The main benefits of having a PhD if you want a job in finance

22 September 2011

2 minute read

The main benefits of having a PhD if you want a job in finance

If you're a student who wants to go into financial services, you may be wondering whether it's worth spending the extra time and money to get a PhD.

During the financial crisis two or three years ago, I would have unequivocally advised staying in school. Layoffs, downsizing, and hiring freezes made it a very difficult environment to land a good job. However, the tide has (or at least, had) turned and many financial institutions are gong back to their normal hiring modes.

So should you do it? Well...

Independently of the economic environment, the decision to do a PhD often comes down to the opportunity cost of spending another three years' in education. Personally, I believe a PhD is financially worthwhile: starting compensation packages for PhDs are generally higher than for non-PhDs. However, I strongly advocate participating in as many internships as possible to gain experience, network, and possibly even land some job offers before you finish your degree.

I also believe that a PhD really does separate you from the rest of the pack. Employers are generally keen to hire PhDs for a variety of reasons. These are the main three:

(1) A PhD proves that you can do independent research This is a huge positive. Even those with the best grades do not necessarily have the ability to conduct independent research. Having a PhD is an excellent indication that you can start and finish a large project with minimal supervision - a quality employers strongly desire.

(2) A PhD topic can demonstrate competence in a particular field In-depth academic research is probably the closest thing someone can get to experience without actual experience (though I reemphasize the importance of internships!). Moreover, if your thesis is closely related to the career path you are planning on, then this also shows some interest and initiative that a prospective employer will appreciate.

(3) Perception There is no doubt that many people believe that PhDs are smarter. Finance attracts all types of people but PhDs generally attract more respect. Admittedly, there are many people who could have achieved a PhD but chose not to. However, there are also others who might not have been up for the challenge. Getting a PhD removes all doubt.

Aaron Brask is a former banker at JPMorgan and Barclays Capital with a PhD in mathematical finance. He's also the author of the Wall Street Primer.

AUTHORAaron Brask

Insider Comment

5 comments

Th
Thapelo
29 June 2016
I'm currently doing diploma in fundamental of financial service and I wanted to do accounting science but now since I've started I fell like I have to finish because if I would change it would be a waste of money and time. So I thought a Ph.D. In financ will do but reading your comments and other sources if no longer want to do it. Please help me to know which job in finance that is a bit more like CA and please know that your comments can build or destroy someone's life. Thank you.
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Ec
Economonty
21 August 2014
This article is really rather misleading for anyone who stumbles upon it. A PhD in Finance is a HUGE committment, and not something that can be decided easially. PhD programs in general, even for lower (<100 ranked) schools, have acceptance rates of less than 5%, and those who do get in generally have an extremely rigorous undergraduate with courses in upper level math, statistics and computer science.A PhD normally takes 5 (five) years to complete, and is entirely dedicated to learning to research ideas.
If you are interested in working in something like M&A, being a financial analyst, or other careers like these a PhD is going to be a terrible fit for you and is absolutely not worth your time and effort. If you are interested however in being an options trader, in risk management, or being a quant, a PhD is no longer something that sets you apart, but is something expected and required. That being said however, many quant jobs have starting salaries posted at 250k+, and many business professors make 175k+, so regardless you can do fine for yourself with a PhD, but you need to do it for the right reasons.
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An
Andrew
26 September 2011
Surely it depends what you want to do. A professional qualification like CFA, Actuarial Science, ACCA etc prove that you have the drive to work and study as opposed to the relatively less stressful phd environment which gives you free reign. I've worked with numerous phd's who were very smart and researching say physics or stats hypotheses and were very good in an academic environment, but when it came to dealing with people and content in the workplace fell down quite badly. Clearly if you're talking about a quant type of role, you would want a specialised stats phd however.
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Ki
Kishore
26 September 2011
Doing a Ph.D restricts your career in research / education sector. Industry would prefer a professional degree in accounting and finance OR at the minimum - an MBA
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Mi
Michel
23 September 2011
Doing a PhD is a complete waste of time if you want to work in Finance. I would rather spend 3 years gaining experience in the field, stepping up the corporate ladder and working on a more relevant certification like the CFA.
Few PhD's know early on that they'll end up in Finance. Those who don't usually are scientists who wake up one day and realize there are no high-paying jobs in their fields. They then drift to becoming quantitative analyst or developers, and are stepped over by everyone else in the firm.
The arguments you put forward only serve on point: landing a good first job; which is not worth spending 3 years in school.
In my opinion, the only reason a PhD would serve you is if you already have experience in the industry, find a hard relevant problem and go back to the research lab to solve it.
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