An MBA or a master's in finance? Breaking down the debate dollar by dollar
It’s a question that elicits plenty of responses with seemingly nothing close to a consensus answer. Some believe that a master in finance has trumped a two-year business degree as the key qualification for getting a front-office job in banking or other high-paying roles in financial services. Others still see an MBA as the bigger differentiator. The truth is, judging simply by the numbers, it’s all about how much time and money you are willing to invest upfront. An MBA requires a much bigger down payment in all aspects, but the potential reward is still greater. Whether that payoff is truly worth the effort is where the debate really begins.
The time investment
In an attempt to make an apples-to-apples comparison, we looked at the most recent employment reports from London Business School and MIT, two universities that offer top-ranked MBA programs and master in finance degrees. The first number we looked at is the average years of full-time work experience prior to enrollment. For MIT’s MFin program, for example, the average is just 17.4 months. While some work experience doesn’t hurt, it’s quite possible to jump directly from undergrad to a master in finance program, even at the top-ranked schools.
The same can’t be said about the best MBA programs. Enrollees at both MIT and London Business School average roughly five years of previous work experience, as is the norm for most MBA programs. You’ll likely need to toil alongside other undergrads in the workforce for a minimum of two to three years before a highly-ranked business school will look at you. And that isn't the only time investment MBAs need to make. The sheer length of the program adds up as well. While a master of finance degree can be earned at LBS and MIT in as few as 10 and 12 months, respectively, each university’s MBA program lasts up to four full semesters (21 months).
The financial investment
Then, of course, there are the tuition costs, which are admittedly much higher at the two schools in question, though they still offer good points of comparison. Tuition fees for 2019 MBAs at London Business School add up to roughly $107k. That number drops to around $61k for its MFin program. Meanwhile, MBA grads at MIT will end up forking over north of $147k. The 12-month master in finance track costs only $78k. Tack on extra living expenses plus the cost of another year off the payroll and the price of top MBA programs well more than doubles that of a master’s alternative.
Considering the differing levels of experience, MFin graduates match up extremely well with MBAs when it comes to employability. At LBS, roughly 97% of MFin enrollees received a job offer within three months of graduation compared to 94% for MBA students. At MIT, the offer rates were 99% and 97%, respectively, for its 2018 MBA and master’s programs.
The big difference, of course, is the financial payoff. MBA graduates from MIT’s 2018 class who took a job in finance – including investment banking, sales and trading, venture capital and investment management – averaged a first-year salary of $125k, plus a signing bonus of between $25k and $52k, depending on the role. At LBS, the average MBA grad who entered finance earned around $107k (signing bonus numbers weren’t made available). Meanwhile, finance-minded MFin graduates at MIT earned less than $90k during the first year out of school, though U.S. citizens took home roughly $95k. The average at LBS was just shy of $87k.
In short, there’s a reason each program has its fans and detractors. Accounting for prerequisite work experience, earning an MBA can take four to seven years after completing undergraduate studies and may cost nearly $200k when including living expenses. You can leverage a master in finance degree into a high-paying job in less than two years for half that cost. However, you may be able to make back that difference as an MBA grad in just a few years at top programs. The question that remains is if the difference is worth all the effort and potential debt – and what the comp comparisions look like 10 years out when experience matters much more than education.
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