The FINANCIAL — The investment banking sector has recovered from recent hard times with renewed vigour – with reports showing IPO activity returning to pre dot-com levels. Yet MBA hires into the industry are still to bounce back in the same way.
Why? Put simply it’s a case of market forces in action. On one side, fewer MBA students target jobs in investment banking and much has been written about MBAs falling out of love with Wall Street. In fact, The Economist remarked lately on the hordes that head into the traditional route of consulting and the new avenues of technology instead. Graduates are being ever-more enticed by the familiar likes of Bain in one corner and the new horizons of Apple in another, leaving the financial sector with a smaller percentage of MBA hires year on year.
On the other side, investment banks have scaled back post–MBA associate programs more than their first year analyst programs – with recent cuts above and beyond those caused directly by the economic crisis triggered by the collapse of Lehman Brothers in 2008.
Contacts in investment banks tell us that this is because MBAs are simply too expensive for their level of technical skill. When compared with those freshly hired from undergraduate finance programs and trained in-house for a few years, these profiles are perceived as better value than those with an MBA after their name.
But the answer to whether MBAs should receive a more advanced technical education in finance lies in a fundamental difference between MBA and Masters in Finance teaching.
MBA teaching is heavily inspired by fields like strategy, human resources and organisational behaviour and experience sharing among participants from very different perspectives is key – so students would not learn as much if everyone in the class had alike experiences. When the class is composed of someone who worked in marketing, someone working in an investment banking division and another in a non-governmental organisation, then the experience in the classroom improves immensely.
This is simply not the same on a Masters in Finance programme where similar backgrounds are more advantageous than diverse ones. The more homogeneous the group, both in terms of technical capability and career aspirations, the faster and the more effectively the class will learn. This is because finance is a considerably more technical field than other disciplines in management.
Though there are ways to tackle banks choosing these graduates over MBAs. At HEC Paris business school, we’ve just launched a combined MBA and Master in Finance program. This dual degree has been especially designed to address concerns by combining traditional MBA education with the technical training of a Master in Finance.
The concept is to provide both managerial expertise and advanced technical skills to answer the needs of the financial industry today.
As the main way to get into investment banking for post-experience students is summer associate schemes, we start the program with a semester of finance classes to put students at an advantage compared to standard MBA students at interviews for these schemes. MBA applicants will have little financial teaching at this point, while those on the dual program will already have had an entire semester.
Another major shift in the financial industry concerns ethics and regulation, which are taking a more important part in the selection process than ever before. It has become rare to go through an assessment center, for whatever financial position, without being asked about one or the other.
This new focus is an additional and different hurdle that MBA candidates who want to go into finance have to go through. To respond to what the industry is asking for, business schools need to design programmes that provide young professionals with the skills they need to enter the banking sector today.
We need to provide financial employers the graduates that they’d hire. Perhaps then we can start to end the MBA finance exodus.
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