The Top Incubators & Accelerators

The Shrinking Appeal of Wall Street

We all have embarrassing skeletons that we’re afraid to share. Maybe you married a drummer after one too many Hurricanes in Vegas. Perhaps you dyed your hair blue to fight the power or tapped out to a 16 year-old during your mixed martial arts phase. Those things happen. People will laugh and forgive. In many MBA campuses, there is one offense that can get you branded with a scarlet letter. And it doesn’t include blowing off a case or hogging the limelight. Instead, it involves the world’s oldest profession – banking.

OK, I’m being melodramatic. I think farming came before banking. And your section probably won’t shun you for joining Goldman Sachs. Instead, they’ll cock their heads, narrow their eyes and purse the lips in a sign of pity. It’s like announcing you want to be a teacher or a cop in high school. Banking just isn’t cool anymore. And your friends will probably wonder if you’re going to tank their 401K or end up folding laundry at Club Fed.

Make no mistake, the appeal of banking is trending downward among MBA students. The number of graduates entering banking, for example, shrunk 41% since according to the Financial Times. At Harvard Business School, that number fell 52%, So what’s behind all this? For one, MBAs are flocking to tech. At Harvard, for example, the percentage of graduates entering tech climbed from 7% to 17%, as students look to build their fortunes in the magical world of Silicon Valley. On one hand, that’s a real danger says Ros Stephenson, UBS’s Head of Americas, who notes that failures and modest results are by far the norm. However, that said, this trend also reflects a generational shift where future business leaders view tech, not finance, as the future. “I think as Millennials that we see that tech is shaping our future and we want to be part of that movement,” says Columbia Business School’s Carol Pak on FOX Business.

Conventional wisdom is that Millennials are shying away from working breakneck 80 hour weeks where you’re always tethered to your smartphone. Instead, they are a generation seeking balance, impact, and purpose. And there is some truth to this perception, with Hazel Mulhare, a vice president of a firm specializing in recruiting junior bankers, telling the Financial Times that many recruits “don’t want to be a cog in the machine.” Another anonymous banker adds that Millennial motivations are different. “If they started 10 years ago, the juniors would have been saying, yes, I want to work hard but I want the perks to work hard, concierge services, people to run errands, car services,” he shares in the Financial Times. “Now, it’s protected weekends and time off…they say they value that.”

And they can get away with such demands, observes Michael De Lucia, Columbia Business School’s Director of International Advising and Business Development, because there are so many paths available to them (including entrepreneurship). “Today, it’s a clear diversity of choices for students. I think many of them don’t feel limited by their options either.”

Of course, pay also factors into students’ decisions. Alan Johnson, managing partner of Johnson Associates, points to total pay at Wall Street banks falling by 10% in 2015. With smaller financial incentives, many MBAs just aren’t willing to put up with the sacrifices and hassles, states Lynda Gratton, a Top 50 Thinker who teaches at the London Business School. “The deal with banking was that you worked really hard but got paid lots of money. Now the deal is broken people are looking at other paths.”

Lest we forget, there is always the elephant in the room. In the wake of the financial meltdown, the banking industry has been tarred with a reputation for recklessness and corruption. In Bloomberg Businessweek, William Dudley, who heads the Federal Reserve Bank of New York, pointed to a discussion he recently had with b-school deans who shared that many students who considered themselves highly ethical were shying away from banking. Worse, Christine Lagarde, managing director of the International Monetary Fund, claimed in a November speech that the financial sector “ranks third from the bottom, after government and tobacco” in terms of public perception of integrity according to Bloomberg Businessweek. In other words, being associated with finance wasn’t isn’t an existential threat to the Millennial soul – but a potential stain on their career.

However, some Wall Street vets view the shift away from high finance as part of a cycle. Count Vince Ponzo, Director of The Eugene Lang Entrepreneurship Center at Columbia Business School, among them.

“Wall Street has been adjusting to this too,” he explains to FOX Business. “You have companies like Goldman Sachs (GS) that are actually getting more involved in entrepreneurship. So, I don’t think banking is dying, I just think it’s in the midst of a traditional period.”

And Wall Street, at least, is responding. In an interview with the Financial Times, Scott Rostan, Founder and CEO of Training the Street, points to his company’s research, which shows 43% of respondents are making $125,000 or more to start, up 26% from 2014. The Financial Times also reports that Goldman Sachs has developed measures to include “faster promotions, guaranteed rotations and less menial work” to appeal to Millennials looking to add skills and make a difference sooner.

In other words, banks are tweaking their approach, knowing time is on their side and ambitious MBAs will ultimately return to the nest. “We’re trying to make sure that we have the best practices in the context of the way we recruit people, train people and develop people,” explains David Solomon, co-head of investment banking at Goldman Sachs. “Races aren’t won by 100 yards, races are won by steps. You’ve got to make sure that your relative performance is a little bit better.”

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Sources: Bloomberg Businessweek, Financial Times, FOX Business