Little did Joseph know it but, one night spent idle in 2014 would lead him to become to win the world’s premier financial modeling championship for 3 YEARS! While Joseph Lau had heard of ModelOff, he hadn’t considered taking part. It was on this night in 2014 when he decided to give some of the past ModelOff questions a go. He was excited when he quickly realized “Oh I can do some of these…”. He decided to enter the competition that same year. Although he didn’t win in 2014, that didn’t deter him from reentering and taking the gold in both 2015 and 2016! Then, when Modeloff was rebranded as the Financial Modeling World Cup (FMWC) in 2020, Lau entered, and he WON AGAIN!
Joseph Lau is the Director of Sustainable Finance at the Commonwealth Bank of Australia. He holds a Bachelor’s degree in Computer Science and Mathematics, a Master’s degree in Applied Finance, and a Ph.D. in Pure Math. I know what you’re thinking, pretty impressive, right?
In this article, you’ll discover how Lau made it to the top of the financial modeling world and how you can dramatically hasten your own rise to the top.
What is the Financial Modeling Championship?
The FMWC (Financial Modeling World Cup) website describes its competition as…
“A leading financial modeling competition for everyone interested in finance. Participants solve real-life case studies by building financial models in Microsoft Excel.” – Joseph Lau
There are 8 stages throughout the year, each taking two hours to complete within a maximum of two days. Once all stages have been completed by the entrants, prize money winnings are split among a range of competition categories including worldwide, regional, age group winners, and so on. Like any competition, there are specific rules that must be followed (you can check them out here).
Summing up his experience with FMWC, Lau remarked “I found the FMWC (to be) a fun and well-run competition. Financial modelers of all levels would enjoy the challenge. Many questions are based on real-life examples and demonstrate how financial modeling skills can be applied in different settings”.
How Joseph Lau Prepared For the Financial Modeling Championship
Of course, Lau’s long list of academic achievements probably contributed to his success. But when asked. he’ll tell you himself that a Ph.D. in math isn’t necessary to reach the top of the financial modeling game.
Lau attributes much of his success to the fact that his day-to-day job is the perfect practice ground for the competition. His role within Commonwealth Bank requires him to do financial modeling work every day, which isn’t the case for participants coming from other academic and industry backgrounds.
In terms of preparation time, Lau typically spent a couple of weeks practicing questions from previous years to put himself in the right headspace.
Lau’s Tips on How to Become a Financial Modeling Ninja
When asked for his advice for people just starting out, Lau voiced a motivating message. That message? Well, he said you don’t need prestigious degrees to master financial modeling. Even going as far as to say he rarely uses beyond high school math in his project finance work. While this might be music to a lot of ears, you’re probably wondering what you DO need to succeed in the FMWC competition?
If you want to win the Financial Modeling Championships then, according to Joseph Lau, you should focus on finding a role that allows you to build a lot of models (brownie points for finding a job where modeling is your primary responsibility). Practical experience is often the best way to learn and excel at something, pun intended. And, what is going to make you great at modeling? Making financial modeling something that’s second nature to you.
Another tip that Lau had was to learn proper modeling techniques and etiquette from firms that do financial modeling (maybe at a local financial consultancy firm?). Immersing yourself in the world of modeling every day seems to be the key takeaway message from Lau – he says that doing so would really help open the FMWC playing field to competitors and enthusiasts worldwide.
The Biggest Mistakes Spreadsheet Modelers Make
One of the most “irritating” things that Lau sees in financial models is how complex and complicated they can be, for no good reason. He’s referring to all those unnecessary, time-intensive issues often created by repetitive models that contain complicated formulas involving extensive amounts of work to run, reference, and convert.
So, what other mistakes do spreadsheet modelers make? Micheal Zimmel of Volve wrote an excellent article published on LinkedIn, detailing 13 modeling errors that should be avoided at all costs including:
- Failure to plan
- Lack of logical structure
- Building overly complex models
- Excessive use of complex formulas
- Formula errors
- Using hard values instead of formulas
- Excessive use of names and range names
- Hiding rows and columns
- Inconsistent formats
- Not fully integrating balance sheet and cash flow calculations
- Lack of systematic naming convention for file versions
- Not adding an executive summary
- Lack of error and sanity checks
Zimmel and Lau definitely agree on a couple of mistakes that should be avoided in financial modeling.
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