Salary levels for MBA grads, especially those in the traditionally highly-paid sectors of finance like investment banking, consulting, or private equity, is a topic of great interest in any economy.
It's a given that the finance industry is not the easiest place to find a job at the moment. But for those few MBA grads lucky enough to land a job, what kinds of salaries can they expect? How is the recession affecting MBA grads' salaries in finance jobs, on and off Wall Street?
We’re all well aware of the general gloom surrounding the financial services industry of late: massive layoffs, slow to no hiring, and frozen compensation. It’s enough to discourage even the best and brightest recent graduates from top MBA programs from seeking career positions in investment banking, private equity, and the like.
But one person’s half-empty is another’s half-full. Let’s say you just hit the job market, armed with your newly minted MBA. Or maybe you’ve been searching for a while. Where are the jobs in investment banking, and private equity? Can you still get one? And if you do, will you earn significantly less as a result of the economy than your counterparts would have in recent years?
Let’s start with the first question – are there jobs, and if so, where? A recent story in The Wall Street Journal said large and midsize financial-services institutions are gradually starting to hire again. While current hiring doesn’t compare with this time last year, the niches of restructuring, credit, refinancing and wealth management are starting to wake up, the article states.
The stellar hiring pool available to financial-services firms may be one reason hiring is starting to pick up. Brian Korb, who heads up the Private Equity practice at
Glocap Search, a New York executive search firm, said his clients tell him, "We're always interested in someone who can bring a lot of value to a fund."
Derek Loosvelt, Finance Editor at career management service
Vault, said obviously MBA hiring in banking will get more competitive, partly because there are many people who were laid off and haven’t yet been re-hired. However, Loosvelt also said investment banking firms, even those who went through massive layoffs, are hiring MBA grads this year. According to Vault, summer internships for MBAs are still paid and still available, though there is more competition for these career-building opportunities.
Mareza Larizadeh, the founder of
Doostang, a job search website that focuses on young professionals, said that although the job pool has shrunk, “If you’re an MBA from a leading school and you put some effort into your job search, you can certainly find something similar to what you’re looking for.” Larizadeh said you may have to compromise a bit; for example, by starting at a small or mid-sized firm rather than going straight into a big Wall Street institution.
Larizadeh concurs that hiring is starting to pick up for the beleagured financial services industry. “Leverage will come back, and there will be the opportunity to make private equity investments, and with that people will need more talent,” he said.
Now to the second important question – if you do land a job in finance, will you likely be earning less than you might have if you’d entered the industry a year or two ago?
Starting salaries for MBA grads in First Year Associate investment banking positions – after bonus – range from $80 to $150 thousand, according to careersinfinance.com. The site says the bonus part of that, typically, is 10 to 50% of salary, moving from one to three times salary over time.
Career experts are forecasting salary ranges over the next two-year period to trend up for those first year associate jobs, ranging from $150 to 250 K, with the typical all-in compensation to be $170 K.
As for current figures, careersinfinance.com said that in 2008, a first year associate at a boutique firm brought in an $120 K base salary with a $70K bonus, making their all-in compensation $190 K. Across the investment banking sector, all-in salaries plus bonues are down about 40 to 80 percent from their 2007 peak. Bulge firm salaries tend to run 20 to 40% higher than boutiques and regional firms (though be aware that there are exceptions to the rule.)
Al Lee, Director of Quantitative Analysis at
Payscale, a company that collects salary data from individuals through online pay comparison tools, said not really. Lee’s job is to crunch the numbers in Payscale’s database of over 80,000 graduates of 45 top MBA programs.
Lee said even in a large downturn with lots of layoffs, generally the pay –- total cash compensation -- doesn’t actually go down much. Pay may be off a couple percent, he said, and firms aren’t paying the starting bonuses they once did, but base pay for top performers isn’t significantly lower than in boom times.
“Top performers” is key, Lee said. In this hiring landscape, companies can fill their open postions with candidates from the top of the heap. This is not to say firms will sell themselves short by scrimping on their compensation offers to those top players, he said. “Companies still want the best person they can get,” Lee said. “They have a budget for that position, and they are still willing to spend it on the right person.”
What has changed, said Brian Korb of Glocap Search, is the degree of variance between compensation for the very top performers and those in the middle tier. He said the bulk of the shrinking bonus pool is going to the really outstanding performers within a firm. However, Korb also said that while TARP restrictions may affect bonus practices, some firms are increasing base pay instead, to retain top players.
Korb also said career trajectories are going to be more gradual at this stage of the game. Annual salary bumps are going to be smaller, and it may take a title promotion to really increase your compensation, at least until the economy recovers.
But for those who can roll with the punches, Payscale’s Al Lee says, “unless everything falls apart and we enter the next Great Depression,” finance will come back, and with it, the chance for more MBA grads to aim high, work hard, and earn well in the financial services industry.
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