top of page
Subscribe for Free Business and Finance Resources
  • Writer's pictureMatt Ting

Do You Still Need an MBA in Finance?

If you're interested in breaking into finance, check out our Private Equity Course and Investment Banking Course, which help thousands of candidates land top jobs every year.



Overview

The hardest career decision I’ve ever had to make has been whether or not to go to business school. After learning about the 2/2/2 path years ago (IB/PE/MBA), I had always assumed that getting my MBA was something worth doing. So getting into a prestigious business school really seemed like the perfect addition to my resume.


After completing banking and private equity, I started to become more skeptical about the idea of the MBA. The vast majority of my private equity peers were still interested in going, but I definitely had my share of second thoughts.


In this post, I’d like to share with you some of the key factors you should keep in mind as you’re debating the MBA. I no longer think it’s the perfect path for everyone, but it still makes a ton of sense for certain groups of people.


Note that my perspective is largely one for a career in finance and even more specifically for the buy-side. Your specific background, situation, and career goals impact the factors in this decision dramatically.


Disclaimer: I didn’t end up applying for business school. However, the main advisor for Peak Frameworks, Patrick Fong, has gone to HBS.



The Pros of Business School


I think the merits of business school are well documented. I view the main pros as such:


MBA Business School Pros

Career Switch

  • By going to business school, you’ll get some structured time to think about your next career move. You’ll get access to at least one recruiting cycle where employers will actively seek out candidates like you.

  • For some people, an MBA will be the only route that you can take in order to break into a target industry. If you don’t have any business background and you want to switch into say banking or consulting, the MBA is by far the most efficient route. It gives you a chance to do a pretty hard reset and re-brand yourself. As an example, Wharton says that 60% of its MBA graduates switch one of their function, industry, or title.


Salary Increase

  • On average, an MBA is going to improve your earning potential pretty significantly. This is because an MBA is going to introduce you to many higher-paying jobs (e.g. banking and consulting). This is also because an MBA is going to help you unlock promotions at your own company.

  • Across all MBAs, I would point out that the average salary coming out of MBAs is ~$140k. So depending on your job prior, this might actually not represent a true increase. If you come from product, software engineering, consulting or finance, this is more likely going to be a lateral salary move.


Financial Times MBA Salary Uplift


People / Network

  • Perhaps the most important factor of going to business school is the people you’ll meet and the network you’ll become a part of. Your classmates are going to be life-long friends, potential co-founders, and even potential spouses. You are going to be surrounded by extremely motivated, smart, and capable people who will also be conscientious about expanding their networks.

  • If just one of your classmates introduces you to a new boss or if you end up winning a deal down the road because of a school connection, the entire cost of your business school program could be worth it.

  • You also get a tremendous amount of access with an MBA. At a top MBA, you’ll have one of the best calling cards in the world. You’ll be able to reach out to alumni and open new doors.


Lifetime Prestige

  • It’s hard to put a price on feeling good about yourself, but there is a significant amount of brand value and traditional prestige associated with business school. There’s only going to be one Harvard Business School in the world, though the most prestigious companies are going to change from year to year. Many of these school legacies have been developed over centuries.


Education

  • The education is supposedly pretty great. I’ve heard mixed reviews, particularly that it’s going to be very redundant if you have a business undergrad. However, you’ll still be taught by some of the best professors in the world and have plenty of extremely smart speakers visiting.


The pros are well known and I definitely see the merits of business school. There is a lot of value in getting your MBA. If you want to switch careers or if you don’t come from a business background, it is still an incredibly wise move.

Buyside Career Switches are Still Rare


I want to make a specific note about buyside careers and how I don’t think MBAs actually help you career switch into buyside roles very easily. Unless you have some investing experience or have already done a feeder job like investment banking or consulting, I don’t think your chances of breaking into the buyside after the MBA are very good.


For example at HBS, 16% of the class comes from PE or VC. However, only 18% of the class goes back into PE or VC after HBS. Net-net, I don’t think there are that many new investing jobs being offered to graduates.



HBS Buyside Stats


Frankly, I think this is because the competition for these roles is already so high. You’re competing with tons of people who opted to continue working in related roles as opposed to getting their MBA.


From my anecdotal evidence seeing friends in MBA programs and having worked in private equity, I think that very few people break into the buyside with just an MBA. There’s some shuffling of seats and you might end up at a slightly better firm if you had already worked in investing, but for the most part, there are not that many new high-quality investing jobs. Even at HBS and Stanford, recruiting for the buyside can be pretty brutal.


If you're focused on breaking into private equity, you should check out our Private Equity Recruiting Course, which will teach you how to build an LBO model, do case studies, and deal with headhunters.



The Considerations of Business School



MBA Business School Cons

In my opinion, here are the main considerations you should have when you are thinking through business school:


Financial Cost

  • If you go to a top American business school, you can expect to pay $200-$250k. I think this is a lot of money. You can certainly pay off the debt if you end up in a high-paying job like banking or consulting, but at the end of the day, it’s still a huge financial commitment.

  • Many people go into debt in order to finance their MBA. It is estimated that nearly half of the MBA students borrow at least $100k to finance their MBA.


HBS MBA Cost of Attendance

  • The biggest concern for me here is the timing of the debt. Taking on additional debt when you are in your late 20’s and early 30’s – a time when you may be considering to start a family or buy property – can significantly restrict your options. I think that taking on that amount of debt really pushes you to optimize to take the short-term highest-paying jobs. In my mind, it really dis-incentivizes going into entrepreneurship and riskier career options.


Opportunity Cost

  • Most top MBA programs are 2 years. This time can help you re-orient your career and give you the flexibility to plan things. However, it also represents 2 years you could otherwise be working and earning.


Preparation Time & Effort

  • Getting into a good MBA is no easy feat. It requires a lot of dedication and mental focus while you’re probably working a full-time job. There’s studying for tests, writing essays, and doing extra-curriculars. It can be worth it, but there’s definitely a lot of sacrifice involved, often at the expense of your social life.


Dilution of Degrees

  • I think the value of the MBA is only going to continue declining over time, as schools grow class sizes and offer different masters programs. Many schools are incentivized to keep growing their MBA program, which I think reduces the value of a single degree.


Groupthink Temptation

  • Another dangerous factor of attending an MBA program is the tendency to adopt a groupthink mindset. When you’re in an environment with extremely competitive and successful people, it can be hard to think fully independently. From my experience in an undergraduate business program, I can attest that many people end up competing for whichever spots are traditionally prestigious. I think that can be a relatively dangerous mindset that doesn’t help you optimize for what you might really want.


In general, I think the most difficult factor to wrestle with is how the financial burden of an MBA can prevent you from taking true career risk. I think the MBA is more likely to lead you to short-term high-paying jobs that are conventionally prestigious.



The Validity of Prestige


Even after I assessed all of the costs of going to business school, I still had an innate desire to go and get a prestigious MBA. When I laid out all of the pros and cons, I felt that it wasn’t a perfect fit for me, but deep down I still wanted to be part of a prestigious institution.


And to be honest, I think that’s a valid reason to want to go. The top MBAs have such valuable brands and if one of your career goals is to have traditional prestige, I think that’s perfectly fine.


Some people optimize for money or for control and I think that wanting prestige is a completely reasonable goal as well. I think you should be honest with yourself if that’s the reason you want to go, so that you can honestly reflect on your decision. But if you feel uncomfortable about that, you should realize that wanting prestige is nothing to be ashamed of.


Summary


In summary, I think that you should go get your MBA under the following circumstances:

  • You have a clear career move in mind

  • You know you want to stay in corporate for most of your career

  • Brand and prestige are important values to you

Recent Posts

See All
bottom of page