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How investment banks fell out of love with MBAs

MBA students have fallen out of love with investment banks and the feeling is mutual. The expensive qualification that formerly offered an option for beginning a banking career after a stint in another industry, is increasingly being eschewed by banks. Banks don't want to hire MBAs: they want to hold onto the juniors they hired at graduate level instead.

The shift is reflected in this year's associated classes. Publicly available information for the 2016 associate classes indicates that just 23% of the new associates across Goldman Sachs, Morgan Stanley, J.P. Morgan, UBS, Credit Suisse and Deutsche have MBAs this year. The figure is comparable across U.S. and European banks, which is surprising.  Across investment banking as a whole, however, it's far lower in London than in New York.

If you're in London in particular, therefore, the MBA-into-banking route has pretty much disappeared in 2016. Banks' recruiters say it's the culmination of a long term trend. "This has been going on since 2008," says one, speaking off the record. "Once things got tough, MBAs just weren't seen as value for money any more."

Goldman Sachs, for example, used to routinely hire juniors on two year contracts before ejecting them to study an MBA and then hiring (a proportion of them) back again.  This arrangement was scrapped in 2012.  Since then, the firm has hired juniors on indefinite contracts and done its best to keep them happy so that they hang around.

MBAs are left out in the cold as a result. "Ten years ago, banks often hired MBA associates into IBD (M&A and corporate finance) sales and trading, equity research, private banking and wealth management," says Derek Walker, a former director of campus recruitment at Barclays, and a former of director of staffing for the investment bank at Merrill Lynch in London. "Now, most MBAs are hired into IBD. A few are hired into wealth management and commercial banking roles, but not many. Trading floors tend to focus on students from financial masters programmes and undergrads."

At the London Business School, just 8% of MBA students went into investment banks last year. Goldman Sachs was the biggest hirer of LBS MBAs: it took nine. McKinsey & Co. took 38. In London, at least, an MBA is primarily a route into consulting jobs.

It's all a far cry from 2005, when 19% of LBS MBAs went into investment banks. Back then, Graham Hastie, then-director of LBS's careers service celebrated the Highly Skilled Migrant Visa, which allowed students from all over the world to access the UK job market after taking an MBA at a top school. Unfortunately, that was scrapped in 2008....

Contact: SButcher@eFinancialCareers.com

 

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AUTHORSarah Butcher Global Editor
  • Ha
    Harsh
    12 September 2016

    Its an interesting tale of who dumped who and the answer to that question often depends on who told you the story! I think the opening sentence gives a convenient lever to turnaround what has been more a case of MBAs falling out of love to first a mutual falling apart and then using statistics to dress it as if banks have been calling the shot. The fact that the numbers have been going down since 2008 is also an indication that the banks are relatively less attractive destination for high cost MBAs. Banks on their part find it increasingly difficult to afford MBAs. Besides, a lot of MBAs actually look at their degree as a platform to help them move away from banks. That said, i dont think it's the MBAs calling the shot either. In markets so uncertain, it is probably polite and decent to conclude that the circumstances were equally tough on both of them and that they have grown apart and that they want different things and that it is in their best interest to find another love!

  • An
    Andy
    11 September 2016

    Where MBAs tend to show strength is in schmoozing (internally or with clients) and corporate politics. When it comes to technical skills and execution there can be holes.

    The primary outputs of an MBA programme are debt and an inflated sense of ego/importance. Third to that and frankly the most substantive element that a person buys with an MBA is a "network".

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