You’re getting an MBA to work on Wall Street.
Okay, maybe not you, but statistically speaking at least a third of newly-minted U.S. MBAs end up in finance. This is particularly true at top schools: 38% at GSB, 34% at Wharton, 37% at Booth, and 29% at HBS. No other industry comes close. Consider Harvard, a larger program known for having more “diverse” industries represented in its class profile. Even so, HBS produces 1.5x as many finance grads as it does consulting or tech grads (21% and 20%, respectively this year). Despite intense marketing efforts targeted at “trendier” industries, the bedrock of the high-end B-school category remains the revolving door from high finance, to an elite MBA, and back to high finance. This is true almost across the board, even at schools that don’t have a “finance reputation.”
Why? What makes a Goldman Sachs alum so valuable to an elite MBA adcom? And how can non-finance applicants (meaning: non-bulge-bracket-I-banking-analyst applicants) compete?
Do Adcoms Pick Finance Applicants, or do Financial Firms Pick Good MBA Applicants?
First off, it’s worth considering this little correlation/causation problem. Top finance candidates often got their finance job because they already had a number of traits that B-schools would be happy to see in any applicant: high GPAs, degrees from elite undergraduate programs, a good network, etc. Finance recruiters and adcoms are looking for a lot of the same things, and in this sense having a big finance name on your MBA application is like being pre-screened by the firm’s HR department. The adcom knows that if you have the stuff to get in at a big New York investment bank, you probably also have what they’re looking for.
However, this logic is not sufficient to explain the overrepresentation of finance veterans in the MBA classroom. Finance proper is responsible for less than 5% of GDP, and graduates from elite universities can found in many other similarly influential industries (big tech, for example). Finance wouldn’t be such a big part of the class at top-level MBA programs for long if these students weren’t also offering something unique in the classroom.
What A Finance Hotshot Offers an MBA Class
There’s a reason adcoms are most interested in bulge bracket investment banking analysts, and not the people on the trading floor or quants working in less prestigious departments: Investment bankers get a chance to view companies at a high level, far beyond peers in many other industries. Much like management consultants, I-Banking analysts must evaluate companies holistically, and attempt to forecast their future value. They then present their insights to C-suite leadership at client companies, executives who are very rarely in the same room as the similarly junior employees at their own company.
Big picture perspective and sharp presentation skills are crucial to success when working on MBA case studies. A finance student who has done high-stakes presentations in front of senior stakeholders can set a good example for peers from other industries, who are unlikely to have had similar experience. They can also help their classmates understand what factors a bank or investor looks at when deciding whether or not to fund a project—crucial information for any aspiring founder or CEO.
The other major pillar of an analyst’s life—quantitative modeling—is much less significant than the soft skills discussed above. Analysts might spend a lot of time on Excel, but that’s hardly unique in the applicant pool. Technical consultants and accounting types from the Big Four often have much more financial modeling knowledge than a bulge bracket I-banking analyst, but the acceptance rate for those accounting applicants is much lower. It’s not that these skills aren’t useful in the classroom, it’s just that they’re much more common in the applicant pool, and therefore not as differentiating during the admissions process.
Finance Is Where the Money’s At
However, these skills don’t explain finance’s appeal by themselves. Adcoms also take into account candidates’ potential for “future success” (read: earnings). The percentage of the Wharton class going into finance peaked in 2008 at a staggering 48%, but after the Great Recession, when the compensation gap between finance and other lucrative industries narrowed, the percentage of MBAs going into finance fell. By 2015, only 37% of Wharton grads were going into finance, and some commentators argued that as money moved toward different industries, finance would become a smaller part of the MBA class.
This proved to be entirely wrong. The naysayers misread the appeal financiers have to MBA adcoms. Sure, a finance applicant will have an easy time reentering finance after graduation, and the high salary they’ll earn there will help push up the school’s earning statistics, moving their alma mater up the B-school rankings. That’s undoubtedly important (you’ll never lose money betting on adcoms to “act in the way that improves their ranking”), but it’s not the whole story.
Tuition dollars and a boost in rankings are a pittance compared to the real money: donations. At HBS, tuition and fees make up just 15% of total revenue! The big money is coming straight from the finance industry. Columbia’s brand new Manhattanville campus has two huge buildings named after Ronald Perelman and Henry Kravis, both billionaires who made their fortune on Wall Street and donated over $100 million each. David G. Booth, founder of Dimensional Fund Advisors, paid a cool $300 million to get Chicago’s entire business school named after him.
The end result is that B-schools assess finance applicants as more capable of the kind of astronomical success that pays their bills. It’s a virtuous circle: by stacking their incoming MBA classes with finance folks, elite B-schools end up with a donor base that’s more interested in finance, more willing to sponsor professors studying their field, and that wants alumni of their firms to be admitted. In a very real sense, B-schools’ real customers are not MBAs, but donors—especially successful financiers and the firms they come from.
What this Means for You as a Business School Applicant
If you’re applying from a top-tier financial institution, focus on soft skills and leadership over basic quant work. The ability to model or to code is really just table stakes; it’s not going to set you apart. Demonstrated talent for developing people, or a passion for taking up the leadership mantle within your firm—these are the kinds of things that make you competitive.
Along those lines, you’ll also want to think hard about what makes you stand out from your finance peers at work. Coming from finance is an advantage, but recognize that adcoms see a lot of applicants just like you, and they can’t accept them all. Give the adcom a taste of a way in which you are “playing against type”—maybe a rare hobby, an aspect of your background that’s unusual in finance, or an area of finance you find interesting that many of your peers don’t. A little differentiation goes a long way.
If you’re not a finance applicant, consider how your profile fits with the adcoms’ underlying needs. What appealing aspects does your profile share with that of a high-flying finance applicant? Think about:
- Times when you worked with C-suite or higher management on projects with a large, company-wide scope.
- Times when you worked with external stakeholders like suppliers or vendors, clients, or joint venture partners on high-level strategic initiatives.
- Times when you were responsible for launching something – a new product or service, a new program or initiative, etc.
- High-stakes presentations you may have made, that convinced your audience to make an important business decision.
- Your post-MBA plans, and how the plausible best-case scenario compares to the relatively high degree of certainty a finance applicant offers. Do you have a clear and convincing plan for your next steps that makes a ton of sense given your background? Is it clear and obvious how the MBA will help propel you forward? Can you prove that you have the network, skills, and knowledge to pull it off?
Finance Is Not the Only Way In
Examining why finance applicants do well in business school can help us better understand adcom’s motivations and what they value in applicants. However, finance is far from the only way into an elite MBA program. When admissions deans say they want a class drawn from diverse industries, they are being sincere! Diversity in itself is a benefit to the institution.
It’s like Hollywood: the studio makes the most money off the cheap blockbuster horror movie. If that was the only thing you knew about the industry, you’d think that they would pump out just that type of movie over and over. But it wouldn’t work, because the studio’s prestige would suffer, and actors and audiences would no longer be drawn to their projects. So in the long term, the studio NEEDS to make some lower profit art-house stuff, and some rom coms, and some CGI-heavy superhero films, just to keep the whole ecosystem running.
If you come from a non-traditional (non-finance, non-consulting, non-Fortune 100) background—you’re the arthouse picture. You won’t make the B-school as much money long-term, but you’re essential to maintaining the school’s prestige and appeal. And just like a jaded producer seeks out genuinely fresh stories, an adcom used to reading hundreds of applications from the same handful of banks each year often gets most excited about submissions from novel or unexpected industries.
As for you finance types, if you walk away with only one takeaway, let it be this: don’t be boring. Yes, the adcom accepts a lot of applications from top firms, but they also receive a lot. If your application stands out from the herd and brightens the reader’s day even a little bit, your chances of beating out the “all work and no play” guy one cubicle over grow exponentially.
Alex is the Managing Director of Systems & Content at Admissionado, a top admissions consultancy. Since graduating from Columbia University in 2013, he has worked with hundreds of MBA applicants on thousands of essays, helping his students maximize their MBA potential. From his base in New York City, he has written a wide variety of education-related reports, case studies, and articles, many of which can be found on Admissionado’s website and Amazon store.