st. The difficulty you come up with sometimes is it’s not so much the application form or your resume or your essay. Those are simple. You can do those in a matter of a few hours.
It’s ordering your transcripts – sometimes people order transcripts and they don’t come in on time, or they don’t come in at all, so they need to request them again. It’s important to give us a little bit of a margin to allow for those kind of things, to make sure that your application gets submitted in time for a review for that start. Of course, recommendations, people are leaving for holidays. Giving people a reasonable amount of time to get those in, as well, is also very important and considerate of them. I would say December 1st latest submission date.
Angela LaGamba: That is all the time that we have for today’s webinar. I do have a couple of closing thoughts before we conclude this session. An enrollment advisor will be following up with you over the next few days to answer any additional questions that you may have about the course demo that was shown today or about any of the online graduate business programs. If you would like to contact an advisor immediately, you can reach them by calling the number on the screen for any of the programs that we’ve talked about today. We’ve also recorded today’s session, and we will be sharing that shortly. If you have any additional feedback on today’s session, you could send it through the chat box on the lower right-hand side of the screen.
But again, I wanted to thank our panel, Christopher Longtin, Michelle Yan, Ashley Bacon, and Rishi Sethi. Thank you for taking the time to walk us through the course demo, and also to talk about the programs, very informative, and also to our audience for being very engaged in sending through all of those questions. This concludes our session, and have a great day, everyone.
Angela LaGamba: Welcome to Northeastern University’s online Master of Science in Finance webinar. My name is Angela and I will be your host and moderator for today. Before we begin, I’d like to go over logistics for this presentation and address some commonly asked questions.
All participants are in listen only mode. To ask questions, type them into the chat box located on the right hand side of your screen and hit enter. Or if you are in full screen mode, toggle over the bar located at the top of your screen and click on the chat icon. We’ll be addressing your questions at the end of the webinar. This event is also being recorded so you can view it again at a future time.
We’re very excited today with our panelist. We have Professor Paul Bolster and enrollment advisor Hayden Jones with us. Professor Bolster is professor of finance and the online MBA faculty director at the D’Amore-McKim School of Business at Northeastern University. His research and teaching interest are in the area of investments and portfolio management. Professor Bolster served as a director for several investment funds managed by Garthmore Investment Management in London and he also holds a Ph.D. and MBA in finance and has the charter financial analyst (CFA) designation.
We also have Hayden Jones, the lead enrollment advisor for Northeastern University’s online graduate business program. His role is to help prospective students through the application and admissions process.
Let’s quickly review the agenda for today’s webinar. We’ll be talking a little bit about Northeastern University and then overviewing the program for the Master of Science in finance. We also have Professor Bolster who will be talking a little bit more about the investment analysis course. And then we’ll have Hayden talk a little bit more about the admissions requirements for the program and tuition and scholarship that are available.
Again, throughout this session, we do encourage you to send in questions using the chat box and we’ll be addressing those during the dedicated Q&A session. All right, let’s get started. I’m gonna hand it off to Hayden. Go ahead.
Hayden Jones: Northeastern University’s D’Amore-McKim School of Business has a distinguished history and a reputation for excellence in teaching, learning and research. The dedicated faculty members who deliver our online masters of science program are accomplished scholars and experts in finances. With their guidance, you’ll complete a highly immersive and comprehensive curriculum that expertly blends current financial theory with real life business practice.
So, next I’d like to discuss our rankings and accreditation. We are accredited by AACSB international, one of the highest business accreditations worldwide. Most recently, Northeastern University’s online graduate business programs were ranked no. 17 in the U.S., that’s 2015, by U.S. News & World Reports. This includes the online Master of Science in finance.
So, why choose Northeastern for MS in finance? Well, it’s designed for busy professionals. Our online Master of Science in finance program can equip you with graduate level knowledge and management foundation to unlock new opportunities for growth in your company and in your career. You can complete this course, and it’s 100% online with no residency requirements. You can earn your degree in as few as 16 months while continuing to work and study at an AACSB accredited regionally accredited business school.
You have two track to choose from: there is corporate finance and investment finance. And you can consider our dual degree option, the online master’s in finance and an MBA program. And you can also leverage our focus on professional experience because we don’t require the GMAT or the GRE.
Now, in a survey conducted back in July, 2014 with our online MSF graduates, 83% of our alums surveyed received more managerial responsibilities. Now, it is important to note that 75% of our alums received a salary increase with 88% of the 75 surveyed receiving 10% or higher increase. And now I’d like to pass it back to Angela who will conduct one of the polls.
Angela LaGamba: Thanks Hayden. So, we would like to hear from you, our audience to learn a little bit more about why you’re considering an online Master of Science in finance. You can find the poll located on the lower right hand side of your screen or if you’re in full screen mode, just toggle with the top of the screen and click on the poll icon. So, what we’re asking is perhaps you’re considering an online Master of Science in finance personal development. Perhaps an advancement in the workplace. Maybe you’re just interested in furthering your career or maybe it’s all of the above.
If you do have another answer, you’re more than welcome to type that in as well. So, we’ll give everyone a few moments to fill that in and then we’ll share the results with everyone. So, while we’re waiting, I’m going to hand it over to Professor Paul Bolster to tell us a little bit more about the investment analysis course in the program. Go ahead professor. You also have control of the slides.
Paul Bolster: Great. Thank you very much and thank you folks for attending the webinar today. What I’d like to do is take you inside the primary course that I teach in the MSF program, investment analysis. This is one of sort of three entry courses for the MSF program. And what I wanna do is just give you a sense as to what the look and feel of a course in our online MSF program is like. So, let me just jump ahead here.
So this shouldn’t surprise any of you, if you’ve got a bit of a background in finance from your undergrad or if you’re working in the profession, none of these topics that are included in the investment analysis course should be extraordinary or surprising. But just very quickly, we start out talking about investment objectives. In other words, before you start investing you really wanna think about what you’re investing for, what’s the purpose. And then we talk a little bit about nuts and bolts, managing and measuring risk and return. We talk about how financial markets function and so on. Portfolio management issues, we do spend some time on stock valuation and fixed income topics as well and finally end up with a little bit more information on derivatives, options and futures for example.
So, one of the things that Hayden mentioned early on was one of the nice things about this curriculum is that it really does combine theory and practice. And so what I wanted to do was sort of give you a few contemporary examples that would be touched upon in the materials within the course that I’m teaching.
And so for example, what you’re looking at right now, you’re looking at obviously a line of stock performance in several different markets. The purple is the Nikkei, the Japanese stock index. As you can see the Nikkei has done quite well since late 2012 and well into 2015, that’s the highest performing stock market over this particular period of time.
The red line at the bottom, that’s the Footsy 100 or the U.K. stock index. And as you can see that has not been nearly as robust. What’s in between? Well the Dax, this is the German stock index, the green line. And there’s no label on the orange line. The orange line is the S&P 500, the basic American stock index. So, what you see is clearly the different performance in these different markets.
And so one of the questions well, how do I know? If I were to pick a market somewhere in the world and invest solely in that, well in retrospect I would have done best if I had invested in Japan and worst if I invested in the U.K. But one of the things that we talk about in the investment analysis course is, there’s also sort of a middle ground, we can diversify. In other words, think about what a portfolio formed with say 25% in each of these four graphs would look like. It would end up somewhere in the middle of those four lines where they all end up. But it would have a lot less gyration over the course of these approximately four and a half years – actually about five years that we’re looking at on the graph itself.
So the point here is that while individual markets look very risky when I look at them one at a time, if I can combine a number of investments into an individual portfolio, some of the risks that are endemic to individual markets are offset by conditions in other markets. So, just something to think about.
Another quick example here. If you’ve been following and it’s hard not to follow this if you’re watching financial news in general is what’s going on in China’s stock market and it hasn’t been a pretty picture quite frankly over the last few months. As you can see from this graph, the Chinese stock market peaked back in mid-June. It got up to about, according to this index about 5166. Since then, it’s declined. I just looked it up just before I came on this webinar today. It’s down to 3367. So, it’s dropped by about 37% over the last three and a half months – about three months. That’s a pretty painful experience for investors in that market.
And why is that happening? Well, there are a variety of reasons we can point to. One is that GDP growth is slowing in China and this is problematic, not only for the Chinese economy, but for a lot of other economies that are dependent on the demand coming from the Chinese economy.
Another issue is the recent devaluation of the Lan. So, China has devaluated their currency to try to maintain – to try to keep their exports from getting too expensive. In other words, that’s sort of a way to cut the price, but cutting the price of the currency itself and try to keep domestic growth in China robust. But that’s having a mixed reaction in world markets.
Another reason for this very jumpy graph is that Chinese stock market regulators are trying – they’re trying their best to try to figure out how to smooth out markets and how to keep markets moving forward and hopefully upward as best as possible. And what they’re finding out is this is a very difficult task. And if they intervene too much on the wrong side of supply or demand, they can just increase the gyrations in the market.
So one of the things we’re seeing now, one of the reasons the market has dropped significantly since mid-June is simply because market regulators in China are sort of backing off. They’re doing less intervention and they’re trying to figure out what, if anything, they wanna do moving forward. So, this makes China’s stock market a very volatile place right now. It’s a lot of risk, yet it’s one of the largest economies in the world. Even through growth prospects have diminished, there’s still a lot going on there.
Okay, last of my three contemporary examples, well this is something that we do a lot in these kinds of courses is we look at individual stocks. And what you would do in my course in investment analysis is one of the things you would do is you would build models, they’re called just kind of cash flow models to put it most simply. And you would try to figure out well, are the projected cash flows associated with Apple as a corporate entity, do they justify the current stock price?
So, you would come up with a way of sort of boiling down your forecast of how Apple’s going to perform going out in the future and you would create from that a present value of future benefits that you would eventually translate into your estimate of the current stock price. You’d compare that to the current stock price, which as of about half an hour ago was $112.25. And you would decide whether the stock is over or under valued. If it’s overvalued, you’d stay away from it. If it’s undervalued, you might think about buying it if you think it’s gonna go up.
So, this is just a quick snapshot from Morningstar just showing where the consensus estimates for analysts come from and analysts, they’re rate Apple a buy, even though it’s selling for 112 in the current market. They think it’s gonna go up to 155 in one year. So, again this is a difficult task evaluating individual stocks, but somebody’s gotta do it and in this class you learn about some of the models we employ to undertake this difficult task.
So, let’s talk about the course itself. That was a little bit about the theory practice bridge that we try to create in our courses. All of your courses will be designed in this five-week rubric if you will. And weeks are typically divided into lessons. So, in my classes, I think in four of the five weeks, there are two lessons within each week and I think in week two if I recall correctly there are three lessons. That’s generally what you would find, two or three lessons per week.
And this is just showing you essentially the types of topics we cover. We start out with the basics of investments. We talk about objectives, risk and return and how markets function. We then go in and we talk about what happens when you combine a bunch of individual securities into a portfolio? How does the characteristics of the portfolio’s risk and return differ from the individual elements within it? We talk a little bit about active versus passive investing. You may know these terms. If I’m an active investor, I’m trying to pick stocks that are undervalued or pick up assets that are undervalued and I’m hoping that the market finally realizes I’m right, those assets rise in value and I’m going to outperform the market averages.
On the other hand, maybe I don’t wanna spend the time or effort or maybe I don’t think I have any skill in finding undervalued assets, so I’m just going to invest passively. I’m going to buy a mutual fund that essentially tracks the S&P 500 exclusively. And so I’m gonna do just as well as the market does.
Week three we talk about equity valuation in detail. This is where you build valuation models and we primarily focus on fundamental analysis. So, building models of value based on observable information and forecasts that we can generate about individual companies.
And week four we talk about bonds. We also talk about mutual funds in general. And then finally, in week five, we talk about some more complex securities, derivative securities such as options and futures. And we, sort of, track back to where we started in week one. We talk about investment objectives again to wrap things up. So that’s, again, just generally how my course flows and generally speaking this is how you should expect most of your courses to flow over the five weeks with each week divided into approximately two or three lessons.
How are you gonna learn in these courses? Well, across our courses, there are different approaches to pedagogy, but these are generally – what I’m gonna show you next are generally what you should expect to see in all of your courses. So, for example, I use notes, examples and exercises in every lesson throughout the course. There’s also a textbook behind the materials and you’re expected to read that textbook so that provides you with a foundation. And then the material that I provide online really enhances that, pulls out what I think is important out of the text itself.
We have weekly online chat sessions. And you’ll have an online chat session with me once a week and you’ll also have an online chat session with your instructor. Your instructor does a little bit more of the day to day work with you as the course progresses. So, you’ve got two weekly online chat sessions that you can log into. It’s all done on the Blackboard platform. You can use a camera, you can see your colleagues, your peers. You can talk to them, you can talk to your instructor, you can talk to me. So, it’s a very nice interface?
What are you gonna provide? What are you gonna deliver? Well, you’re gonna deliver exams, problem sets. There are also discussion boards, I’ll show you an example of that momentarily. There’s also, in this class, a stock analysis project that you’ll do in small groups.
Okay, here’s some examples of my example. So, this is a screen shot of a single slide or page from the notes within my course. It’s part of a series of eight slides entitled what is portfolio risk and what this is showing you here, just very simply, you’re looking at a graph of monthly returns for Exxon, that’s XOM is the ticker symbol and McDonald’s, MCD. And what you see here is there’s some similarities and some differences as to how these two stocks have gyrated over the course of this two year period shown in this particular graph.
And the point here is again if I took any pair of American stocks, I would probably see a material positive correlation in the returns over any period of time. But the correlation is far from perfect. As you can see, these two lines don’t move by lock step. They do by a tiny period from October 2011 to about February 2012, but there are a lot of breakouts here and there. And what that’s telling is that hey, again, there are diversification opportunities by holding these securities in my portfolio at the same time. So if there’s a way to exploit that, I really wanna do it. So as you can see here, this is gonna get fairly quantitative and you should expect that in most of your courses, you’re coming into a finance curriculum. So, there’s a lot of quantitative content. And not just in my course but in others as well.
This is just another quick screenshot showing the punchline of one model of what kind of return should I require from Google, for example, in this case. And based on the assumptions that we’ve plugged into this particular model, this says well you wanna expect a return of 16.1% from Google. And then maybe you’ve done your own fundamental analysis and you think it’s gonna generate a return a little bit higher from that. Well, this is basically telling you that the return you expect to get from holding Google is superior to the return that you should require from a security with this level of risk. So again this may seem a little bit out of context if you haven’t done any work in this particular area, but I think once you see these kinds of examples in the context of the course, they’ll make a lot more sense.
Ah, Robert and Julia Peterson. As you can see here, here’s a couple that is close to retirement. They have a reasonable nest egg and this point in time and you’re their financial advisor. So, this is a simulation that I designed that essentially asks you to help them to make asset allocation decisions. How should they essentially allocate their investment funds in order to generate a return that they think is reasonable and will meet their good lifestyle expectations.
And what you’ll find is that they have a lot of questions. They will push back sometimes on some of the recommendations you’ll make. And you’ll see them in a couple of different times during the course. You see them during week one and you’ll see them again in week five. So, it’s an interesting interactive exercise and students seem to really find this one challenging and interesting. And then there’s a discussion that typically follows this exercise. So, after you’ve worked on this a few times and you’ve sort of gotten a sense as to what you’re doing right and what the difficulties are in advising a couple that hasn’t quite figured out what it is that they really wanna do, you can discuss that with your colleagues in the class.
And discussion boards. Well, here’s an example of a discussion board in week two. This one’s a quick discussion about the pros and cons of short selling. And so what I’m asking you to do is by the end of day four, each week obviously has seven days, by the end of day four, I want everyone to make at least one post to this discussion. So, we’re talking about is short selling a good thing or a bad thing or why do you think it exists.
And then I expect some follow up as the rest of the week progresses. So, if there’s one of these each week in my course, in other courses you may see one a week or you may see just a few scattered throughout the five week period. But this, again, is a way of generating some interactive content and again students seem to find this very helpful and very reassuring to essentially get some feedback from their colleagues in various classes.
So to sum up, there a lot to do in just five weeks. This is a full-fledged grad course that we’ve squeezed into a five week box. The good news is you just take one course at a time, so it allows you to focus entirely on, for example, my investment analysis course. And as I mentioned, my course and most of your online courses are fairly quantitative in nature and this is the nature of finance in general.
Courses and discussion change each time the course is offered. So, in other words, we are consistently updating our courses to freshen materials, to introduce new pedagogies, to update any data or any data links that we may embed into our course materials. The work load is rigorous, but it is manageable. Lots of folks have done this before you and you can do it too. It takes some dedication, but you can do it. And you also have the support of a dedicated instructor and elite faculty member, such as myself.
Angela LaGamba: Thank you very much professor for walking us through the investment analysis course. What we’d like to know from our audience is if you have any questions for the professor, please send them in through the chat box in the lower right hand side of your screen or if you’re in full screen mode just hover over the box and click on the chat icon. We’ll be answering those during the Q&A session coming up shortly.
In the meantime we also have a poll for you. We’d like to hear from you and find out which online Master of Science in finance track are you most interested in? Would it be the corporate finance, the investment finance or perhaps you’re interested in both tracks. So, we’re gonna leave that poll open for you. And in the meantime, we’re gonna hand it off to lead enrollment advisor Hayden Jones to talk to us a little bit more about these admissions requirements for this program. Go ahead Hayden.
Hayden Jones: Thanks Angela. So, now I’d like to just go over the admissions requirements with you. We require that you have a minimum of five years professional work experience, an undergraduate degree from a regionally accredited institution with a GPA of 3.0 or above on a scale of 4.0. Now, if you don’t meet all the above requirements, it does not automatically disqualify you from being accepted into the program. I’d ask that you reach out to your enrollment advisor for some counseling.
Next, we have the application requirements. The application process is fairly simple. On average it takes about two weeks depending on how disciplined and focused the applicant is. We require an updated resume, a statement of purpose, two letters of professional recommendation, all U.S. post-secondary transcripts or equivalent for international students and there is a $100 non-refundable application fee.
So next we have the tuition and scholarships. I’m sure you’re wondering how much the tuition is. Now currently, our tuition is $1,476 per credit hour with a total of 30 credits, which equals $44,280 for the 16 month degree. Now there is also a total of 10 classes and each class is three credits long. Now please note that tuition is subject to change each year.
Northeastern University is committed to supporting our veterans and the online program has recently become part of the yellow ribbon program. If you fall under this program, then it means that most if not all of your tuition will be covered by the government and Northeastern University. For more information, please visit the website listed on the slide there.
And as part of our commitment to our alumni, beginning in the fall of this year, the D’Amore-McKim School of Business now offers a double husky scholarship to all Northeastern alums that have completed a degree from one of our colleges. In addition, the $100 application fee is waived for applicants. Again, for more information, please visit the website listed on the slide. And now I’d like to hand it back over to Angela to begin the question and answer session.
Angela LaGamba: Great, thank you very much Hayden. So, what I’d like to do now is encourage our audience to continue to send in questions and we have both Professor Paul Bolster and Hayden Jones available to answer your questions about program, the curriculum and any of the admissions requirements, or perhaps any other questions that you might have. So, why don’t we start with the first question, which is for you professor? One of our students was wondering if they are out of school for more than 10 years, do you recommend that they do anything to prepare for the program before enrolling in the Master of Science in finance? Go ahead professor.
Paul Bolster: Well that’s a good question and it has been asked before. I have had a number of students who have been out of a university setting for many years. I think the only thing I would suggest is that you might want to do just a little bit of remedial work on some basic quantitative methods. If you’re basic math – if you feel pretty comfortable with that. You shouldn’t have any trouble walking into any of these courses. They pretty much pick up right at the beginning.
But if you feel like you’re really uncomfortable with basic statistics or something like that, you just might wanna refresh that just a bit before. I don’t think you have to do a super deep dive. In fact, one of the things that we have in the MSF program, we have what we call a primer and that would probably be a good thing for you to do before you take your first course. It’s sort of like, if you will, it’s a primer, it’s a quick jump start, a mini course, really just some materials that walk you through some of the basic methodologies and just to refresh some of the basic skills you would need through the rest of the curriculum. So, we do have some of that ramp up material already built into the MSF materials.
Hayden Jones: Sorry, I’d like to just add to that professor. So, yeah about the primer, usually it’s required and once you’ve been accepted into the program and you’ve accepted your seat into the program. And there are full modules that deal with basic math, accounting, financial analysis, time value of money and statistics and data. And at the end of completing those four modules, you’ll have a 20-question test. So, again, just to get you in the habit of understanding this math and quantitative and statistics information.
Angela LaGamba: Great, thank you both very much. The next question that we have is for you Hayden. One of our audience members was wondering if you could talk through the admissions requirements for 2015 and if there’s any financial aid available?
Hayden Jones: Yeah, so sorry the question was about –
Angela LaGamba: Financial aid and if there were any starts available for 2015.
Hayden Jones: 2015, yeah. So, the next start is in November, November 16 I believe and there is financial aid available for the fall one start. There’s no financial aid available for the November 16 start. In order to qualify for financial aid within a specific semester, you need to take six or more credits and the course in November, that’s the last course of the semester. So, financial aid will not be available until the January 4 start date.
Angela LaGamba: Thank you very much Hayden. Professor, our next question is for you. One of our audience members was wondering if you could talk a bit more about the corporate finance and investment finance tracks and what the difference between the two are. Go ahead professor.
Paul Bolster: Sure. Well, first of all there obviously is overlap because there are core courses that folks in the corporate track and folks in the investment track would take. But then as you move through that core, you have the opportunity to specialize and the specialization typically has to do with well essentially where your interests are, where your career ambitions are. Perhaps where you’re working now. For example, if you were going into the corporate finance track, you perhaps would look at courses such as investment banking. You may look at valuation, value creation. There are a number of courses that are electives. So you get to sort of specialize toward the approximately last half of your program, in your last set of courses.
If you were to go the investment track – again that’s – so corporate, think of if I were engaged in a corporate finance function. In other words, I’m not a money manager, I’m not in the money management field. I’m working for a company in a finance function or that’s what I really want to do. So, I’m gonna be making decisions on buy or replace – equipment decisions. I’m gonna be making evaluations, cost benefit analyses on the corporate level. If that’s you, then you’d be more appropriately seated in the corporate finance track.
On the other hand, if your ambitions or your interest or your current career path is moving you into money management or financial advising, then the investment track would probably be more appropriate for you. And there you’ll be getting into course work such as portfolio management in your elective phase. There is a financial risk management course that is entirely focused on derivatives and other kinds of financial instruments that are necessary or important for folks that are moving into a more sophisticated investments environment.
So, that’s essentially the difference between the two. It’s sort of where you want to be, where you wanna go in terms of your career ambitions. Do you wanna work in a corporation, in a finance function or do you wanna work in money management in a function where you’re working with investments.
Angela LaGamba: Thank you professor. The next question that we have from our audience is for you Hayden. One of our audience members wanted to know would the Master of Science in finance degree say online on it? Go ahead Hayden.
Hayden Jones: Good question. Frequently asked question. So, no absolutely not. We don’t distinguish between the on campus or online degree. In fact, the professors that teach the online program are full-time and teach the on campus program as well. So, neither the transcripts or the degree itself says online.
Angela LaGamba: Thanks Hayden. The next question that we have is for you professor. One of our audience members wanted to know how can Northeastern University’s online Master of Science in finance program help students who are currently in accounting who may wanna transition to the finance field? Go ahead professor.
Paul Bolster: Sure. Actually that’s a really strong pair of skillsets. If you’re coming from an accounting background, first of all, then a lot of the basic issues that we’re gonna build upon in this finance curriculum are issues that you’re already very comfortable with, like financial statement analysis. And again, that’s a super helpful background to come into the program with.
The other is that this is a relatively concise program. It’s not as lengthy as an MBA. So, in a relatively concise period of time you can build an academic credential and some academic knowledge that is quite deep in finance. And so it really would be a nice compliment to someone who wanted to move from a pure accounting function to one that was more of a combination of accounting and finance or maybe purely in finance at some point in time. But really, you’re coming from an accounting background, this would be a great way to move into more of a finance role in a relatively short period of prep.
Angela LaGamba: Thank you professor. We have another question for you from one of our audience members. They wanted to know is the curriculum for this program similar to the CFA credentials? Go ahead professor.
Paul Bolster: Sure. Well, the short answer is yes and no, I suppose, but there is a lot of overlap between what we do in this course. I have the CFA charter. A number of the other faculty who teach in this program are CFA charter holders as well. So, we know what’s in that curriculum and we have built our courses really that – they may not be precisely the same as the curriculum, we won’t cover every single point, but there is a very high degree of overlap between the two. So, this would be a great opportunity for you to build an academic background or build an academic credential at the same time you are generating a lot of knowledge that would spill over into a CFA study program.
Angela LaGamba: Thank you professor. The next question from one of our audience members is around the example that you had shown earlier for China. So, one of our audience members wanted to know what your thoughts are on the market in China over the next 5-10 years and what you think will occur there? Go ahead professor.
Paul Bolster: That’s a tough question. You’re asking me to predict the future, and this is what – one of the things I tell my students is, particularly when we’re doing security analysis, like when you’re saying is Apple overvalued or undervalued? We have to engage in storytelling and we do it quantitatively. So, the folks listening to our stories see this as being very sophisticated and it has to be very rigorous, don’t get me wrong. But frankly, we’re trying to predict the future and it’s an awfully hard thing to do and that’s what you’re asking me to do here.
Nonetheless, here’s what I would say. I think China’s long-term prospects are quite good. I think it’s a modernizing economy. I think that they’re moving – the hybrid of collectivist and capitalist structures within their economy are sort of slightly moving toward maybe a more capitalist approach. But generally speaking, they’re figuring out how markets work and how to best exploit them, both internally and globally. So, I think the long-term prospects for China are quite good. It’s a strong culture, it’s a strong working population. They have a lot of capital to work with at this point in time. Growth may be more moderate for the next five years or so, but long-term growth prospects are still quite robust.
If I were advising someone, and I’m not an advisor, but if I were advising someone on this, I would say, again, this comes back to diversification. I would put a modest portion of my investment, my long-term investment assets, my retirement funds, for example, into a fund that had some exposure to China. I would not put half, I would not put three-quarters in. But, maybe a smaller portion, maybe 10% and that would provide me with some diversification, I would have some exposure to China if it does well, awesome. If it does poorly, my portfolio’s gonna take a hit. But generally speaking, these are the kinds of asset allocation decisions that we have to make all the time. So, again I’m moderately bullish on China over the long-term and again this is just my opinion. Don’t go out and invest money based on just my opinion, you gotta do your own research.
Angela LaGamba: Thank you professor. The next question that we have is for you Hayden. One of our audience members was wondering if you could talk a little bit more about the dual degree option available to students. Go ahead Hayden.
Hayden Jones: Thanks Angela. So, for the dual degree and it is necessary to start off with the MBA first, so you cannot do the MSF first and ask to complete the dual degree. MBA, so halfway through your MBA, you would then have the option of opting to take the dual degree and you can have both the MBA and the MSF for a total of – an additional four classes, four classes of three credits. So, MBA and then you take an additional four finance classes. But you cannot complete the MBA first and then go back and do the dual degree. The MBA degree cannot be conferred first before taking the dual degree.
Angela LaGamba: Great, thank you very much Hayden. And I wanted to hand it off to you professor to share any final thoughts with our audience today.
Paul Bolster: Sure. Again, I’m presuming I’m speaking with a group of folks that are interested in finance that are either already in that area or thinking of transferring into that area. And I can’t say enough good things about it myself. I really find finance to be an incredibly interesting field. As you know if we look at markets, if we look at how corporations are making decisions, it’s just a very interesting field and it changes all the time.
I mean about a year or so ago the market looked like it was gonna do nothing but go up. Now, we’re wondering whether the market is finished going down with these recent corrections we’ve seen in major market indices in the U.S. and elsewhere. So, there’s never a dull moment, but it’s also – it’s very intellectually stimulating work to do, work in finance. It’s very intellectually stimulating to work in an academic content and finance, which I’m lucky enough to do all the time. And perhaps you’ll opt in as well. I hope you do.
Angela LaGamba: This concludes our webinar. Have a wonderful day everyone.
Angela LaGamba: Welcome to Northeastern University’s financial aid webinar for online business programs. My name is Angela and I’ll be your moderator for today. Your webinar presenter is Robert Picariello. He’s the financial aid counselor for the D’Amore-McKim School of Business Graduate Programs at Northeastern University. I’m now going to hand it over to Robert to tell us more about financial aid. Go ahead, Robert.
Robert Picariello: Thanks, Angela. Like Angela said my name is Robert Picariello. I’m the financial aid advisor for all of the graduate programs here at the D’Amore-McKim School of Business at Northeastern University and today during the webinar we’re going to go over a handful of topics including basics of graduate financial aid, the types of financial aid that is available, the monthly payment plan that the university offers, tuition reimbursement that you may have available through your employer, and we’re going to finish off with the student financial services department contact information.
So starting with basics of graduate financial aid I do like to go through some of the basic steps because sometimes students aren’t familiar with the federal financial aid process. The first thing that you need to do is file what’s called a FAFSA and the website is here, it’s very easy, www.fafsa.gov. It would also be the first thing that you could Google if you were to Google FAFSA. That stands for the Free Application for Federal Student Aid and on that application you do need to list Northeastern University’s school code, which we have listed here as 002199. You can also search for us by city and state, so you would be using our main office, which is in Boston, Massachusetts and just looking for Northeastern University. But the quickest way to find us would be by our school code listed here.
All graduate students are considered independent and one of the important factors here is that students who may have had to fill out financial aid at the undergraduate level, they’re considered dependent students, but once you become a graduate student regardless of what your age is, you are considered an independent student and again, that doesn’t matter if you’re a younger graduate student or you’re coming back to school after a period of time in the workforce. You’re always considered an independent student when you’re in a graduate program. What this means is that you’re not required to provide any parental income information or signatures. The only information that we need is you as the student and you have the option to put your spouse’s information on there if you qualify in that scenario.
There are no federal grants available to graduate students. The majority, if not all, financial aid availability for graduate students do come in loan programs, which we’ll talk about in a few minutes. And there are a couple of rules of thumb for federal financial aid for graduate students that we’re going to go over.
Students must always be enrolled in at least six credits in a given term to be eligible for federal financial aid. In the online business programs here at the D’Amore-McKim School of Business, each full semester is broken up into three smaller modules. So you’ll have, for example, in the Fall you’ll have Fall 1, Fall 2, and Fall 3. Over the course of those three modules that consist of the full fall semester, you must enroll in at least that six credit minimum throughout the course of that entire semester. So a lot of students sometimes will take classes in all three sessions, but for the most part you would have to get to at least six credits in either two of the three sessions or across all three depending on which classes you’re taking.
And then one of the important factors I like to list at the end is all communication regarding billing and financial aid is completed through your Northeastern email address, which you will be provided with once you enter the program. And this is important because sometimes students are managing multiple email addresses at the same time, whether it’s personal or for work, but we are – obviously you’re going to be a graduate student here at Northeastern, so we do all of the communication through that email. It is very easy to forward this email to something you regularly use if you need to.
So we’re going to talk about the types of aid that is available for graduate students first. The main source of financial aid through the FAFSA program is the federal unsubsidized Stafford loan. This loan is – the maximum is $20,500 per academic year, and most graduate students in the online business programs here will qualify for that amount. This loan comes with a fixed interest rate and the loan origination fee that is taken off the top of the loan by the Department of Education. So what this means is that the Department of Ed does charge a small fee to use their loans. So while the gross amount that you receive might be $20,500, the net amount does come in a little lower than that. This loan does accrue interest while you’re in school, however, there is no credit check required to apply. The only requirements for this loan are you need to be a
US citizen or permanent resident, and you need to be enrolled in that six credit minimum like we talked about on the last line.
In addition to this loan, there’s another federal student loan program that graduate students can access and that’s the federal graduate PLUS loan program. This loan can be used to borrow up to you total cost of attendance less your other aid. What that means is if your $20,500 loan does not cover everything that you are looking to have covered, and that was the maximum that you received through the FAFSA, you can apply for this graduate PLUS loan which can help with the costs that go above and beyond that over the course of the academic year. This also has a fixed interest rate and a loan origination fee that is taken off the top by the
Department of Ed, similar to the Stafford loan. Interest accrues while you’re in school.
However, there is a credit check required for this loan. This is not the same as applying for a mortgage or applying for a car loan, but the Department of Education is running a credit check to make sure that the student may not have previous federal loans that are in a delinquent status or something of that effect and just making sure that you do not have any larger credit issues. I mean if it’s something where you’re a little unsure about your credit score or something like that, I would still encourage you to apply for the graduate PLUS loan if it’s something that you’re planning on using to finance your education.
This does require a separate application which is available through the MYNEU student portal. We offer the PDF on our financial aid website as well, and the easiest way to get this done, though, is through MYNEU student portal, it’s a link and it’s done completely electronically and it’s only two pages and very easy to complete.
The current federal interest rates and fees can be found at studentaid.ed.gov. These are rates and fees that adjust once per year. The interest rate is fixed from July 1st through the following June 30th, and the loan origination fee is fixed from October 1st through September 30th the following year. So, those occurring fees can be found on the studentaid.ed.gov website right there.
In addition to federal loans, there are also private student loan lenders that do offer student loans to graduate students as well. There are multiple lenders who all have different terms and fees and these can vary depending on the lender that you decide to use. These terms and fees are becoming more and more comparable with the federal rates, so I would definitely urge you to take a look at the financing options that we provide on the Northeastern website with the link available here. So, on the Northeastern website if you were to just go to our financing screen, we do have a list of commonly used lenders that students at Northeastern will generally use. And a lot of these may line up with some accounts that you may have in other aspects of your life like a car loan or a mortgage or a credit card. So if you already have a relationship with a private lender and this is the route you are looking to go, this might make sense to take a look at prior to figuring out what type of loan you’re going to use to finance your education.
We do also offer the Double Husky Scholarship. The Double Husky Scholarship is a 25 percent tuition discount for students who have a degree from Northeastern already. So if you are a Northeastern alum and you’re looking to come back and do your graduate work at Northeastern as well, and you’re looking at the online business school programs, whether it’s the MBA, the MS in Taxation, or the MS in Finance, you do have the ability to access this Double Husky Scholarship which will allow you to get a 25 percent tuition discount. More information can be found on the Double Husky website of Northeastern, but the gist is if – the thing to remember is the 25 percent discount off of tuition only.
We also offer the monthly payment plan. So the monthly payment plan is something that is administered by a third party called Higher One. The company Higher One administers monthly payment plans for multiple universities as a third party vendor, and this plan is completely separate from using a student loan program. So this isn’t a loan, this is a way for you to break up the payments for the semester over the course of a period of time.
Enrollment in the monthly payment plan can be set up via a checking or savings account. Unfortunately, Higher One does not accept credit cards as a form of payment for the monthly payment plan. These plans come interest free. However, a $35 fee is charged per semester upon enrollment. And some information and deadlines can be found on the Higher One tuition pay website.
One of the things to keep in mind is that this is not a long-term payment plan, so these payment plans offer assistance to break up the costs of an individual semester. So, for example, if you were looking to break up
the fall payments, you would have the ability to break up your fall payments over the course of a fall semester which generally runs from September through December. So it is a way to break up a few payments, especially if you’re only going to be taking one class at a time. It could be an avenue that students may want to take a look at or use in conjunction with another form of payment.
Lastly, for forms of payment and financing, I’d like to mention tuition reimbursement because this can be a big perk depending on your employer’s rules and regulations and what they offer. So there are a couple of different ways that we generally see tuition reimbursement used by a student. The student if they’re getting paid – if the employer is going to be paying Northeastern directly, which is the more rare case, the student must provide Student Financial Services with a written statement of intent to pay by their employer no later than the end of the first week of classes. This is a standard sheet that we can provide to your employer where they fill it out promising to pay regardless of the grade or anything else that the student may have to reach. In the next bullet it does say if there are stipulations associated with the payment agreement, such as a minimum grade requirement, then the student must pay the university first and then they would be using their reimbursement funds to do exactly that, to reimburse themselves.
The other way, the more common, is the tuition reimbursement that’s paid directly to the student. So the student would still be responsible for paying their bill prior to the billing due date. Tuition unfortunately cannot be left unpaid pending a reimbursement at the end of the semester. A lot of the times employers will require the student provide a grade and a certain grade would then trigger the reimbursement and at that point at the end of the semester the student’s bill would definitely have been due at that point. So, again, can’t leave the bill unpaid towards the end of the semester.
But we do have a plan for students who have 100 percent tuition reimbursement with or without a grade requirement and I would recommend reaching out to me for further instructions on that because the students with 100 percent tuition reimbursement we do understand they’re kind of stuck depending on whether it’s a grade or not. We want to make sure they can access that funding source and we do try to help them out. So if you happen to be in a situation where your employer will cover the entire cost of your tuition, but they won’t do it until the end of the semester, reach out to me here in the financial aid office and we can take a look at your individual circumstance.
Speaking of reaching out to me, here is the Student Financial Services contact information. Like I mentioned earlier, our main office is located in Boston, Massachusetts. So if you’re not a local student, obviously the main office may not be as helpful, but if you need to send anything to us or fax, mail, anything like that, our main office is found here on the Northeastern website you can also look up all of our hours and things like that, but we’re going to go over that as well.
The graduate financial aid office has its own phone number, so if you’re looking to reach out to me or anybody else in the graduate financial aid office, we’re located at 617-373-5899. And you can also send a general email at any time to our email address here, it’s email@example.com.
If you’re looking for just billing information or have a question about billing and payment and you’re not someone who may be looking at financial aid, but you’re just looking for questions about your bill, we do have a dedicated line for that as well. That is 617-373-2270 and our billing office can be reached at firstname.lastname@example.org.
Our office hours here in Boston are 8:30 a.m. to 5:00 p.m., so we can be reached via phone or in person if you’re local during those hours. Again, my name is Robert Picariello. I’m the financial aid counselor for all of the graduate programs in the D’Amore-McKim School of Business including all of the online programs. My email address is fairly simple. It’s my first initial dot last name so it’s email@example.com. I can also be reached at the phone number 617-373-5899 here in the grad financial aid office. If I happen to not be the one answering the phones at that time, just feel free to talk to one of our staff or they can get you in touch with me directly. And I thank you for your time.
If you have any questions regarding any of the topics that we went over today, I would encourage you to shoot me an email or give me a call. I’m happy to answer anything, even if you’re not a live student at this time, if you’re still in the application process, or if you are still making personal decisions on what’s the school you’re attending or what kind of financing you’re looking for, I’m happy to answer any questions whether you’re a deposited student or not. So feel free to give me a call, and again, thank you for your time and I look forward to hearing from you.
Angela LaGamba: Welcome to Northeastern University’s online Master of Science in Finance webinar with Professor Steven Kursh on the topic of financing ventures from early stages to exit. My name is Angela and I will be your moderator for today. Professor Kursh is the executive professor of finance at Northeastern University. He develops and teaches courses in finance in the D’Amore-McKim School of Business and Professor Kursh’s present research focuses on crowd funding and other sources of funding for startups and growing ventures, financing and innovation enterprises and intellectual property, including licensing and valuation.
We also have Khurshid, our enrollment advisor, for Northeastern University’s online Master of Science in Finance. His role is to help prospective students through the application and admissions process.
Now you might be wondering what are we going to be covering in today’s webinar? We’re going to be focusing on a couple of key topics. We’ll briefly talk about Northeastern University’s the D’Amore-McKim School of Business and the only Master of Science in Finance with Khurshid . And then Professor Kursh will be discussing financing ventures from early stages to exit. And then we’ll have Khurshid top off with admission requirements and tuition scholarship information.
Throughout the presentation we encourage you to send in questions through the Q&A box, and, again, we will have your questions answered during the dedicated Q&A at the end. Without further ado, I’d like to hand it over to Khurshid to talk a little bit more about Northeastern University and the D’Amore-McKim School of Business. Go ahead, Khurshid.
Khurshid Iqbal: Let me begin by telling you a bit about Northeastern University and the D’Amore-McKim School of Business. Northeastern University was founded in 1898 and the College of Business in 1922. In 2012 we received a generous naming donation from two alum, Richard D’Amore and Alan McKim, in the amount of $60 million; hence the name D’Amore-McKim School of Business. Today the D’Amore-McKim School of Business has a distinguished history and a reputation for excellence in teaching, learning, and research; one which we are very proud of.
Next I would like to discuss a little on our rankings and accreditations. We are accredited by the Association to Advance Collegiate School of Business, otherwise known the AACSB, and by the New England Association of Schools and Colleges. Both represent the most highly regarded accreditation in the United States. We are also very proud of our rankings. US New and World Report ranks Northeastern University’s online graduate business program as 18th in the United States.
So why choose Northeastern University’s online Master of Science in Finance? The program is a highly specialized program and designed for individuals who are wanting to move up the career ladder to senior level roles within finance or business settings. You can complete the program in as little as 16 months. It’s a highly flexible program and designed for working professionals. It can be completed 100 percent online with no mandatory residencies. You also have the option of steering your learning curve either towards the investment track or corporate finance track.
Steven Kursh: I’ll be talking a little bit about one of my research areas and also teaching area, which is financing ventures from early stage to exit. But we’re going to talk a little bit about what’s commonly known in the business as runways. Take a moment to think about the last time you were on a plane and the runway that the pilot he or she had to take off the plane. And as we may know, although we’re not aeronautics engineers, I’m assuming we aren’t, that short runways can cause problems, and you can think about it in the same way with a business. We have a runway and we generally think about how long’s our runway until we reach that stage of cash flow, and what kind of capital sources can we have to help us get from that runway from the start all the way to when our business takes off. Again, thinking about that metaphor, the plane.
Now in my work I like to think about the stages you have in a business as sort of falling into four related stages. Now these are not in simple little boxes that aren’t connected to one another, but instead just like the lives we all have led. There’s our birth, our childhood stages, and suddenly we’re out of lessons, and then even more suddenly we’re teenagers, and then we’re adults.
Well, the same process happens with businesses that ___ the flow process from the initial startup of the company all the way through to adulthood, and then the liquidity and the exit. Now that period can be relatively short, literally a matter of a year or two years, or it could be relatively long, several years. In one of the ventures that I founded, it took us about five years – it took us about four years until senior management, IED, figured out how to make the business successful. And then by the fifth year we were negotiating with potential purchasers of the company, and by the sixth year we had our exit opportunity.
Okay, now what are the key take-aways from today’s presentation? Well, our key take-aways are first and most importantly to provide you with a quick overview of financing sources, and tied in with that is how financing has changed. Literally, five years ago – three years ago – the way in which we financed businesses through these various stages of startup, adolescent growth, and exit; very different then they are now.
There are a variety of reasons for that, which we’ll explore today.
Second key and bullet point, as you can see, is money just isn’t money, and that’s kind of a strange statement, but the meaning of it is that how you get sources of money really does matter. It matters if you move to later stages of the business. It matters in terms of the liquidity event, and that’s also going to be a topic that we talk about.
Third topic is something that to me is probably the most important topic of a key take-away here today, and that is match your need and maturity of funding. And this is critical – I’m going to repeat it again – match your need and maturity of funding. You may be thinking, “What in the world is he talking about?” Here’s what I’m talking about. Often times when you interact with people who start a business or are thinking about starting a company, they’re often talk with venture capitalists. Well, that’s probably a very bad idea, with some exceptions, but it’s probably a very bad idea. Now it depends on the business. If you’re in it’s a different situation. Say, for example, technology or retail or any other field.
But you need to think about where you search for money and that will often match with the maturity of your business. And we’re back again to the runway. If you’re spending your valuable time looking for money in the wrong places, then you are not going to succeed. So you need to be targeting, you need to, again, match your needs with maturity and your funding sources.
We’ll talk about that today. I cover a lot of this in a course I teach, so today’s kind of an overview. But thinking about where to get money and how to get it, again, match those needs.
Fourth bullet point. I am fortunate to live in an area where you have an opportunity to interact with a variety of people who have been involved with startup ventures and growing businesses, businesses that are pre-liquidity. And many times you get the impression that they think that getting funding means that they’re successful and it’s not. Getting funding from a variety of sources, whether it’s angels, whether it’s the three F’s, which we’ll talk about, whether it’s institutional money, like venture capital, private equity. Getting funding is not a successful company; it is one step along the way. It may often be an important enabler but it does not mean having a successful company.
Next bullet point. While often forgotten by people with businesses, and that is raising money is a full-time job. It’s very tough to run a business, be a partner in a business that’s growing, and also spending time raising money. It really is a full-time job. On the other hand, the vast majority of us don’t have the time, don’t have the resources, financial and otherwise, to have someone on staff to manage a business when you could be out raising money. So what it officially means is that it takes you really working almost two jobs. There’s the day-to-day running of your business and there is the time day-to-day that you have to look for and constantly raise money. And this is continual as you move down that runway. It’s not simply just your early stage financing, it’s all the way through.
Now that I raise here, another point, which is focus on getting paying customers or even just customers. There’s a wonderful guy involved with helping businesses grow, his name is Steve. He teaches at Stanford in California. He’s written some wonderful books, I highly recommend them. And he notes that particularly when you’re selling to enterprises that it is valuable just to go talk to people you know at the enterprise and see if they would take your product for free. Just, “Hey, would you take my product?” And it’s a great test for the viability of your ideas and your products, and/or your services because if they say, no, then what in the world would you ever do in terms of actually having a business that makes money.
So the task is just to see if people will buy, and also to learn because this is also a mistake that many people make. They sit behind their desk, they do a lot of spreadsheet models, they do “a business plan ” rather than what’s most important, which is getting paying customers because no matter how smart you are, no matter how much time and effort you spend with your partners in the business, you really don’t understand what people want until you’re out in the market talking to customers. That’s also one of the benefits of crowd sourcing, which we’ll talk about in a little bit.
The other key bullet point take-away is that the only valuation that matters is at the time of the liquidity event. People often get caught up with various stages of financing and how the company’s valued and, quite frankly, the only one that really matters is at the end because that’s when the money goes into your back pocket.
And then finally, the only equity that matters is yours. A good example of this is Mark Zuckerberg at Facebook who was Mr. Zuckerberg for a variety of reasons was very smart in preserving his equity interests throughout the process of Facebook funding as you may have seen on social network. Some of it is said to be true, some if it is said not to be true. But the point is that he held onto a lot of his equity.
Those people, the runway kept getting extended, they kept giving up equity, and when the company went public, they didn’t walk away with a lot of money. Obliviously they’re successful, they’re millionaires at least on paper. But in terms of potential success, they didn’t have much equity at the end. So the only equity that matters is yours.
All right, those are our take-aways. Now let’s talk a little bit about financing options, and this is at a high level. I’m going to talk a little bit about old ways. Now when we would start and grow businesses, we’d either previously use what we would call equity and non-equity sources; equity being, of course, stock, and non-equity often being debt or other sources. And our primary sources in the past were the three F’s. Now, if this was a class, I would call on people cold and say what’s one of three F’s. But I’ll kind of get you in the secret here.
The three F’s are what we used to call, and still call, friends, family, and fools. Those are the people who decide to invest in our businesses because they like us, because they know us, because we’re friends, because they’re the family, or because they’re foolish enough to do so.
Tied in with that is boot-strapping. Now boot-strapping is a primary way that companies get started. It used to be that debt on credit cards was a key factor in starting up businesses. That’s diminished somewhat because the federal government has decided to make it harder for the banks to issue credit cards. So the days of credit cards being a great source have diminished.
Home equity loans, are also a good source of self-financing, accounts payable, and our customers, including the government. Accounts payable, if you think about a balance sheet, we can push our suppliers, and use them as a financing source pay for what we use in our products.
Our customers – we need customers to pre-pay. This is particularly helpful in businesses where we have high margins. Getting your customers to pre-pay at an incredible discount but you the capital and you move on. And the government is also very good at startup from the government, although you do have some IP issues is you work for the government, which is beyond the scope of this discussion.
Some other sources in terms of non-equity debt financing. We can often get banks and other intermediaries, like the government. Maybe customers can lend us money. Equity sources. Again, we’re thinking about stock.
It could be one of the three F’s if we want equity. There are the angels. Venture capital certainly venture capital, private equity. And potentially IPOs. Now here under equity sources we’re talking about the entire life cycle of the business, the stages and each of these potential sources of capital could have a role in the process. Let’s move to our next slide.
And now the world has changed. I noted earlier that in the last several years that the world has changed and it really has changed. We have a lot of other sources of capital. Under non-equity we’ve got crowd sourcing with rewards. Many of us may be familiar with Kickstarter, Indigo. Those are companies that provide rewards. Say, for example, a t-shirt or something special from the product line. And there have been several companies that have raised a lot of money. You might be familiar with, for example, with this reward based crowd sourcing. That’s known as token crowd sourcing. We also have crowd sourcing with debt, which is that you can raise debt through the crowd.
Now crowd sourcing has also changed – and I want to talk about this from the equity side in a moment – but there are other sources of the non-equity financing called the EB-5, which is a program of the federal government established that allows investors from abroad to invest in companies. This is particularly true in real estate and large developments. In exchange for those developments create new jobs. The people who invest the money are on their way in terms of getting a green card and potentially citizenship here. Now similar programs exist in other countries.
Another source of non-equity, something called LOBs, which are when people for example – someone leaves the company and here she’s got money in a retirement account. You can actually borrow from that retirement account for your business. LOBs are often used by companies that sell franchises, and people then draw from their retirement accounts. There are good and bad parts about it as well. Again, beyond today’s discussion. Just trying to give you a quick overview. And then there are other sources of non-equity funding as well. But I’ve listed some of the big ones. This is, again, the new world of financing.
In addition to crowdsourcing where you can sell equity, and this is really important. The regulations went into effect really just this summer, and now we can go to use the internet and we can raise money and sell equity. Now there are a lot of downsides to this. How do you value the company? How do you sell the stock? What happens along the way, but there are several intermediaries in the market, you can Google them, and you can raise capital now through crowdsourcing tied in with something called regulation A+, which ties into what the Securities and Exchange Commission has done and we now have a source of capital.
There was a wonderful article in the Wall Street Journal the other day about this, and it’s quite frankly been a slow takeoff, which is to be expected. It’s going to take a while until people get comfortable with this whole idea of literally selling their stock in a public market through crowdsourcing. But we’re going to see more growth of these kinds of options. So, again, back to that runway. The ways in which we finance businesses have changed, it creates a whole slew of new opportunities. We can grow the business. We can grow the financing of the business and it’s really neat to see this taking place.
I’ll add just as a sidebar that crowdsourcing is also very helpful in terms of verifying your product, i.e. , do I have a product or service that has viability in the market? Well, let me test it through the crowd. That’s one of the reasons why the whole concept of market research for products and services has really changed. Instead getting out there, seeing what people are saying, see what works, see what doesn’t work, and inevitably they’re stuck if it doesn’t work, and you learn by getting out into the market.
Okay, let’s move on. And now we’re on to our second key bullet point: Money just isn’t money. Again, matching the maturity of the lifecycle of your business with financing sources. As I noted earlier, you do not have a seamless transition from one financing stage, say birth to childhood to adolescence, but instead it is transitional.
Now, what does all this mean? For those of you with a finance background, I want you to think about simply investing in United States treasury bills. Now we know that investing in treasury bills is essentially risk free. But we also know that investing in treasury bills doesn’t give us much in a way of return. Well, in effect, everything that we do when we raise funding for our business has to tie in to that key point. You want to show to your prospective investors that you aren’t too risky, and, yes, yes, we know in finance that higher risk means higher returns, but the reality is for investors they want high returns without high risk.
So we have to think about ways to reduce the risk for investors. And, again, think about your business in the lifecycle. Now what does this mean? Well, again, matching your needs to maturity and now I’m going to reference Paul Graham, who’s one of the founders of Y Combinator, one of the best incubators in the country. They’ve been extremely successful. You look them up online and there are several companies that have incubated and been very, very successful. As I recall while sitting here, my memory always isn’t accurate, I think Airbnb was one of theirs.
But Graham argues you need low gears with your startup and high gears when you’re moving. Think about like a bicycle riding up a hill or riding down a hill, riding on a flat surface. And that’s how you want to match your gears, i.e., your funding sources to your needs. You used too much money too early – and I’ve seen this happen to a lot of businesses – you waste resources and it hurts your business moving forward.
In fact, as an aside, if you’re familiar with kind of the culture of Silicon Valley, one of the indicators of how a business is doing is how are their orders for stuff like pool tables, ping-pong tables, and other kinds of recreational activities, beanbag chairs people can sit on. And do they need more, do they need fewer, what’s going on? Because that can be a sign of how well the business is doing. So, be careful, too much money too early can be dangerous. You want to be lean and mean.
How mature is your business? Well, how do we really know how we are? Where are we in the lifecycle, and here you can ask yourself some quick questions like first of all, let’s look at the income statement. Do you really understand what your profits are? Do you understand if the business is cash flow positive? If not, why not? What about your revenue sources? When, how much, and what risk is attached to it?
Now, one of the interesting things I noted earlier today, a lot of people waste time building up financial models with Excel. And one of the reasons most importantly are either missing the timeline talking to customers and learning what customers really need. But second is that you don’t really know your business model. You don’t really know your primary sources of high margin and products or services. You don’t really know what your primary expenses are. So that’s part of understanding the maturity of your business. Clearly as the business gets mature over time, you have a better sense of those numbers and you can more easily model them. But early stages, birth, adolescence, childhood.
Again, think about yourself. Did you really know where you were when you were a teenager where you would be today as an adult? Chances are probably not. Same thing for a business because businesses really are twists and turns and responding to market opportunities, and where we start is often different than where we end. A good example is in companies like Google.
All right, we ask questions about how we can scale our business. What are our margin pitfalls? What are the risks associated with revenue margins and operating expenses? We’re also going to think about assets and collateral that can be used to secure debt. Essentially we’re testing our concept and if you can really map out on a spreadsheet where you are in business, then the chances are your business is pretty mature because you have a sense of those numbers.
So what does this mean? Well, it means, again, understanding, looking at a self-evaluation, what year are you in as a company, and then understanding that you focus on seeking funding accordingly. Again, you focus on what can you do to reduce risk? What can you do to improve viability? That extends your runway. And, incidentally, easy to say, harder to do, but we match our funding sources with our expectations and the maturity of the business. And it all gets down to what’s most important and that is customers, probably paying customers, and that shows you have a pretty good understanding of your market.
Back to the Facebook example. One of the great successes of Facebook – one of the reasons it was really easy for them to raise capital is because they had such a tremendous growth of revenue of customers. They hadn’t monetized the customers yet in terms of revenue.
So let’s summarize this. We have stages of venture financing the old and new ways. You can see here walking across the columns on the far left side of the stage of your business the range and your investors. You can see here a stage. I talked about this from a financing source going down that first column. Seed startup, your development, initial launch. Your expansion, which is a series B financing and your rate of maturity financing called series C.
So note when this happens. So for example, when you want to expand and you’re looking for capital to expand and on my second column, third row, with expansion you’ve got your management team largely in place, you’re ready to scale, you understand support, you understand your market reach. That’s quite different than under seed startup where you basically have your own idea, concept, and your prototype.
Moving across the line, moving across the row, look under investors. Our first row, last column on the right, we’re looking for money from our 3X, generally about $100,000 and then maybe around $1,000 from the angel investors.
Over in the far bottom right corner, so on the southeast corner of this slide, and you can see again financing. Note here that 48 percent of all venture capital investment according to a recent study is made at this stage. So essentially half of all venture capital investment is made at series C. And that’s kind of a sign that if you’re looking for a seed startup, probably venture capital may not be a good source for you, although there are firms that do focus in seed startup. The point, again, I’m getting at is not to beat up on VC firms, but instead understand and manage your needs with the maturity of your business, and accordingly the financing sources.
So let’s talk about this runway from startup to positive cash flow and returns to investors. And here what we see is that birth and childhood, again, in customers – customers pay even better. We have multiple needs of capital. A statement that has been attributed to Bill Gates is first you demo, second you sell, and third you build. And, again, the point being it’s really hard to define your product perfectly well when you’re in the birth and childhood stages.
Again, this is a mistake a lot of people make with startups. They spend too much time in getting their product just perfect rather than getting their product out into the market and listening to feedback from customers. One of the reasons that people do that is because quite frankly they’re insecure about going out and talking to customers. They’re insecure about having customers say their product sucks. They’re insecure about having a product that doesn’t work. They’re insecure about their knowledge. They’re insecure about a lot of stuff. The only way you get a business that works is by having products and services that people want and that people are prepared to pay for.
Again, last line you see on that slide, your key objective is validating your product and service at this early stage of birth and childhood. You want to make sure people are even interested in your product or service.
What happens after that? Well, we’re now into childhood; we’re further down the runway. Where do you get sources of funding? You can see credit cards and equity loans, LOBs, maybe a working partner, i.e., maybe in a relationship with someone and he or she works during the day so you can spend time on working on growing the business. Often said also you might have a regular job. You work 9:00 to 5:00 and then you work on your business from 5:00 to 9:00. It’s also known as boot-strapping.
Now that’s hard to do, I’ll add. It’s very hard to do. But the benefit is you’re closer to the business, the business remains yours, and you are out there in the market. The downside, of course, is that there’s only so much you can do. You miss the opportunity of potentially of having a huge or really successful business because you’re focusing small. So, again, it really depends on what kind of business you want to have, which, again, is beyond the scope of today’s discussion.
Another thing we often see, another factor is with childhood is people starting off offering consulting services and then they seem to get products created from those consulting services. Why? Because with a product you can gain scale. Customers prepay, suppliers, birth and childhood. These are our sources of funding. You can also think about incubators and accelerators do some crowdsourcing, test viability, and again proof of your business concept, your birth and childhood.
Well, now we’re moving to the next stage, adolescent and teenage period. Now, essentially, time to look through your financial statements and your business. You’re further along that runway, further along in life. So you look through your income statement and balance sheet. How consistent and valid are your revenue streams? What about your expenses, your margins, your business? For example, do you have intellectual property?
A good question to ask yourself at this stage in a business is if you had more capital, how would you spend it, and could you justify that spending? For example, you’re at the teenage period, if we had more capital we would expand internationally or we would expand into adjacent products, or we would create more IP that would add – these are the kind of questions that you ask yourself and other members of your management team, and you have a sense of where you’d spend that money. If you’re not really sure, then that’s a sign that you’re not an adolescent teenager, you’re still in childhood. Not bad or good, it just means you have to refocus your issues.
So critical question. You can see the bottom bullet point, second from the bottom, what is your business model really at this stage and also teenage period. You should have a pretty good sense of your business model in a sense of scaling opportunities, my customers, geography, pricing, and profitability.
And you can see my bottom comment, which is contrary to business plan 101 happy talk. If anyone’s ever read business plans or written business plans, they know what I mean by happy talk. And if you can’t answer these questions, then the reality is cut the happy talk, cut that we will dominate, cut the mission and ____ statement nonsense, and you really focus on let’s go back, let’s get those customers, let’s understand what customers want, and let’s get into the market. And it may well be that you have a product or service that customers don’t want. That’s okay, that’s fine. You learned, you move on, you find what customers want. I can’t tell you in my businesses how often we thought that we were so brilliant and we had such great ideas, but then until we got into the market and we got reality, that’s when we understood what our customers really wanted.
Okay, so let’s do a quick summary. Funding sources, adolescent and teenage period. This is the first of some slides on this topic. How do you finance growth? Well, customers, you have customers that come through even better. Particularly with technology focused businesses, we can be set up in a way that our margins are so high, we may not need very much external sources of capital. We can finance out of cash flow. It’s clearly not true with life sciences businesses, it’s clearly not true with heavy asset businesses. Perhaps we have some consulting services, but the consulting services compliment the sales of our products because most customers don’t just simply want a product. They want potentially some customization to it.
We now have the three F’s but we’re potentially talking with angels, which are a more formal source of capital. And of course crowdsourcing.
One key thing to keep in mind is acronym OPM, which stands for if anyone knows. If not, I’ll tell you other peoples’ money. Whenever possible we want to you other people’s money for working capital. What does that mean? It means we push our suppliers. It means we collect money early from our customers. Just like, for example, if you ever bought a Dell computer, you pay for it, Dell gets that money, Dell invests that money, and Dell doesn’t pay its suppliers until we have working capital. Joint partnerships getting people to invest in large organizations. Angels, seed incubators, private equity, VC firms, we are licensing the existing assets of when our engine, which is a developer of engines when our earliest biotech companies called Epogen in order to raise capital and for other business reasons, they sold the rights to Epogen to Johnson and Johnson. They may very well regret that decision today, but enabled them to license existing assets to a source of capital for business. Epogen is now a publicly traded company and has created some really wonderful products.
We also think about short-term debt financing. At this stage we finally are at the point where they might be interested because we have some collateral, although that might often have to be personal collateral, like co-signing loans, and of course crowdsourcing type of financing.
Continuing, we’re now at the adulthood stage. So we began our discussion talking about childhood. We went through birth and then childhood, and then adolescent, teenager, we’re now at adulthood. We’re moving down that runway. Time again to ask ourselves questions. How consistent are our revenue streams, expenses, margins? Do you really know your business opportunities? Do you understand what’s scaled and what hasn’t scaled?
Do you understand the pricing of efficiency?
So, again, the bottom line here is you see it’s the same questions as before but our answers are different because we have the data, we have an understanding of our goods. We can now really in much greater depth manage our business through the numbers. We are a mature business now for all good reasons and bad reasons. We can draw on that experience. No more happy talk. No more hand waving, this business plan, this Excel model has got data that is viable and data that reflects our knowledge of the market. Now recognize again markets change very quickly. They could change at any time.
But nevertheless we are down the runway, and the kinds of sources of capitals we seek are different now. Why are they different? Because you can offer to your sources of capital when you’ve got the data, i.e., we’re back to that risk ____. People can feel comfortable as investors. Institutional money can come in potentially. The reality is that you’ve got nice recurring revenue streams. You’ve got a business that’s viable and suddenly that’s going to get a lot of interest from investors.
So what about funding sources? Back again, customers – customers who pay even better. This is just like before, getting back to this issue of having customers. Other people’s money. Well, we can start requiring prepayments from customers. We can start requiring potential investments. Of course equity funding by A+, that’s crowdsourcing, talked about that briefly. Literally, we could spend the whole course on crowdsource funding because it is such a rapidly growing source of funding for businesses. Long-term debt financing. Maybe we sell some assets, real estate and short-term debt financing.
So now what we’re doing is we have a challenge. When we got this business we were in adulthood. Now it’s time to think about other future products and services. Maybe we can create opportunities for 1iquidity events. That’s commonly known as putting lipstick on the pig, i.e., getting that pig out there and lipstick on it, and maybe we can sell the whole business and we have a liquidity event. And isn’t that just wonderful? There’s nothing like a liquidity event where suddenly you’ve got the money in your back pocket from all your hard work. What a great place to be.
So a quick summary. Our funding sources, liquidity events and exits stage, we can do a private sale, which is a sale of business, which is the primary liquidity event for most businesses. Businesses that have liquidity events, and most businesses do not, is through a private sale to another party. It’s very rare that companies go public. Perhaps you can raise long-term debt. You’ve got a lot of recurring cash flows coming in from the business. Perhaps what we can do here is borrow money and you use that borrowed money as a way to pull out some of our capital. And, again, beyond the scope of this discussion but it’s a tool that’s often used. So there’s IPO/PIPO, which is a private IPO, selling it, replacement of stock. A traditional IPO.
So what matters to buyers? Again, you’re looking at how do I position my company? I’m looking for the liquidity event. Maybe your buyers are interested in cash flows, maybe buyers want your intellectual property. Maybe buyers want your other assets. Maybe your development team, maybe your location. But that’s an understanding of who you are selling your business to and what assets they’re interested in.
Angela LaGamba: What we’d like to do now is open up for our dedicated Q&A session for the webinar. We encourage you to continue sending in your questions. Why don’t we start with you Khurshid while we’re waiting for the audience to send in questions? Could you talk a little bit about upcoming application deadlines and class start dates?
Khurshid Iqbal: Yes, definitely, Angela. We are now recruiting for our upcoming start with classes starting on October 10th and a hard deadline to be September 19th. And after that it’s going to be for Fall three start, which will be starting on November 14th and the deadline for that particular start is going to be October 24th.
Angela LaGamba: Professor Kursh, I was wondering if you could talk a little bit about the courses that you currently teach in the online Master of Science in Finance program and just give prospective students a very high level understanding of the courses that you teach and how do students usually participate in those courses. Go ahead, Professor.
Steven Kursh: Sure, delighted to. Thank you for the question. The first is a course that reflects on a course that we also teach in my classroom environment called Corporate Financial Strategy. That course is focused on a combination of finance and strategy. Some people really like the course because it ties together strategic elements with finance. Some people really don’t like the course, quite frankly, because it gets all of us thinking about how do companies execute, develop strategies to grow corporate value and someone who thinks that one grows corporate value by doing complex mathematics, that course is – they get a little disappointed in the course, but the reality is the complex mathematics is pretty much limited to hedge funds and financial trading, which we’ll cover in other classes.
We deal with issues, again, thinking about at a C-level in an organization how you build corporate value. It’s a wonderful course. I’ve enjoyed developing the materials in the course. We draw from a lot of consulting firm work. We do a lot of applied finance, and again, it’s applied finance. So we do get into applying finance with different kinds of financial models. I emphasize we put them in the context of corporate strategies, so that’s a great course. It seems it has been well received except, again, with the exception of people that think that all finance is nothing but equations. And it’s financing entrepreneurial ventures, particularly — high tech entrepreneurial ventures.
In that course we get into some of what we discussed today, but we also get into a lot of other issues; the concept of real options and financing businesses. Something called left-hand side balance sheet financing.
Again, if we think about a balance sheet and typical financing on the right-hand side with equity and debt, there’s also left-hand side balance sheet financing. Part of that can be also what we talked about today.
We discuss a variety of other issues in terms of what are some of the challenges in financing ventures. People like the course, particularly people who are thinking about eventually starting their own businesses or getting into relationships with people who startup with growing concerns.
We also have many people who are at large corporations, and as I think many of us are aware, large corporations are continually challenged by their investors, whether public company or private, to grow revenue. And since so much of what most businesses do is now in what are relatively mature markets, one of the challenges you see in multiple industries is how to innovate to grow revenue, to grow businesses, and of course you can also grow through mergers and acquisitions. So that’s a topic that’s beyond the scope of my class. But as we think about corporations and how they innovate, how they come up with new products and services. So a lot of, if you will, pressure from the investors for those companies. The course then also is of help to those people in large organizations challenged by their senior management to grow revenue. And those are the two courses to grow and expand our horizons, and of course interact with me and other students so please think about the program and, again, if there’s anything I can do to help you, contact the folks at D’Amore. Thanks, Angela.
Angela LaGamba: Great, thank you very much, Professor, and thank you to Khurshid for walking us through this topic and all explain a little bit more about the online Master of Science in Finance program. That is all the time that we have for today. If you do have any questions, please feel free to contact Khurshid. We’ve included his phone number and email, and also a link if you’d like to schedule an appointment with him. Again, thank you to everyone for participating in today’s session. This concludes our webinar and have a wonderful day everyone.
Angela LaGamba: Welcome to Northeastern University’s online Master of Science in Finance webinar with Professor Gary Porter on the topic of Portfolio Management. My name is Angela and I’ll be your host and moderator for today. Before we begin we’d like to go through some logistics for this presentation and address some commonly asked questions. All participants are in listen-only mode. You can listen to the audio through your computer speakers. To ask questions you can type them into the Q&A box and hit submit and we’ll be addressing your questions during our Q&A session. This event is being recorded so it can also be viewed at a future time.
All right, so you might be wondering who your presenters are for today. We have Professor Gary Porter and Khurshid Iqbal. Professor Porter is the Assistant Teaching Professor of Finance at Northeastern University’s D’Amore-McKim School of Business. He holds a PhD and his research interests include efficient markets and mutual fund performance and metrics, closed end funds and stock valuations.
We also have Khurshid who is the enrollment advisor for Northeastern University’s online Master of Science in Finance and his role is to help prospective students through the application and admissions process.
Let’s go through the agenda for today’s webinar. So we’re going to have Khurshid talk to us a little bit about Northeastern University and the online Master of Science in Finance. Professor Porter is going to be discussing portfolio management and then we’re going to wrap up with some additional information around admissions requirements, tuition, and scholarships. And as I mentioned earlier, I do encourage you to send in your questions through the Q&A box as we do have a dedicated Q&A at the end of the webinar. All right, without further ado, I’m going to hand it over to Khurshid to talk to us about Northeastern University and D’Amore-McKim School of Business. Go ahead, Khurshid.
Khurshid Iqbal: Let me begin by telling you a bit about Northeastern University and the D’Amore-McKim School of Business. Northeastern University was founded in 1898 and the College of Business in 1922. In 2012 we received a generous naming donation from two alum, Richard D’Amore and Alan McKim, in the amount of $60 million; hence the name D’Amore-McKim School of Business. Today the D’Amore-McKim School of Business has a distinguished history and a reputation for excellence in teaching, learning, and research; one which we are very proud of.
Next I would like to discuss our rankings and accreditations. We are accredited by the Association to Advance Collegiate School of Business, otherwise known the AACSB, and by the New England Association of Schools and
Colleges; both of which represent the most highly regarded accreditation in the United States. We are also very proud of our rankings. US New and World Report ranks Northeastern University’s online graduate business school program as 18th in the United States, in the past online graduate business programs excluding MBA’s in the category of 2016.
So why choose Northeastern University’s online Master of Science in Finance program? The Master of Science in Finance program is a highly specialized program and it is designed for individuals wanting to move up the career ladder to senior level roles within finance or business settings. You can complete the program in as little as 16 months. It’s a highly flexible program and designed for working professionals. It can be completed 100 percent online with no mandatory residencies. You also have the option of steering your learning curve either towards the investment track or corporate finance track.
Gary Porter: I would like to briefly explain the online portfolio management class that I’m the principle professor for every summer; I’ve done it the last two summers. And then after that I thought I would talk about a study I did several years ago that may be a little different than what you’re used to when it comes to your thoughts about portfolio management.
So in the class that we teach here at the School of Business, it’s an intense five-week class. Very, very dense material and we start with a week of reviewing statistics and client objectives. And client objectives are probably something that you haven’t seen in an introductory investments class and really is what the class is all about. It’s about determining the risk level of your clients, determining their needs, their objectives, and then working with them. So we start right off the bat with the practice interviews and discussions and assignments. I have an instructor who helps me who you would meet with every week if you were to take this class. There are weekly assignments and there’s a semester-long, five-week long project. There are exams associated with it, but the assignments and the projects are pretty intense and we get some good response out of them.
The second week we do a little more review from your finance and investment classes where we talk about measuring risk and how they apply to individual portfolios. We look at historical performance and try to uncover any strategies that appeared in the past that you might take advantage of when working for you client. But we also talk a lot about efficient markets and the efficient market hypothesis. It’s always a caution when you’re dealing with active management, which this is all about.
Then in week three we delve into those possible strategies that you might use for your clients, and we critique them. And I can tell you that one of the critiques that we’ve been talking about lately, that you may have been reading about, is the rapid speed in technology, the speed of information, and as you probably know, information is what’s necessary in choosing the correct stocks, choosing portfolios, and we talk a lot about the speed with which strategies have been coming and going. And the difficulty that active portfolio managers have in delivering alpha, you may have heard that term, and in doing well.
In week four we talk about performance measurement and we go through a couple strategies there, also considering transaction costs and tax considerations for your client. And then finally week five we talk about bonds and alternative management strategies.
And just a word about bonds – this is something that I’ve been talking with my students about recently. We’re in sort unprecedented territory when it comes to bonds. And so a lot of the discussion is cautionary. As you know, when yields go up, bond prices go down or when people leave bonds in favor or stocks or other alternatives, the yields go up. And so holding bond portfolios has probably become riskier than it’s been in a long, long time. So we talk about strategies for managing that and for navigating that landscape.
And I’ll be happy to handle any questions if you’re writing them up about the class to the best of my ability. I can tell you that I meet with everybody once a week to answer any questions or explore any issues that people have or expound on the concepts and the theories, which I love to do.
And so now for something completely different. I for many years would walk into a classroom and talk about the Wall Street Journal’s investment dartboard contest. It’s always good to talk about in an investments class. And that is the title of the paper I wrote. I just checked and you can download that from Google Scholar. I believe – unless I had something special going on in my computer, I believe it’s free to you. And what the Wall Street Journal did starting in 1990 was to pit professional stock pickers against Wall Street Journal’s staff members throwing darts at the pages of the Wall Street Journal. And for those of you who are younger, in 1990 there were a lot of pages of stock returns for the Wall Street Journal. That was pre-internet or at least pre-proliferation of the internet. So there are actual pages you can throw darts at. And then every six months they would measure the performance of the portfolio the pros picked and measure the portfolio returns of the portfolio chosen by darts, and they’d compare both of those to the Dow Jones Industrial Average.
And I had some issues with the way they were measuring performance when they started reporting performance over a long period of time and sort of bided my time and was able to present the students with some insights in that. And then when they announced that the contest was over, that they were going to be ending, I thought, “Good, this is the perfect chance for me to properly measure the performance,” because after it ended the Journal reported that based on average returns, the pros – the stock picking pros – beat the Dow Jones Industrial Average and the portfolio formed by darts. And I was pretty sure that might not be the case. I wasn’t sure that it wasn’t the case, but I was sure that it might not be. And I don’t have it on the slide but I’ll give you an example of one of the problem of using average returns that I think most people don’t think about.
Suppose for a moment you have an investment worth $100. And in one year it drops to $50. Well, you’ve lost 50 percent, haven’t you? So let’s now assume that in the next year you make that loss back and you have $100 again. When you return next year it is 100 percent; you’ve double your money. So your average return over those two years is 25 percent, a positive 25 percent. Well, as you know, you started with $100. You had $100 at the end. Where was that return? So one of the problems with using average returns, especially the more volatile in the return series, is that it grossly overstates both on the upside and on the downside; the actual change in wealth of either the security or your portfolio. So this particular flaw, and there were a couple of others that you could see in the paper, was the reason for me to do the study.
So here’s what I did as a way to try and determine which of these particular participants was the best. I invested equal amounts in each of the stocks picked by the pros. We held them for six months as the Journal instructed and then sold them. So I included transaction costs, but no tax consideration because I assume the investor held the portfolio in a tax deferred account. I also invested $1 in each stock randomly picked by the darts, and unlike the Journal that sold those stocks at the end of six months, if this is going to be a test of the efficient market hypothesis , which basically posits that a diversified portfolio over a long period of time, or a buy and hold portfolio is likely to beat an actively managed one. If that’s the purpose of the contest, then you should hold on to those randomly chosen stocks, which I did. And the only way those stocks left the portfolio was either they were acquired by another company, they were merged or they went out of business, and there actually were several that did.
So we’re buying and selling what the pros suggest, smart people, six months, and we’re buying and holding the randomly chosen securities. And we also, to make it realistic, invested a dollar in each – a dollar in the Vanguard 500 index fund. So we’ve got equal amounts of money going in each one of these participants over a 13 year period. What do you think happened?
The terminal value created by the pros – now remember, we were only investing a dollar in each contest and each stock. The terminal value was a little over $1,000 after commissions. The terminal value of the portfolio chosen by the darts was 25 percent higher, $1,368. Both of them beat the Vanguard 500, which I found interesting. Now if you go into the paper you’ll see – to make this really interesting for the readers, rather than having results come out every six months, the journal ran six separate contests staggered by one month. So every month I can go in to the classroom and say here’s the results of the latest six month contest by the Journal and the numbers I’m showing you here are the results of investing in every possible contest.
So if you were buying those stocks selected by the pros or buying those selected by the random – by the darts every week, this is how you would have done.
Now why did these portfolios beat the S&P 500? Well, many of you are probably too young to remember, but there was a bear market. There was a collapse of the tech bubble in 2000, and that bear market lasted a couple years. And the values in the S&P 500, or that index, was driven largely by very large tech stocks at the time. So the pros in the down market were able to choose defensive stocks and they were able to move away from bullish stocks that they hadn’t been in before and in defensive stocks. Then, of course, the random portfolio was still with a lot of small stocks, so they didn’t have the risk of being in control by the large stocks that were in the S&P 500 that were driving it down.
So what I did was I said let’s look at that bear market and see how the pros did. Two hundred and fifty-four dollars, remember we were investing a dollar at a time in each stock. That was determined the value to achieve by the pros, and only $54 for the S&P 500. So those large cap stocks in the S&P 500 really drove that index down, and the pros were able to avoid those losses.
And that’s really consistent with just about every other piece of research that’s done on active management, and that is that it serves you well to have an active manager in down markets. Unfortunately, what we now know is that in up markets, or bullish markets, we see that every year fewer and fewer pros, that is a smaller and smaller percentage of active management beats their index or the major indexes, and so that’s why we’ve seen a move toward passive investing mode. I’ll direct you to some recent stories on that in both Barron’s and the Wall Street Journal about the value of passive investing and the increased participation by individuals and also by financial advisors are putting their money in passively managed portfolios, which for a portfolio manager, active managers, is a challenge. And of course we’ll talk about that in our classes.
Angela LaGamba: What we’re going to do now is open up our Q&A session. So to our audience, if you have any questions please continue to send them in. What I’d like to do now is start with one of our audience members. Professor, one of our audience members wanted to know what key skills do portfolio managers need to beat the stock market?
Gary Porter: To beat the stock market, key skills? That’s an interesting question. What we teach mainly is how to survive. I’d almost say that portfolio management is a mix of survival skills – that is not doing the wrong thing, learning about discipline, selecting strategies but also hedging. Yeah, boy, believe me – not to be flippant, but if I knew the key skills to beating the stock market consistently, I don’t know that I’d be sitting here. I mean, it’s nice but, no, I think by virtue of the fact that most professional portfolio – fund managers can’t beat the market. I can’t say it’s because they lack the proper skills. I think they’re all skilled. The market is not – well, I’ll tell you what I tell my students.
We apply a lot of math to this, but this is not physics. We don’t have relationships and action and reaction in the financial markets that’s precise. And so gathering information is important, putting together good models is important, but models can fail miserable. I’ll go back to my initial suggestion is whether you’re going to be an advisor or a portfolio manager. It’s about survival and about not doing the wrong thing.
Angela LaGamba: And the next question that we have is for you, Professor. This is in regards to your portfolio management discussion earlier on. It’s, “How can the pros improve their chances in the stock selections for their portfolio beyond what happened in the dartboard study results?”
Gary Porter: Yeah, that’s an interesting question, and I want to go back and add an addendum to the first question, which probably applies to this one, too, which is the best thing you can do as a portfolio manager is to put yourself in a position where you can take advantage of opportunities. So if you’re reading what Cain’s referred to as the tea leaves ___ then you put your money in the best place for opportunity. Then you stand the best chance.
As far as the dart board contest goes, one of the criticisms of course that I had of the study was that the Journal didn’t provide any ability to do, we didn’t know how many advisors or stock pickers in the middle of the six month period said, wait, wait, sell that stock I told you to buy. So in that regard we followed a very strict – the experts said this is the best stock for the next six months. We held it for six months and sold it. So in that regard there was no way to go back and regress that or address that situation.
Other than that, these were all professional stock pickers. One of the conditions of the contest was that there were four stock pickers and the two with the best performance over the six month period, got to come back and pick another stock each. So there was some – sort of a momentum component in there. If you had done well, you got a chance to do well again, and it could repeat for as many times as you did well. I just keep coming back to the fact that there’s – you can throw all the smarts and resources at the market you can and it’s not going to stop something from undoing your best efforts. So information and put yourself in the best place to take advantage of opportunities is probably the best thing you can do.
Angela LaGamba: One of the common questions that we get asked for the Master of Science in Finance program is around the primer that’s available to students coming into this program. So, Khurshid, I was wondering if you could share a little bit about how the primer works and how students would be utilizing that in their program.
Khurshid Iqbal: Absolutely, and that’s a very good point here. We have a Master of Science in Finance primer in place for our students and this really helps people who have been out of school for a while or for people who have had no formal education in the area of finance. Basically it gathers speed and get familiar with the topics once again, and this way they get to cover topics such as math, statistics, finance, valuation, of money, accounting, all these topics are revisited and then they kind of get familiar with the topics once again and gathers speed to be successful in the upcoming classes. So it is not something that is mandatory, but it’s highly recommended and why not take it when it’s completely complimentary and there’s no cost associated with that, and it’s there for your success. So why not take full advantage of that? That’s a great opportunity that you would be getting as a gift from Northeastern to be successful in the program. Thank you, Angela.
Angela LaGamba: Okay, thanks, Khurshid. So those are all the questions that we have for today, but I wanted to ask the professor if you had any final thoughts or anything you wanted to share with our audience before we wrap up?
Gary Porter: I do. If the individual who asked the agency question is still there, it occurs to me they might have been – I was thinking about a mutual fund manager, which is where I do most of my work. If they were talking about a financial advisor or someone who’s managing money for somebody, for individuals, then there’s a clear principal and agent problem. Basically agents can exploit the principal’s lack of knowledge about how these markets work. And the best evidence we have of that or how that manifests itself in the worst way is excessive fees. And so one of the things we keep striving is find managers, find funds, find individuals, who charge the lowest fees possible. We have found no positive correlation between fees and performance. So if someone’s telling you I have to charge you a lot of money so that you will do very well when
I manage your money, that really isn’t the case. That’s sort of a random thing.
So, yeah, matter of fact, the SEC has basically addressed that agency problem by pretty much making anybody who professionally manages money a fiduciary. So these people now have fiduciary responsibility to act in the best interest of the principal where that has not always been the case. And that’s going to cause a shakeup in the industry. So I hope I answered that person’s question.
Angela LaGamba: I want to really thank you, Professor, and also Khurshid for taking the time to walk us through the Master of Science in Finance program online and also portfolio management.