Should You Get an MBA to Break Into Investment Banking?

MBA Investment BankingI get a lot of questions about business school.

And I try to answer what I can – but just like with the CFA, GPA rounding, and my other favorite topics, there’s a ton of bad information out there.

Here are some myths you should stop believing right now:

  • That a top MBA program is a guaranteed ticket into Goldman Sachs or KKR.
  • That even 2nd tier programs will help you break into investment banking or private equity.
  • That you can easily break into fields besides investment banking as a career-changer in an MBA program.
  • That it’s a good idea to go to business school directly from undergrad.

All of those are partially or completely wrong.

So here’s when business school is useful, when it’s not useful, and how to use an MBA to break into finance:

Definitions

There are many reasons to attend business school: maybe you want to move into management in another industry, maybe you want to network and learn more about business so you can start your own company, or maybe you just want to take a break for a few years.

Those are all fine, but I’m assuming here that you want to use business school specifically to break into investment banking or related fields like private equity.

Does Business School Actually Help You Break Into Finance?

If you’re interested in finance, there are 2 solid reasons to go to business school:

  1. You’re from a non-finance background, you’ve worked full-time for 2-3 years, and you’re using the MBA program to make a career change, gain credibility, and get better access to recruiters.
  2. You’re already in a field such as investment banking or private equity and you need business school to advance – your firm has explicitly told you that you need an MBA to move up the ladder.

If you’re not in either of those categories, business school is a bad idea and will yield a low return on time and money.

Here’s why that’s true – and why you need to stop believing those 4 myths at the top of this page:

Top MBA Program = Goldman Sachs or KKR!

Wrong.

Competition is tough at these firms, and in the case of top PE firms like KKR, most people actually get in prior to business school – after they’ve worked as investment banking analysts.

If you think about the numbers, this claim also makes no sense: there are (tens of?) thousands of people at top schools each year, but banks and other finance firms might only hire a few hundred in each recruiting cycle.

Sure, some of the students have no interest in finance and don’t apply in the first place – but plenty of others recruit everywhere and win no offers.

Not only are you competing against hordes of bankers and PE guys who want to stay in finance, but you’re also competing against former engineers and marketers who are suddenly “interested in finance” as well.

A top program gives you more credibility and better access to recruiters, but you have to do a whole lot more than apply and get in to win job offers in finance.

Even If I Don’t Go to a Top Program, It Will Still Help!

I hate ranking schools and banks and will never do it here, but business school is only useful if banks actually recruit on your campus.

Otherwise there’s no point in going – so if you can’t get into top 10 programs (or any program where most banks recruit) then don’t waste your time and money.

I’m not going to give a list of top schools here because it changes from year to year and no one agrees on the “best” programs anyway.

But use the US and international rankings compiled by other groups – if the program you’re applying to is not one of the top-ranked ones, do your due diligence first and ask students there how many banks actually recruit.

I Can Get Into Private Equity, Venture Capital, Hedge Funds, and Other Fields Outside of IB

This one’s not completely false, but it’s less true for certain fields:

Most career changers, of course, go to business school to break into investment banking and that’s possible assuming you’ve made the right preparations (keep reading).

Sales & trading groups don’t do much recruiting at business schools because they don’t care about the degree; wealth management and related industries do some recruiting, but not nearly as much as investment banks and management consulting firms.

I Can Go to Business School Right Out of Undergrad

This is a really, really bad idea because then you’re stuck in “no man’s land” – no bank would bring you on as an analyst, nor would they hire you as an associate since you have no work experience.

Business school admissions have been skewing younger and younger over the years, but most of the younger students who attend are not going for banking or consulting jobs.

The Harvard 2 + 2 program might be an exception, but even there you get 2 years of work experience before completing the program.

When I reviewed resumes in investment banking, most of the MBA-level candidates had at least 3-5 years of full-time experience – otherwise you don’t have enough real world experience to manage down and manage up.

Banks do promote some analysts to associates without requiring an MBA degree – but that takes 3 years of work as an investment banking analyst, which is equivalent to 6 years of a normal job in terms of hours worked.

How to Use Business School to Break In

Here’s an example of how you would use business school to break into banking as a career changer:

Step 1: You study biology as an undergraduate and work for a biotech startup for 2 years after graduating.

Step 2: You get more interested in the business and policy side after you talk with friends in business development, so you leave the startup after 2 years and join a healthcare policy think tank in Washington, DC (or whatever the capital of your country is) and work there for another 2 years.

Step 3: During your first year at the think tank you apply to top business schools. You get into Wharton and decide to go there and pursue the health care management major.

Step 4: After 2 years at the think tank, in the summer before you go to Wharton you cold call extensively and work for a few months at a boutique healthcare investment bank to gain some finance experience.

Step 5: Also in the months leading up to business school, you contact all the alumni you can find who are working in healthcare and healthcare finance-related fields. You’ve spoken to dozens by the time you get to business school.

Step 6: Once you’re on campus, you continue to stay in touch with your contacts and you make weekend trips to New York and San Francisco. When summer internship recruiting comes around, you can point to a logical progression toward finance and your industry experience in healthcare.

Since you’ve done so much networking, have a great resume, and have prepared for interviews, you get a summer internship in the healthcare group at a bulge bracket bank in San Francisco, which turns into a full-time Associate offer.

This is just an example of the “path” you might take – you don’t have to be from a healthcare background and you don’t have to have gone to Wharton or worked in San Francisco.

But this practice of working in another industry and then moving into a related industry in finance is common, which is why I’ve picked it.

What did our aspiring banker here do right?

Applied ONLY to Top Schools

Not all of us can get into Wharton, but it’s a waste to aim for 2nd tier schools. If this person had not gotten into a top program, she would have been better off cold calling boutique banks and networking aggressively.

And if that didn’t work, she should have pursued a management role at a healthcare or biotech company and then leveraged that to move into venture capital.

Got a Pre-MBA Finance Internship

This is one of the key ways to show you’re serious when you’re using business school to rebrand yourself.

It doesn’t need to be an internship – it might just be a part-time or informal position outside your normal job, or it might be a finance-related competition, program, or conference.

You just need something to show that you didn’t just get brainwashed into wanting to be in finance when you arrived on campus.

Started Networking Before Going to Business School

This goes along with the point above: you need to show commitment even before you arrive on campus.

A lot of undergraduates don’t understand the importance of networking and/or are too “shy” to do it – but this is 100% different at the MBA-level, where everyone else will be pounding the pavement aggressively.

If you’re not doing at least as much as everyone else, you’ve already lost.

Told a Convincing “Story”

I’ve seen a lot of interviewees tell awful or non-existent “stories” in interviews. That sinks your chances of advancing to the next round, because a poor first impression is nigh-impossible to overcome.

So please watch the story tutorial right here and also read about how to answer the “Why investment banking?” question right here.

In the example above, our aspiring banker would have explained that she started out being interested in biology, but then came into contact with a friend who worked in business development (her “spark”), which made her more interested in that.

She decided to move into a business and policy role after that (growing interest), and in her new position she got to analyze a lot of healthcare deals, which made her more interested in finance and led to the Wharton program and the internship at the healthcare boutique.

She’s here today because she wants to become a trusted advisor to healthcare companies and leverage her industry background and knowledge of finance to get there.

Got a Brand-Name Internship and Leveraged That Into a Full-Time Offer

Just like at the undergraduate level, you need a banking internship if you want to use an MBA program to break in.

If you’re in a 1-year program like INSEAD where you have a much shorter timeframe for an internship, you can still follow this plan – it’s just that you have less of a margin for error.

More About Business School

So that’s why you’d want to – or not want to – go to business school, and how you should use it to break into investment banking.

I can’t cover every angle and all other MBA-related questions here or this would turn into a book, but you can check out these posts on M&I and Management Consulted for more tips on using business school to break in:

Good luck, and let me know which MBA program you decide on.

-Brian

Mergers & Inquisitions
Breaking Into Wall Street

P.S. Get here from an email forward, a friend’s link, or a random Google search?

This lesson is part of The Banker Blueprint newsletter – which gives you all the tips and insider information you need to break into investment banking. Learn more about it and sign up here.

P.P.S. If you’re looking for business school admissions prep and you’re thinking about the GMAT right now, I highly recommend the GMAT Pill program from my friend Zeke Lee.

It’s very similar to my own Breaking Into Wall Street training program, with step-by-step video-based tutorials for everything and interactive Q&A. And Zeke is an expert on getting high GMAT scores in a short time frame – so sign up today to score in the 98th percentile.