By Tom
Braithwaite
The
Financial Times, 30th September 2012
More
graduates are opting for careers outside investment
banking as the pull of big bonuses is replaced by job insecurity in an industry
struggling to adapt to regulatory change.
MBA
statistics show a steady decline in the number of graduates taking jobs at
investment banks. The Wharton school at the University of Pennsylvania, which
bankers consider the “conveyor belt of Wall Street”, sent 16.6 per cent of its
class to investment banks in 2011 compared with more than one in four in 2008.
The pattern is similar at other large business schools.
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“The
number of students going into financial services has remained steady but what’s
changed has been the types of roles,” said Maryellen Lamb, director of MBA
career management at Wharton. “We’ve seen more opportunity for students in
private equity and hedge fund roles.”
Goldman
Sachs’ decision to end its
two-year graduate training programme caused ripples on university campuses. The
bank has decided to hire graduates on an open-ended basis partly due to worries
that some were defecting to private equity firms after the two years were up.
“They’re
out there on a limb by themselves now,” said one campus recruiter at a rival
bank, whose company is considering following the practice. “It’s going to be
interesting to see whether it’s positive or negative from a campus recruiting
standpoint.”
A
senior executive at Morgan
Stanley said his bank was
committed to its training programme and added that the industry had a duty to
train people and not be “feeders like the hedge funds”.
In the
UK, the financial services sector cut 9,000 jobs during the past three months
as business volumes and profitability fell for the first time in more than
three years, the CBI employers’ group and PwC reported. A further 3,000 job
cuts are expected.
Banking
suffered the deepest job cuts after a slowdown
in investment banking revenues and a scandal over the Libor benchmark
interest rate.
City
of London recruiter Morgan McKinley, which reinforced the uncertain employment
outlook, said new vacancies in the UK’s financial market fell 19 per cent last
month compared with August and 43 per cent compared with a year ago.
For
those who decide to stick with Wall Street, pay packages are down but not to
penurious levels. Graduates who land a job at JPMorgan
Chase, Goldman or Morgan Stanley
can earn $60,000-$70,000 in their first year, with a potential bonus of one to
two times that salary, according to recruiters. MBA graduates typically earn
about $90,000-$100,000 in salary with a similar proportion of bonus on top.
There
is also debate about the effect of broader anti-bank sentiment on students
desire to choose a Wall Street career. John Studzinski, head of Blackstone
Advisory Partners, who talks regularly to MBA students, said there had been a
noticeable turn against a career in finance with more wanting to become
entrepreneurs.
The
campus recruiter at the rival bank said there was a noticeable spillover from
the Occupy Wall Street events last year. “There was a lot of backlash and there
were some protesters at some of the campus events,” he said, adding that at his
bank there seemed to be as many students as ever willing to work long hours for
the privilege and pay of being an investment banker. “We didn’t see a decrease
in applicants.”
At
Harvard Business School, the proportion of MBA graduates this year moving into
investment banking fell from 10 to 7 per cent. But it was not clear that they
are all doing something more entrepreneurial. The proportion going into
consulting, at 29 per cent, was a nine-year high.
Additional
reporting by Brian Groom in London
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