Bull Bear Report Dec 07 2009

MBA Students Still Banking on Finance

By kyle stock

Despite thousands of career casualties, the crisis has not made MBA students any less eager to charge into the front lines of finance.

A third of 2009 full-time MBA candidates plan to pursue careers at finance and accounting firms, level with the past two years, according to annual surveys by the Graduate Management Admission Council, a nonprofit group that administers the GMAT.

Jonathan Lemle, in his second year at Columbia Business School, is still committed to landing a job at a real estate fund.

"If anything, the crisis has just motivated me to work harder," he said. "The jobs that I am seeking are still out there, there will just be less of them and they will ultimately be harder to obtain. The program is what you make of it."

Driving the interest in a post-MBA finance career is simple economics. Stocks and houses may be on sale, but business schools are not any cheaper than they were 18 months ago. Tuition and fees at top full-time MBA programs still average almost $90,000, roughly $100 per hour of class-time. Students, in turn, are not any less enthralled with the prospect of a lucrative Wall Street career, even if they may be harder to come by these days.

Sarah Driansky, a current MBA candidate at New York University's Stern Business School, said the cost of the degree is "truly exorbitant," though she does not regret her decision to pursue one. "It makes any career choice other than a top finance or investment banking position, a serious economic decision," she said.

The value of an MBA was questioned in the wake of the crisis, but the financial storm also whipped up a wave of applications to the country's top business programs, despite -- and possibly because of -- an anemic job market. Applications to Harvard Business School, traditionally a pipeline to Wall Street, were up 16% in 2008 and rose an additional 5% this year. The Stanford School of Business saw its applications rise 15% in both 2008 and 2009 while Northwestern's Kellogg School of Management opened 6% more applications last year and has seen a similar level this year.

The cost-benefit analysis of a business degree does not appear to have changed in the eyes of aspiring MBAs. Those who got their degrees from full-time programs in the spring -- even as the economy was on its knees -- expected a 77% increase over their pre-graduate school salaries, according to the GMAC survey. And 91% of those students said that they considered their degrees a good value.

"$100,000 certainly feels like a lot of money right now, but most of us feel as though it will pay off in the long run," said Eric Gonzalez, a current student at Columbia who spent five years prior to school working in sales and trading.

An alumni network, arguably the most-valuable aspect of a business degree, has only appreciated amidst the flood of finance pink slips.

Ellis Chase, a Manhattan-based career consultant, said that alumni connections are the only reason to go to a top-tier MBA program.

"For example, a year ago, you were an idiot if you were trying to get a job at an investment bank," he said. "But it wasn't about that. It was getting in touch with someone at an i-bank, who could introduce you to someone in a boutique outside of New York, who could introduce you to somebody working on TARP."

Chase said that he seldom advises a client against business school.

"Industry-Wide Hangover"

Still, a larger percentage of current students are facing big student loan payments without a job offer in hand than in the past, like hedge funds sweating a margin call.

Driansky, at NYU, said that the fall of 2008 showed the "bipolar nature" of the finance industry.

"It felt as though we were experiencing an industry-wide hangover," she said of recruiting for summer internships. Some of Driansky's friends were laid off just months after leaving school, while others had offers rescinded days before graduation.

Only 43% of students hoping for a job in finance or accounting had received an offer by mid-March, according to the GMAC survey.

Robyn Underwood, another MBA candidate at NYU, said that classes quickly took a backseat to recruiting when Lehman went down last fall.

"The crisis changed everything," she said. "The schools and recruiters tried to say 'don't freak out' and that everything would work out okay. In the end, things didn't turn out well for a lot of students."

Opportunities, however, are still out there. Underwood accepted a position at Credit Suisse for the spring.

Driansky managed to land a summer internship in Credit Suisse's energy group, despite the recruiting season panic. But when it came time to accept a full-time position, she went with Hess Corp. where she will still practice finance while also learning more about running a business.

"I think the crisis did change my goals," she said. "The true risk to a career in finance was that many talented people possess very similar skill sets."

For the time being, there are no signs of the MBA market cooling off. In the first 10 months of 2009, almost 213,000 people took the GMAT test required by most MBA programs, slightly more than in the same period last year and a 13% increase over 2007.

"I think things turned out a lot better than we thought they would," said Ethan Hanabury, a senior associate dean at Columbia University's Business School. "Students certainly have some concerns over their short-term prospects for jobs, but they also seem very optimistic. They are able to separate this experience from what's going on in the market."

Write to Kyle Stock. Stock is currently pursuing his MBA at Columbia Business School.

More from Stock:
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- Conservative Strength: Credit Unions Continue to Grow During Crisis

- The Next 100 Years: Finance Lobbyists on the Front Line

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