INVESTMENT BANKS LOSING ALLURE by
Oleksiy Nesterenko
In the pre-2008 world, all MBA soon-to-be-graduates eagerly awaited for the opportunity to be interviewed by one of the major investment banks. There was an unspoken understanding among business school graduates: landing an investment banking job was a mark of success. Despite countless ruined weekend, numerous “all-nighters”, and overall culture of “do or die”, job at a bank was point of pride and viewed as the first step on the way to becoming a “baller”.
In the pre-2008 world, all MBA soon-to-be-graduates eagerly awaited for the opportunity to be interviewed by one of the major investment banks. There was an unspoken understanding among business school graduates: landing an investment banking job was a mark of success. Despite countless ruined weekend, numerous “all-nighters”, and overall culture of “do or die”, job at a bank was point of pride and viewed as the first step on the way to becoming a “baller”.
One financial crisis and seven years later, the picture has
drastically changed. In 2014, a long
slide in the number of MBAs joining investment banks reached a new low point. According
to Harvard Business School report, in 2007 ca. 13% of the business school's
graduates who landed jobs went into investment banking. By last year, that figure
fell to ca. 5%, and is expected to drop to 4% in 2015. Other business schools
are witnessing similar trends. Fewer and fewer graduates chose to go into
investment banking: Columbia saw a drop
of nearly 15% (26% in 2007 vs 11% in 2014) in the number of MBAs joining the
industry, Wharton experienced a decrease of 10% (24% in 2007 vs 14% in 2014),
MIT’s figure declined from 11% in 2007 to 6% in 2014.
These tendencies were driven by a myriad of reasons, ranging
from bad perception investment banks received for their role in the financial
crisis to the tech boom that is luring away entrepreneurs seeking to strike on
their own. But the key factor is the reduction of pay that is no longer
sufficient to compensate for miserable work-life balance of employees. Average
pay at investment banks nearly halved since the financial crisis due to a drop
in revenue and a greater focus by regulators and shareholders on bonuses (for
example Goldman Sachs per-employee compensation expense fell to $373,265 in
2014 from $661,490 in 2007).
Major banks have started to implement measures to fight
back, promising newly joined MBAs better working hours, guaranteed day off each
week and reasonable deadlines. These efforts, in part, were prompted by the
death of an intern, who collapsed in his shower after he had worked for 48
hours straight, at Bank of America London’s office in 2013.
Yet, it seems like the new initiatives will be fruitless
until the moment MBAs once again will start considering investment banking as a
sustainable career.
About the author:
Oleksiy Nesterenko is a co-founder of Afenest Advisory, a financial advisory firm that provides guidance to clients in areas of corporate finance, business strategy and M&A. Prior to Afenest Advisory, Oleksiy Nesterenko spent most of his career in investment banking, focusing on technology companies in the USA, Europe, and CIS countries.
Oleksiy Nesterenko is a co-founder of Afenest Advisory, a financial advisory firm that provides guidance to clients in areas of corporate finance, business strategy and M&A. Prior to Afenest Advisory, Oleksiy Nesterenko spent most of his career in investment banking, focusing on technology companies in the USA, Europe, and CIS countries.
Mr. Nesterenko holds
an MBA degree from INSEAD business school and BA degree (Magna Cum Laude) in
Business/Economics from UCLA.
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