Sternies Moving Away from Investment Banking?

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Written by Sanjana Gupta

Coming into Stern, most students are very aware of the fact that its main export is traders to Wall Street. It was normal for students to come to Stern, study finance and accounting and go to the Street, with many students still following this norm.

However, a trend most professors have noticed in subsequent batches are “the numbers for consulting are going up and the ones for banking are going down.” While the number of students entering investment banking are still high, they have suffered a decline in the past few years.

Sternies no longer dream of being the Wolf of Wall Street and it is no longer the most prestigious industry to be in. Several students have decided to not recruit for banking saying they “are not suited to the industry”, “don’t enjoy finance”, “don’t want a job where they are hunched over a desk 24/7” and “have realized that it is just a craze.” Most students today see the value in joining other industries that are suited to their natural skillset where they are more likely to succeed. In fact, some students have moved away from concentrating in Finance altogether, instead concentrating in Data Science, Marketing and Economics.

The beginning of the fall of the banking industry, especially sales and trading, began with the 2008 financial crisis during which the banking sector never seemed to recover from. This is evidenced by the fact that UBS had 1,100 traders a decade ago but have only 12 today. Professor Joe Foudy, Clinical Associate Professor of Economics, believes that after 2008, banks are subjected to “restrictive trading rules…regulations have limited the kind of proprietary trading they can take on.” The tighter risk management in these sectors has reduced the profitability and therefore the demand for workers in this department.

Another factor that has reduced jobs available in the banking sector is the automation of the sales and trading department. The development of sophisticated algorithms have minimised the need for human intervention. Professor Anindya Ghose, the Heinz Riehl Professor of Business, who consults with several companies in industries ranging from tech to consumer facing, thinks that the jobs lost in the investment banking industry have moved to other industries, especially tech, consulting and e-commerce–with the most essential skills being data mining and business analytics.

While student perspectives are mixed, Professor Foudy thinks that initially students were so entrenched in finance that they didn’t consider other options. Now that other firms in consulting and tech have increased their hiring from Stern, students have become more aware of other career paths they can pursue. What Foudy finds interesting is that these trends are mirrored across universities and among both undergraduate and MBA students.

For many students, Computing and Data science has replaced Finance as Stern’s “it” concentration either because the ability to play with data is now an essential skill, or because it counts as a STEM concentration, giving international students 3 years of OPT (allows them to work in the US on their student visa). The reality is that data analysts are required across all industries–from banking to advertising–and these skills are transferable across careers. One of Professor Foudy’s former colleagues at Stern had remarked that “the #1 service we do our students, no matter their career interests is to make them comfortable with data.”

Another factor which may make students averse to banking is society’s increased emphasis on work-life balance. Although major banks have recently made efforts to control the working hours for junior bankers, as Wall Street careers still have some of the longest working hours. In a world where U.S. citizens use antidepressants at least once in their life, Professor Ghose drew attention to the intangible value of job security and the ability to live a life outside work, something a career in banking may not offer versus other paths.

The fact remains that while a majority of Sternies still want to head straight to Wall Street after graduation, a sizeable chunk has acknowledged other industries. The Stern leadership once said that in the future Stern will be sending students into all careers ranging from traditional IB sales and trading to consulting to marketing to tech equally but it is still hard to imagine a world where Stern is not known for its finance majors.

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