Choosing Financial Services in 2015

About 100 new Consortium students will indicate an interest in finance in 2015

In two weeks, about 400 new candidates for the MBA degree will become Consortium students. They will swarm into Phoenix for the Consortium's 49th Orientation Program. The new students (most of whom are privileged to be full-tuition fellowship winners) will start at 18 Consortium schools around the country this fall, but will first have the opportunity to meet each other, meet corporate sponsors and be congratulated dozens of times about their admissions into both the Consortium and top business schools. (A few will actually earn summer-internship offers from corporate sponsors, even before they start school.)

About 100 or so will express an interest in financial services with plans to become corporate or investment bankers, private-equity investors, financial consultants, community bankers, operations managers, venture capitalists, researchers, hedge-fund traders, or asset managers.

Trends and recent numbers suggest that, despite intermittent times of volatility and uncertainty for those who choose financial services, there won't be any noticeable drop-off among the MBA students who check off finance when deciding a concentration in 2015.

Is there some cause for apprehension? Do they know what they embark upon? Are they hopeful for ample opportunities? And do they understand the constantly changing scenarios faced by banks, funds, broker/dealers, and an all others in the industry?

Do they understand the implications of working for  an institution that regulators might declare "systemically important"?  Will they realize the impact of regulatory advisories that force banks to boost their capital cushion? Will they comprehend how this might have some influence on what they do in finance or how much in bonus they are awarded?

They likely do to some extent, if only because to gain admission at schools like Michigan, Virginia, Cornell, or UCLA, they will have thought deeply about what they want to do with the MBA and they will have expressed effectively in applications what they plan to do in finance or financial services (or at least, hope to do in the current environment).

How should the current MBA in finance approach this scenario?

A consensus among many says that long gone are the days when a finance MBA from, say, Dartmouth, Cornell or Emory, any respected school, could gain an offer as a corporate -finance associate at Goldman Sachs or a similar position at Wells Fargo and expect to be there 20-30 years, rapidly and assuredly climbing rungs of steps toward a senior-vice-president or managing-director slot.  And be happy about that or be comfortable working within the same institution with its same culture for decades.

Students today are better off approaching careers in segments, in five-year spans, knowing that vast change will continue to overhaul the industry or reshape the way financial services are delivered or performed.  Once there was a time when the finance MBA joined the institution, remained enthusiastically loyal to it, and often (sometimes naively) counted on the institution to shepherd him through development, enriching assignments and lucrative rewards.

The MBA graduate today is better off asking herself what contributions can she make to a project, team or institutions over the next five years, based on her talents, experiences, and skills.  And while at it, she  must ask what can she do for herself to ensure she continues to learn, develop, and adapt to different business conditions.

Today, the trading desk that existed five years ago has been disbanded.  Some of the financial modeling that new associates toiled over in years past is now performed in India. And much of the processing of securities, funds, and foreign currencies is presided over by vast computer systems. With the snap of a finger, GE decided to cast aside GE Capital. Banks that had bulge-bracket presence in investment banking decide overnight they don't want to do as much i-banking anymore.

Deals will get done, services will be delivered, clients must be hand-held and schmoozed, and transactions will be processed.  However, technology, systems and data analytics will be supreme, critical factors.  The MBA graduate might find himself spending as much time implementing technology or interpreting reams of data and statistics as analyzing capital markets or reviewing the financing needs of a new company.

The MBA graduate might opt to disregard working for the familiar, established companies like Morgan Stanley, AIG, Schwab, or JPMorgan Chase and consider working in what is popularly called "fin-tech," or working for the hundreds of new companies in "financial technology" that have sprouted in recent years.

Those companies have goals to upset the status quo, fill gaps where big banks may have struggled with in recent years (e.g., making corporate or small-business loans).  The fin-tech companies are experimenting with innovative ways to deliver financial services (make payments, make loans to small and large businesses, raise capital for new ventures, make loans to consumers, or execute trades for dealers). Long-term viability for most of these new companies is still in doubt, yet some new  MBAs might prefer the adrenaline (and possible mammoth long-term pay-off) that comes from working in a new, industry-busting venture.

Regulation? Yes, financial reform and regulation, in whatever degrees of pressure they exist, will always be the gray cloud that hovers overhead, even if regulation isn't too onerous or too oppressive. It will always be the elephant in the atrium, sufficient enough to redirect banking business strategies or force banks to cede control of products and services to the upstart fin-techs. The push-pull between those factions who argue regulation has overwhelmed and those who argue regulation is feeble will continue.

The financial crisis is slipping into memory for some new MBAs.  For some new students, the debacles that were Bear Stearns and Lehman happened when they were departing high school.  It helps, nonetheless, for MBAs in finance to be aware that crises come and go and return.  Markets are booming and can bust.  Interest rates plunge, but also soar.  Borrowers bankrupt, and new ventures can wipe out private-equity values.  And unfortunately,  the lessons learned from a previous crisis are sometimes forgotten or dismissed.

New MBAs should still know that despite the plague of  uncertainty, rollicking markets, and banking institutions that must reorganize and restructure themselves every other year,  some truisms remain. Financial technical skills are still a must-have.  In the end, financial managers, risk managers, financial consultants, and corporate-finance bankers still must make big decisions on loans, equity portfolios, bond portfolios, balance sheets, and investments.

They still need to be adept at near-expert levels in accounting, corporate finance, and capital markets. They will still need to understand what drives stock markets, what constitutes a shrewd investment, what influences interest rates, when a company should issue new stock, or why some companies can handle debt burdens better than others.  Graham and Dodd forms of analysis never go out of style.

Tracy Williams

See also:

CFN:  Opportunities in 2015
CFN:  MBAs and Technical Skills in Finance, 2010
CFN:  MBAs Face a Complex Landscape in Finance, 2014
CFN:  The Finance Resume' and Recruiters, 2014
CFN:  New Opportunities in Financial Technology, 2014