MBA Salaries in the Current Economic Climate: Investment Ban

MBA Podcaster's gueststhis week are:

• Brian Korb, Partnerand Head of the Private Equity practice at Glocap Search, a recruiting firmfocused mainly on alternative assets
• Mareza Larizadeh,Founder of Doostang, an invite-only website that connects young professionalswith career opportunities
• Al Lee, Director ofQuantitative Analysis at Payscale, a company that collects salary data fromindividuals through online pay comparison tools
• Derek Loosvelt, GlobalFinance Editor at Vault.com, a website that provides information and solutionsfor professionals and students who are pursuing and managing high-potentialcareers

Salarylevels for MBA grads, especially those in the traditionally highly-paid sectorsof finance, like investment banking or private equity, is a topic of greatinterest in any economy. 

It'sa given that the finance industry is not the easiest place to find a job at themoment.  But for those few MBA gradslucky 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’reall well aware of the general gloom surrounding the financial services industryof late: massive layoffs, slow to no hiring, and frozen compensation.  It’s enough to discourage even the best andbrightest recent graduates from top MBA programs from seeking career positionsin investment banking, private equity, and the like.

Butone person’s half-empty is another’s half-full.  Let’s say you just hit the job market, armedwith your newly minted MBA.  Or maybeyou’ve been searching for a while.  Whereare the jobs in investment banking, and private equity?  Can you still get one?  And if you do, will you earn significantlyless as a result of the economy than your counterparts would have in recentyears?

Let’sstart with the first question—are there jobs, and if so, where?  A recent story in The Wall Street Journal said large and midsize financial servicesinstitutions are gradually starting to hire again.  While current hiring doesn’t compare with thistime last year, the niches of restructuring, credit, refinancing and wealthmanagement are starting to wake up, the article states.

Thestellar hiring pool available to financial-services firms may be one reasonhiring is starting to pick up.  BrianKorb, who heads up the private equity practice at Glocap Search, a New Yorkexecutive search firm, said his clients tell him, "We're always interestedin someone who can bring a lot of value to a fund."

DerekLoosvelt, finance editor at career management service, Vault, said obviouslyMBA hiring in banking will get more competitive, partly because there are manypeople who were laid off and haven’t yet been re-hired.  However, Loosvelt also said investment bankingfirms, even those who went through massive layoffs, are hiring MBA grads thisyear.  According to Vault, summerinternships for MBAs are still paid and still available, though there is more competitionfor these career-building opportunities.

MarezaLarizadeh, the founder of Doostang, a job search website that focuses on youngprofessionals, said that although the job pool has shrunk, “If you’re an MBAfrom a leading school and you put some effort into your job search, you cancertainly find something similar to what you’re looking for.”  Larizadeh said you may have to compromise abit; for example, by starting at a small or mid-sized firm rather than goingstraight into a big Wall Street institution.

Larizadehconcurs that hiring is starting to pick up for the beleaguered financialservices industry.  “Leverage will comeback, and there will be the opportunity to make private equity investments, andwith that people will need more talent,” he said.

Nowto the second important question—if you do land a job in finance, will youlikely be earning less than you might have if you’d entered the industry a yearor two ago?  Al Lee, director of quantitativeanalysis at Payscale, a company that collects salary data from individualsthrough online pay comparison tools, said not really.  Lee’s job is to crunch the numbers inPayscale’s database of over 80,000 graduates of 45 top MBA programs. 

Leesaid even in a large downturn with lots of layoffs, generally the pay—totalcash compensation—doesn’t actually go down much.  Pay may be off a couple percent, he said, andfirms aren’t paying the starting bonuses they once did, but base pay for topperformers isn’t significantly lower than in boom times.

“Topperformers” are key, Lee said.  In thishiring landscape, companies can fill their open positions with candidates fromthe top of the heap.  This is not to sayfirms will sell themselves short by scrimping on their compensation offers tothose top players, he said.  “Companiesstill want the best person they can get,” Lee said.  “They have a budget for that position, andthey are still willing to spend it on the right person.”

Whathas changed, said Brian Korb of Glocap Search, is the degree of variance betweencompensation for the very top performers and those in the middle tier.  He said the bulk of the shrinking bonus poolis going to the really outstanding performers within a firm.  However, Korb also said that while TARPrestrictions may affect bonus practices, some firms are increasing base payinstead, to retain top players.

Korbalso said career trajectories are going to be more gradual at this stage of thegame.  Annual salary bumps are going tobe smaller, and it may take a title promotion to really increase yourcompensation, at least until the economy recovers.  Across the board career experts areforecasting salary ranges over the next two-year period to trend up slightlyfor first year associate jobs, ranging from $150,000 to $250,000, with thetypical all-in compensation $170,000.

Forthose who can roll with the punches, Payscale’s Al Lee says, “unless everythingfalls 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 earnwell in the financial services industry.

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