Wall Street: Is the Party Over for MBAs?

Posted by: Louis Lavelle on February 7, 2012

For a certain type of MBA, but certainly not all, the degree is all about landing a job on Wall Street. And not just any job, an investment banking job, the kind that promises untold riches—a lifetime of high six-figure salaries and bonuses to match.

But that kind of job is rapidly disappearing. UBS, Deutsche Bank, Barclays, Morgan Stanley, Citigroup and Credit Suisse have all announced massive pay cuts for investment bankers in recent weeks, and many of the same institutions have also reported job cuts. In fact the global financial services industry is hemorrhaging jobs of all sorts, not just investment banking, with the total now somewhere north of 200,000 in the latest purge. For a withering view of life among the Masters of the Universe these days—and a good explanation for why lower pay may be a semi-permanent condition—check out this week’s New York magazine cover story, “The Emasculation of Wall Street.” If you’re contemplating a banking career, or already have one, it will give you second thoughts.

These banks are big employers of MBAs, or at least they were. At Chicago’s Booth School of Business and Wharton, big banks hired nearly 70 full-time MBAs at graduation; at Columbia, in Wall Street’s backyard, the number approached 100.

Booth, Virginia's Darden School of Business, and Duke's Fuqua School of Business are already reporting a decline in investment banking recruiting activity such as campus visits by recruiters and scheduled job interviews during the 2012 recruiting season, which began in the fall.

The assumption, I think, is that the cutbacks are supply driven--the supply of investment banking jobs is drying up, so recruiting has taken a hit. But I'm beginning to wonder if it might be demand driven--if the number of students who view investment banking as a viable career choice is beginning to slip as the industry enters a period of turmoil that makes those jobs seems less certain, and far less lucrative than they once were.

Are there any would-be investment bankers out there who have given up on the idea of a Wall Street job in favor of something a little more ordinary?

Reader Comments

Midwest

February 7, 2012 1:43 PM

The cutback is definitely supply driven. At my school there are still far more students interested in banking jobs than there are available.

However, if compensation continues to decrease the business model will have to change. It is going to be harder to convince kids to work 90 hour weeks if the pay is not significantly greater than other opportunities.

Jeff

February 7, 2012 1:44 PM

Let's work up a "Sharpe ratio" coefficient for financial service jobs. All the uncertainties: regulatory, variable equity based deferred comp, 200k/yr job purges... I bet a $150 - $200k/year C&I banking job delivers better alpha.

Guest

February 7, 2012 1:58 PM

As a current student at one of the institutions mentioned in the article, I can certainly corroborate your suspicion that it is demand that has shifted (and sharply so) vs. supply. As my wannabe-consultant classmates would say -- I think that we are experiencing a monumental paradigm shift

Joev

February 7, 2012 5:45 PM

It is high time! These so called investment bankers created no value for society, they were a net drain on our resource, as a nation. We can do with 90% of them gone. Good riddance, find a real job now!

calhou

February 8, 2012 1:24 AM

Midwest...that is funny. I have worked for commercial banks, manufacturing companies and non profits. Sixty hour weeks are the norm and ninety not uncommon.....for considerably less pay than investment bankers...so regardless of where you end up, much will be expected.

Matt

February 9, 2012 11:33 PM

I'm currently enrolled in one of the programs listed in the article, and I can say without a doubt that those who may have originally intended to pursue I-banking have since changed their pursuit and are looking towards summer and full time positions in Consulting, Corporate Finance, or General Management. These career paths seem more stable and do not have the poor reputation held by those on Wall Street...

Luke

February 10, 2012 9:04 AM

"Are there any would-be investment bankers out there who have given up on the idea of a Wall Street job in favor of something a little more ordinary?" I doubt it, but maybe!

Tom

February 10, 2012 4:03 PM

I'm at a top MBA program right now and recently decided to accept my offer in investment banking over a sponsorship offer I had from my previous consulting firm. It was a difficult process and I had to think long and hard about the merits of banking as a career. A few thoughts about the career/decision:

1. I'd like to see some hard data on the so-called dwindling recruiters on campus. I'm actively involved in the banking club, and I can tell you that there was no drop off in the number of recruiter visits, lunches, dinners, etc relative to last year. There were fewer offers for summer internships, but with banks reporting revenue decreases of 30+ percent, isn't that what one would expect? I'd be very careful about designating this as a 'trend' and not just an impact of a natural and probably healthy business cycle.

2. Doesn't this same phenomenon happen every time that there is a retraction in the banking industry? Take a look at the definition of 'Harvard MBA Indicator' on other sites. I'm not saying this is exactly the same type of occurrence, but I think recruiters are probably refocusing on a core group of schools as they come to the realization that the industry will remain smaller for the foreseeable future. This means fewer MBA jobs, which will impact the demand side as well as the supply side as folks decide it's not worth the effort to even go through the arduous recruiting process.

3. On the supply side, I do agree that banking is a relatively less attractive job than it was before. The long hours, combined with the falling bonuses, make it an unattractive job for someone looking for a 1-2 year gig. I think the recruiting process has shifted in that people who decide to recruit realize that they need to be in it for a longer haul to 'cash in.' To that end, though, let's be careful not to label the industry as being 'dead.' There are only a handful of other jobs in the world where you can make $500k+ in your early 30s, so as long as there are ambitious MBAs out there, there will be a consistent supply of willing applicants regardless of the economic cycles.

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