Transparent MBA: MBA Industry Guide: Investment Banking

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Source: Transparent MBA

Investment banking has long been a coveted industry for emerging MBAs, but are the tides changing for these financial institutions? As interest in technology increases, MBA interest in investment banking is declining. The percent of MBA’s entering investment banking from schools such as Harvard and London Business School declined by nearly half between 2007 and 2013. Psychology Today cites lackluster company culture, reduced bonuses due to increased industry regulation/scrutiny following the recession, and an increased interest in starting entrepreneurial ventures as causes of the declining interest. Investment banks have taken note of this shift and are making changes to lure talent back to their positions. Morgan Stanley has increased base pay, Goldman Sachs has promised faster promotions and guaranteed rotations, and Credit Suisse has introduced a fast track and mentoring program for analysts. Despite the decreasing interest in the industry, TransparentMBA’s database of nearly 4,000 employers shows that investment banking still accounts for at least 8% of full time MBA positions.

he investment banking industry is known for enticing pay and substantial bonuses, and the total starting compensation for an MBA is $225,906 (89th percentile). The average salary of an MBA in investment banking is $126,768 (86th percentile). While some financial perks are below average, such as stock compensation in the 43rd percentile, other bonuses live up to the industry’s reputation. The average performance bonus for an MBA graduate is $55,859 (86th percentile) plus a $34,947 signing bonus in the 97th percentile.

While the compensation packages for MBA graduates in investment banking are hefty, they aren’t just handed out. The average MBA job in investment banking requires 77 hours of work per week, which is 23 hours above the average for all other MBA grads. The percent of time spent traveling is about 1/3rd the average at only 9%, and many MBA graduates spend all of this time working in top financial cities such as New York.

The largest banks have also established “protected weekends” in an attempt to create a workplace culture that is more enticing for MBA graduates. These policies prohibit associates and analysts from working between Friday night and Sunday morning. The changes seem to be having a positive effect on company culture, as one analyst stated “there’s less of a culture of ‘We have to work on weekends’ than there used to be, and I think that’s been very positive.”.

Evidence of these positive effects of the policy change are reflected in TransparentMBA‘s 250,000+ data points. Despite the high number of hours worked per week, happiness and culture scores for MBA graduates working in investment banking are above average. Additionally, companies such as Lazard Freres & Co., LLC reported average hours as high as 83, yet still received 10 out of 10 satisfaction scores across the board.

Interns also had positive views of company culture, despite working only one hour less per week and earning up to $100,000 less annually than their full time counterparts – probably due to a lack of the generous performance bonuses enjoyed by the latter group. The average culture score for MBA interns in investment banking is 6.7/10, with interns at Morgan Stanley (and others!) rating culture at 9 out of 10 points. Internship offers peak in January, in time for Summer Associate positions. Applications at companies, such as J.P. Morgan Chase & Co., are typically due between November and January and internship programs last 9-10 weeks. After a summer internship (which is practically a 10 week interview), full time offers peak in August. The popularity of summer associate positions is reflected in offer sources for full time positions in the TransparentMBA database. Summer employment represented the largest source of full time offers, especially when the internship was facilitated by the school. To compare firms and their internship ratings and compensation, simply sign up for free and visit the Investment Banking Dashboard.

Men tend to outnumber women in MBA graduate jobs in the investment banking industry, but this is actually the norm for the MBA world. As a result, schools are investing in scholarships and outreach to increase female enrollment in MBA programs because women tend to make up 40% or less of MBA students. At this time men account for about 80% of full time MBA positions in the industry, and have a typical starting compensation that is $31,000 more than women. However women reported an average stock compensation of $5,000 whereas men reported only $263, so each compensation package and experience is unique. No matter what your background is, you should visit TransparentMBA’s Investment Banking Dashboard to learn how much your peers are earning. Being knowledgeable about the compensation you deserve will help you in MBA job offer negotiations.

Pursuing an MBA degree is an increasingly popular way to pivot in a career, as 2 out of 3 MBA students use their new degree to switch both their function and industry. While investment bankers come from many different functional backgrounds, the most common transitions start from consulting or business finance. If you decide to switch to an MBA career in investment banking your compensation could increase by an average of 265%, based on what function you are currently in and the compensation you already earn. No matter which function you are in, you’ll typically work in an “associate” position at your firm of choice.

If you have an interest in investment banking, chances are you can already name a few top banks you dream of working with. The largest and most profitable multinational investment banks are said to be in the “bulge bracket”, and a few of them are compared below. To compare other companies and see their employee satisfaction scores, sign up for free here and visit the Investment Banking Dashboard.

Since investment banking is still a coveted industry for MBAs, there are many handy interview guides, but how do you make the most of your first year once you’ve landed the position? A veteran investment banking analyst at a bulge bracket firm offers these tips:

Sign up for a frequent flyer/ hotel loyalty program. If you’ll be traveling for work, this is a free process that can score rewards.

Likewise, consider a rewards credit card for your corporate expenses. Talking to other analysts in your group can help you gauge how much you may spend annually.

Treat everyone (even those in positions “below” yours) with respect and dignity. Besides being the right thing to do no matter what, it speaks volumes about your character and can benefit your career in the long term.