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Do MBAs have what it takes to work in investment banking now?

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It’s getting tougher for MBAs to get into investment banking. Firms are curtailing the number of people admitted on to their associate programmes, preferring instead to focus on fresh undergraduate recruits and train them up. The feeling is mutual, however, with more MBAs shunning banking careers for jobs on the buy-side or within tech firms.

Junior recruits are hot stuff in investment banking currently, but the focus more recently has been on in-house training of technical skills over the recruitment of often more expensive MBAs with less knowledge of the fundamentals of the finance industry, according to Jacques Olivier, finance professor and director of finance programs at HEC Paris. “MBAs are not as technically competent as those trained in-house and in the era of cost-cutting, banks are favouring analyst recruits over associate programmes,” he said.

Oliver was speaking at the launch of HEC’s dual MBA and Masters in Finance course earlier this month, which aims to offer the best of both worlds – equipping MBAs with in-depth industry knowledge. However, assuming you’re just embarking on an MBA, is it really likely to bolster your employment prospects in the financial sector?

“Investment banking is moving from a rugby ball-shaped structure into more of a sunglasses shape,” says Jean-Eric Pacini, managing director and head of structured equity distribution, EMEA at BNP Paribas. “At the very bottom, you have a demand for much more automation and technical and project management skill-sets. Banking is full of people who could engineer Concorde, but not sell it to anybody. Therefore, the other extreme is the need to create innovative solutions for clients, which requires creativity and the ability to see the bigger picture. There’s never been such a big polarisation of skills in the industry and it’s how MBAs can add value.”

Shrinking numbers of MBAs

Nonetheless, the number of MBAs being hired by large investment banks is on the decline. The proportion of students going from London Business School into investment banking has shrunk from 23% in 2010 to 13% last year, at INSEAD 14% of its latest class went in finance – half the figure of 2008. Even in US schools, where MBA recruitment has held up, the proportion of students going into investment banking is falling – nearly 21% of students at Wharton went into the industry in 2010, compared to 15% in 2013, while at Columbia the figure has shrunk from 26.3% in 2010 to 14% last year.

Despite the fact that most investment banks have pulled away from hiring MBAs for their markets businesses, associate programmes are definitely not going to go away, suggested a number of senior investment bankers speaking at HEC. Instead, they’re looking for different skill-sets.

“As MBAs we can play the generalist card,” says Sebastien Abbate, director, head of private banks and family offices at HSBC. “If you go into a single business area, the chances are that you will get bored. Banks need people to be able to move around the business and think outside the box – this generalist versus specialist requirements is where MBAs can add value.”

The argument is that MBAs aren’t brought into an organisation because of their technical expertise, but precisely because their thought processes differ from the usual investment banking graduate recruit. As Richard Bland, head of the careers service at London Business School told us previously: “Softer and broader management skills as well as the ability to build relationships are all developed during an MBA. Investment banks are increasingly asking for these over technical skills.”

In other words, the range of opportunities an MBA opens up is worth the investment, or at least that’s the argument of a panel of business school graduates now working in investment banking. This, of course, is handy in the current climate where banks are retreating from certain business areas – an MBA theoretically offers the versatility to move on elsewhere if you suddenly find yourself exposed.

“An MBA is your get out of jail free card,” said Pacini.

 

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