Jobs in banking and finance lose allure

It used to be the case that young high-flyers attended top notch business schools as a stepping stone into finance jobs. These days graduates from the best MBA programmes use their degree to do just the reverse: move out of the finance industry altogether.

The contrast between data collected for the Financial Times MBA ranking in 2015 and that collected five years previously for the 2010 ranking is stark, especially among the top 10 ranked programmes in the world.

For the first time since the rankings began in 1999, fewer graduates from the elite business schools go on to work in finance and banking than did so before they began their MBA. In fact, the proportion of top 10 MBA graduates in finance and banking dropped by 5 percentage points in the 2015 ranking, from 33 per cent for the pre-MBA class to 28 per cent three years after graduation.

Data collected across all the 150 odd schools that take part in the ranking each year show a similar trend, though the shift is not as extreme. The number of those working in finance and banking jobs increased by 4 per cent, according to the 2015 ranking, which is based on a survey of the class of 2011.

By comparison, data from the 2010 ranking (based on a survey of those who graduated in 2006) show that the number of those working in finance and banking jobs three years after graduation nearly doubled compared to pre-MBA levels.

Those leaving jobs in the finance and banking industry after graduation has increased slightly over the past 10 years, but the most significant change has been the drop in the proportion of those joining the industry. In 2007, 2.2 MBA graduates used to join the industry for every one that left. This ratio has now halved to 1.1.

The financial crisis in 2008 is one obvious factor behind this drop. The salary premiums attached to finance jobs, while still attractive, are not nearly as good as they used to be. MBA graduates surveyed for the 2008 ranking who switched to finance after their MBA saw their salary increase by 170 per cent on average, from pre-MBA salaries of $60,000 to $161,000 three years after graduation. Those surveyed in 2014 merely doubled their salaries to $139,000.

In comparison, those who kept working in finance enjoyed higher salaries three years after graduation but with smaller pay increases. They earned on average $166,000 in 2007, up 157 per cent in 2007 and $160,000 in 2014, up 86 per cent.

Another factor is that jobs in the IT and telecoms sector are becoming more attractive. Among those surveyed for the 2010 ranking, the overall proportion of those working in IT and telecoms almost halved three years after graduation, from 19 per cent of the pre-MBA class down to 10 per cent. More than a third went into the finance and banking industries.

Five years later, the proportion of those employed in IT and telecoms jobs three years after graduation dropped by only 4 percentage points to 13 per cent.

Once again, the elite graduates from the 2015 top 10 MBA programmes lead the way: a quarter of them who left finance went into IT and telecoms, compared to only 14 per cent of graduates from other programmes.

“My MBA really helped me move from a trading floor to the IT industry,” said one graduate from Insead.

In comparison, the proportion of executive MBA graduates (programmes for working senior executives) employed in finance and banking jobs has remained fairly constant over the past 10 years. About 15 per cent work in finance both before their EMBA and three years after graduation.

One reason is that EMBA graduates are much less likely to change career than their MBA counterparts. Only about a quarter move industry after graduating, compared to nearly two-thirds of MBA graduates.