by Brian DeChesare Comments (17)

Is Finance a Good Career in 2021 and Beyond?

Is Finance a Good Career Path?

If you look at most sites that “teach you” how to break into investment banking, private equity, and related roles, there’s one question they rarely address: is finance a good career?

We like to debate salaries, bonuses, hours worked, and exit opportunities, but hardly anyone asks the critical question: should you bother with the industry in the first place?

This question seemed pointless a long time ago because finance jobs paid so much more than the alternatives.

But this question is increasingly relevant as changing macro conditions affect the industry’s outlook:

What Does “Finance” Mean in This Context?

In this article, I’m using “finance” to refer to roles such as investment banking, private equity, hedge funds, and venture capital (primarily IB since that is the most common entry-level job).

Yes, equity research, asset management, sales & trading, corporate finance, and corporate development are also “finance jobs,” but they’re further removed from this discussion because:

  • Equity research, asset management, sales & trading, and quant fund jobs are more on the “public markets” side and attract somewhat different candidates.
  • And since corporate development and corporate finance roles exist mostly at “normal companies,” they’re more stable in the face of big macro shifts. They also pay less, but that’s the trade-off for higher stability and lower stress.

So, a longer, more precise version of this question is:

“Are careers in finance fields such as investment banking, private equity, hedge funds, and venture capital still good in both the short term and long term? And if not, which other careers are better to pursue?”

Why Now?

I like to examine this question every few years, and I last published an update in 2016.

Since that time, there have been several significant changes:

  • Macro conditions have changed, and we seem to be stuck in a loop of zero/negative interest rates, money printing, and currency devaluation. And it’s obvious that these have become the new normal rather than “temporary measures.”
  • Traditional exit opportunities from IB roles are still good, but they have lost some of their appeal over time.
  • Alternative careers, such as working at the Big Tech companies, have also lost some luster because these companies may be heavily regulated or broken up in the future. And that’s a big deal when stock-based compensation is a large component of total compensation.
  • Some trends, such as super-early recruiting, have partially reversed, with some banks now starting the internship recruiting process a year in advance rather than 1.5 years in advance.
  • And, finally, there’s the pandemic, the accompanying lockdowns and mass hysteria, and the fact that no one knows when things will ever “return to normal” (if ever).

Is Finance a Good Career? The 2016 Version

This article from ~5 years ago is no longer on the site (this version is a replacement), but the TL;DR version was:

  1. People usually justify finance careers based on the skills/training, not knowing what else they want to do, the exit opportunities, the high compensation, and gaining a network of “the best and brightest.”
  2. But these arguments have weakened over time because you can now learn many of the skills independently, some exit opportunities, such as hedge funds, have declined, the money is good but not necessarily “the best” anymore, and fewer students from top schools are entering the industry.
  3. Recruiting keeps moving up, making it more difficult for everyone, but especially for students at non-target universities and MBA programs.
  4. So, if you want to enter the industry to make a lot of money in a few short years or to learn specific skills, it’s not the best idea, given the time, effort, and early preparation required.
  5. It makes the most sense if you like the work and want to make a long-term career out of it, or If you want to enter a field, such as private equity, that has another finance role as a prerequisite.
  6. Otherwise, if you’re in the “I don’t know what to do, but I want to make good money after graduating” category, join a tech company in an engineering, product management, or sales.

I still agree with parts of this advice, but I disagree with the overall conclusions.

Is Finance a Good Career? The 2021 Version (Short-Term)

Over the past few years, the short-term prospects of finance jobs have improved, but the long-term outlook has worsened.

By “short-term,” I mean roughly 3-5 years. In other words, enough time to work in an entry-level role such as an IB Analyst and then get promoted or move to a buy-side job.

By “long-term,” I mean more like 10-15 years – enough time to reach the senior levels at a bank or other financial firm.

Short-term prospects have improved because:

  1. The alternatives, namely the Big Tech companies, have a more questionable future than they did 4-5 years ago. Politicians worldwide and the general public seem to hate tech, and we could start seeing country-level bans and breakups.
  2. Finance has been less affected by the pandemic and lockdowns than other industries. Yes, bonuses will be down for the year, and banks have slowed hiring or cut staff in some cases, but it’s a far cry from the travel and restaurant industries.
  3. And while recruiting still takes place earlier than it did in 2015 or 2010, it’s a bit less crazy than the 2018 timeline (for example).
  4. Finally, entry-level IB/PE jobs still pay a lot – maybe a bit less than an engineer at a FAANG company, but still more than almost any other entry-level job.

There are some negatives, such as the awkwardness of “networking” in the current environment and the inability to meet in-person.

Also, the recruiting process is becoming increasingly impersonal due to HireVue, online tests, and various boutique banks using headhunters to do their work.

On balance, though, I’d say the short-term prospects have improved.

For some evidence, take a look at recruiting data from HBS and Wharton.

At HBS, for example, 39% of students went into “Financial Services” in 2011, but that fell to 31% in 2015. But by 2020, it had ticked up to 34%.

At Wharton, the percentages entering “Financial Services” were:

  • 2008: 48% (!)
  • 2011: 39%
  • 2015: 37%
  • 2020: 36%

So, interest declined sharply in the aftermath of the 2008 financial crisis, but since then, the percentage of students going into finance has remained in the 35-40% range.

Is Finance a Good Career? The 2021 Version (Long-Term)

In the long-term, though, I think the industry outlook is less appealing because:

1) Interest Rates Cannot Fall Forever as Deficits Rise and Inflation and Currencies Remain Stable

Since 1980, falling interest rates have propped up all financial assets – equities, fixed income, real estate, and private equity.

They’ve also encouraged significant M&A activity because all deals look great when the cost of borrowing is at all-time lows, the foregone interest rate on cash is 0%, and stock prices rise indefinitely.

But now that rates are 0 or negative, they can’t fall much further.

If they rise – i.e., if central banks lose control of rates – then the prices of all financial assets will decline, and debt, equity, and M&A deals will become harder to justify.

But even if rates stay the same, that means that deal activity is unlikely to grow beyond its current levels.

And if central banks keep printing money and eventually use yield curve control to suppress rates, they’ll get (more) currency devaluation – which will also make deals more difficult to execute.

In short, I don’t see how monetary and fiscal conditions could become more conducive for finance jobs. They’ll either stay the same or get worse.

2) Interest in Regulation and Antitrust is Picking Up

Especially after the events of this past week, let’s say that many people are now questioning the ridiculous amount of power that tech companies have.

But even outside of tech, plenty of other industries have consolidated over time.

For more on this topic, you should read everything that Matt Stoller writes (e.g., see his piece on the monopoly in the cheerleading space).

I’m not saying that all the large M&A deals will be reversed or that all large companies are going to be broken up – but I could see it happening in some cases.

I do expect that it will become more difficult for many deals to win approval from regulators.

More regulation and oversight mean reduced deal activity, a smaller fee pool, and lower compensation for senior bankers in the future.

3) Political Pressure on the Industry Will Increase Because of Rising Wealth/Income Inequality

Although banks and investment firms are not directly responsible for rising wealth and income inequality, they have been some of the chief beneficiaries.

It’s quite easy to point to examples of financiers “cheating” or otherwise paying less in taxes than they should (see: the Robert Smith tax evasion scandal).

Politicians will likely focus on tech companies first, but eventually, the “eye of Sauron” will turn to the finance industry as well.

I could easily see the carried-interest tax loophole being closed under the Biden administration, and private equity may become a more regulated industry as well.

The Bottom Line: Is Finance a Good Career?

In the short term, I would say yes.

Even though finance jobs no longer pay a huge premium to everything else (see: Big Tech software engineering, prop trading, and quant fund jobs), they still pay more than ~95% of other opportunities.

Also, unlike some other, more lucrative options, you do not need to be extremely good at math/statistics/programming to get into this industry.

In the long term, the picture is more of a mixed bag.

I don’t think these industries will “disappear,” but I do think that compensation will decrease and that it will become more difficult to reach the top – especially in buy-side roles.

We often get questions asking something like, “What’s better? Tech or finance? Which one’s better in the short term and long term? Please give me a blueprint.”

In previous years, I sometimes attempted to answer this question.

But I now have a new answer: neither one.

Your long-term goal should be to become financially independent via a business, a side hustle that turns into a business, or your own investments.

No matter how much you earn, you never want to be dependent on a single company for your income.

You can get there by starting in an IB/PE/HF role, staying there for a long time, and saving and investing wisely, but there are other options, such as starting a side project in a day job and expanding it over time.

You might object to this recommendation and say, “But people who go into finance don’t take risks! They can’t start companies!”

To which I respond: “It doesn’t have to be a company – start small and reduce the risk in increments. Also, anything you do to increase your income involves risk, so pick your poison – it’s also risky to move up the ladder in any industry.”

If you want to achieve that long-term goal, I recommend this set of steps:

  1. Win the Year 1 or Year 2 Finance Internship in University – Since IB recruiting starts early, you need to win an early internship to be competitive. Also, you want to see if you like these jobs, and, if not, rule them out. I recommend a somewhat technical major or a technical minor to keep your options open.
  2. Use the Internship(s) to Decide Whether or Not Finance is For You – If it is, continue and aim for the all-important summer IB internship (or an internship in whichever field you pick) at the large banks. Convert this internship into a full-time offer.
  3. If Finance is Not For You, Test Other Options – You could think about tech, but the field is wide open here. It could be healthcare, media, the Big 4, or anything else. I recommend roles where you are building (engineering) or selling (sales) – or both. You can also think about more creative transitions, like moving from a valuation role into corporate development if you want to work on deals, but you don’t like the stress and hours of IB/PE.
  4. Focus on Learning and Income Growth At First – Your first job matters mostly for setting you up for later opportunities. Even if it pays a lot for an entry-level job, you won’t be able to save enough to generate significant income from investing in your first few years. So, focus on increasing your income via promotions and transfers at first.
  5. Decide on the “Side Project” Path or the Promotional Path Within ~3 Years – If you like this industry, continue up the ladder and keep earning more money. If not, get to work on a side project that might eventually turn into an alternate income source. If you need ideas, check out Side Hustle School.
  6. Aim for Some Amount of Financial Freedom Within 10 Years of Graduating – This doesn’t mean “retire early” – it means “avoid staying in a job you hate.” If you went the promotional route, you’d rely more on your investments and income earned from them; if you went the side project route, you’d spend more time and energy on that.

My final tip here is that if you want to take the “side project to real business” route, do it early.

The longer you wait, the harder it gets.

I have friends who have wanted to “start something” for 10+ years.

But most of them never acted, so they have not made any progress.

In some cases, they had stressful jobs that made it difficult to do much else.

But in other cases, they lacked motivation or kept flip-flopping between ideas.

Now, some of them have kids and family obligations and jobs they don’t like – and although I’m too nice to tell them directly, their options are limited at this stage.

This article started as an update of a previous one but somehow turned into a career/life action plan by the end, as often happens on this site.

And I suspect it will generate more than a few questions, so ask away.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi Brian,
    Thanks for the article! At the beginning, you stipulated the difference between “finance” in this article versus “public markets”. Would you be able to talk more about the prospects of the public markets (particularly asset management), and what you meant by them attracting different candidates?

  2. Wealth management still looks strong in the long term no? If interest rates go up, UHNW investors will want to park more cash in higher yielding treasuries.

    Wealth inequality seems to be a big issue, but i’m not sure how higher taxes would affect wealth management. I would assume it would actually increase the need for an advisor because of their accounting and tax know-how.

  3. Brian,

    Great article as usual. I do hope you can offer some advice for me. I am a current sophomore at a semi-target and plan want to be a CRE Broker. My plan is to go into REIB for a couple years and then exit to become a CRE Broker. Is that a viable plan or is there a better way of getting there? Looking forward to your response.

  4. Avatar
    Chester Ming

    Hi Brian, I noticed you said you had done several internships in your first year of university in another article. In what time period were you able to do these? Given that summer break is about 11 weeks and summer internships last 10 weeks usually. Furthermore, these internships are usually for 2nd years are they not?

    My final question is what type of internships we should be doing in the first year vs the second year of university? I was under the assumption that in the first year you’re only expected to do a spring week program and in the second year, a summer internship… please correct if I’m wrong.

    Another great article thanks!

    1. OK, I don’t remember any article that said that unless it was an interview with someone else and not my own story. I definitely did not do multiple internships in Year 1 of university unless you really stretch the definition of “internship.” But recruiting was also different back then, and early internships were less important. People got into full-time IB roles at bulge bracket banks without previous IB internships, which would be almost impossible today.

      I would refer to the tips here for when you should complete internships: https://www.mergersandinquisitions.com/investment-banking-recruiting-timeline/ (though the timing is slower outside the US)

      A spring week can help, but not necessarily as much as the internet thinks (and there are potential downsides). Basically, you should aim to complete one school-year or summer internship at a boutique bank, PE firm, VC firm, or something similar within your first two years.

      If you’re in the UK, which I assume you are since you’re asking about spring weeks, you don’t need to start quite as early because applications for Year 3 internships tend to open up over the summer, which is a bit later than in the U.S. So it’s less important to complete an internship and start networking in Year 1.

  5. Given the updated outlook, what would be your take or advice for someone taking one of these paths a bit later in their life, say late 20’s MBA potential associate route, instead of the earlier 20’s post undergrad stage which I believe your article was aiming more towards. Any nuances to be aware of? Appreciate the guidance and as always, great content.

    1. Thanks. I’d say the main thing at the Associate level is to decide very early on if you actually want to stay in IB or not. And if not, get started with recruiting for other roles ASAP because it’s much more difficult to execute as an Associate, especially if you wait too long (whereas Analysts can get away with late entries into other roles). It’s somewhat easier to take the side project route if you go for roles outside IB at normal companies, such as corporate development, but harder to advance up the ladder. If you stay in IB or move to a buy-side role, you should focus on the promotions and try to build passive income from investing.

  6. Hi Brian,

    Super interesting article- I think the bit about getting into the side hustle to real business early is a hard pill to swallow for many. I had a question about where you see 2021 recruiting going. I am currently a junior in college and was not on top of my game for the 2021 summer recruiting cycle. I did end up with an IB offer but it is from an IBAB and accepted- what do you think prospects are for full time roles at a “better” bank? I have a 3.7 from a semi-target, diversity, and made some pretty good connections at BBs and EBs but I just made them too late. Is there any type of bank that hires more FT than others that I should concentrate efforts on?

    Thanks!

    1. Yup, agreed, but I think it’s the truth. You have to either move up the ladder or start generating serious side income to succeed.

      Personally, I wouldn’t even try to aim for an offer at a “better” bank this year unless you have, say, 20-30 good connections at BB and EB banks. If you do, maybe send each one 1-2 emails between now and the start of your internship to stay in touch, and then another one midway through to ask about accelerated recruiting.

      Your best bet is probably to aim for non-NYC offices and also groups that are a bit less popular because sometimes their intern yields are lower. If these contacts are all based in NY, then you could try anyway and see what happens.

  7. Hi Brian,
    I was able to jump into CD w/o IB from a non-target undergrad thanks to your articles.

    From your crisis recruiting article you mentioned A&D energy and I am curious about oil & gas A&D vs renewable energy PE (a post-2008 interview you did) in terms of LT/ST future?

    Appreciate your work!

    1. Thanks, glad to hear it! Well, renewable energy is obviously the hot area now and will continue attracting attention, but I don’t think traditional oil & gas will just “go away.” Short-term, renewable energy is probably a better bet, but the sector is also quite bubbly at the moment (look at First Solar’s share price). So, longer term, I think traditional oil & gas will come back. Oil prices seem very likely to rise over the next few years as inflation picks up as well.

  8. Hi Brian,

    Good advice on the side hustle vs promotion path in the first 3 years. I guess the best move might be to try the side hustle out at the start and if it doesn’t work out, just aim for the promotion route.

    Also, any chance of an update on the IB vs Consulting article or the Brexit article?

    1. Thanks. Yes, it’s best to try these side projects early on and see what sticks. You don’t want to be 40 and still trying random side projects all the time (at least, most people probably don’t want to be).

      IB vs. consulting – yes. Brexit – probably not for now because it’s too hard to figure out what is going to happen with the dystopian state of the U.K. due to lockdown #4 (or is it #5 or #3? I’ve lost track) in conjunction with Brexit. I may write an update if/when things ever return to normal on the health front.

  9. Very interesting article! I have been doing some freelance work as a side project. It seems that I will have to go though some approval process once I join a bank if I want to keep other income and business. Would it be a problem if I want to do some real business project while working in a big financial institution?

    1. Thanks. That is a good point; some banks will care about it and others won’t, but if it’s something related to finance in any way, yes, you should probably ask for permission. If you end up moving to a smaller firm that’s less regulated, often they won’t care about it. I didn’t close anything when I started this site while at a bank, but it was also easier to avoid being caught back then…

  10. You referenced product management as an alternative that has good compensation prospects. I read your article on product management but didn’t see a comp discussion in it. Do you have data on PM comp or how it compares to IB?

    1. It depends on the company size, but product management compensation is generally 20-25% lower than software engineering compensation at the equivalent level. At the FAANG companies, all-in compensation might be around $150K for the entry-level roles, rising to $300-400K at the mid-levels. See: https://www.levels.fyi/?compare=Google,Facebook,Microsoft&track=Product%20Manager#

      There will be a discount at smaller tech companies, but the main difference is that the compensation becomes much more stock-dependent at private startups.

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