Business Schools Prepare For A New Wall Street

As Wall Street tries to survive the credit crunch, business schools are planning their own rescue plans: tinkering with their curricula and preparing students for a different job landscape.

“Our advice to them is that this will pass,” says Joseph Baczko, dean at Pace University's Lubin School of Business in New York City. “We’ve gone through this before,” he says, referring to other crises like the 1987 stock market crash.

If tumultuous market swings weren't enough in recent weeks, Wall Street has undergone structural changes that are likely to shrink the number of jobs available to future business school graduates.

Investment banks Goldman Sachs and Morgan Stanley have opted to become bank-holding companies, while others—Merrill Lynch, Lehman Brothers and Bear Stearns—have either been bought up or filed for bankruptcy protection.

As a result, many schools are working to reduce the anxiety their student's are feeling by re-evaluating the curriculum and helping students navigate the gloomy job market.

At the Villanova School of Business, in Villanova, Pa., Dean James Danko sent a letter to all business school students on Friday Sept. 19, 2008; the end of a week that saw Lehman Brothers file for chapter 11 bankruptcy protection, Merrill Lynch agreed to a takeover by Bank of America and AIG receive an $80-billion federal rescue package. The letter encouraged students to meet with career services and to investigate “different career paths, industries and companies.”

That thinking was evident at other schools as well. Take Dean Van Tassell, 27, a senior in the MBA program at Pace.

“I’m starting to develop a contingency plan,” he says acknowledging that his dream job on a trading desk may be even harder to attain in this market. He's now also seeking opportunities in other areas like corporate finance and portfolio management.

Villanova dean Danko said the school is working with a more diverse group of companies looking to recruit business students including teen clothing retailer American Eagle Outfitters, conglomerate General Electric (the parent company of CNBC and CNBC.com) and British engine maker Rolls-Royce.

Ed Fredericks, a professor at Pepperdine University’s Graziadio School of Business and Management in Malibu, Calif. says that areas of growth for newer grads will be in smaller “boutique firms.” He recommends students intern over the summer to improve their chances of landing a job upon graduation.

That was the case for Andrew DeVries, 29, a senior in the MBA program at Emory University's Goizueta Business School in Atlanta, Ga., who was recently offered a job at a Wall Street firm he interned at over the summer.

"Most of the banks seemed to strictly [hire] out of their summer classes," says DeVries.

Graduates may have another reason for optimism. “They’re cheaper than the older talent,” says Baczko.

Cheaper indeed. The credit crunch has hurt entry level pay and starting bonuses more than during other downturns. Sign-up bonuses are lower because there’s more people in the job pool, says Van Tassell, who’s now actively job hunting. “They aren’t competing for labor right now.”

Curriculum Changes

In addition to helping students navigate the new job market, many schools say they are shifting the curriculum so that students graduate with a broader business background.

Emory's business school has done that and more, while Villanova now offers a combined finance and accounting course that exposes students to both fields.

Change and challenges aside, schools say they are not expecting a drop in applications. “The classic situation is that when certain sectors go down people look to sharpen their skills,” says Baczko.

In fact, many have seen an increase this year as the economy stumbled. A survey conducted by the Graduate Management Admission Council, an association of graduate business schools around the world, shows that 77 percent of full-time MBA programs reported an increase in applications in 2008, the highest in five years.

In the testing year ending June 30, 2008, the GMAT, the standardized test used to get into MBA programs, was administered 246,957 times, the highest ever, according to GMAC. The second highest year the test was administered was in 2002, the time of the last downturn.

Some, however, are seeing signs of a shift away from business schools.

Lisa Jacobson, CEO of Inspirica, a high-end, one-on-one test preparation firm says many of her students are changing plans and opting for law school, which happened during other slumps. The joke is they’ll be busy doing bankruptcy work, she says.

“This younger generation has never really seen a bad economy," says Jacobson, "To them it’s really scary.”

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Want a Wall Street Job? Start Preparing Now

(Note: This is a very old article. But it's still very useful to those seeking job on Wall Street.)

If you're a college or business school student or if you're thinking about a career change, what can you do to prepare to enter the highly competitive world of finance?

I've mentored students from my college and business school, and I've been on both sides of the interview table about 1,000 times over the last 17 years. I've distilled that experience into a handful of factors that separate success from failure, which I'll present today along with some practical advice and resources for the aspiring financier.

Artists Need Not Apply

The primary function of finance is to facilitate the workings of the economy, to be the grease that oils the wheels of progress. Finance is suitable for people whose primary objective is to make a decent (although not necessarily outrageous) income and don't mind working 60 to 100 hours a week on sometimes numbingly dull work. People who have an aptitude for math, computer programming and games such as bridge, backgammon and poker do very well.

Finance is not suitable for people who are creative in the traditional sense (e.g., artists) or interested in the "caring" professions (teachers, doctors). In fact, when I used to do interviews for Morgan Stanley, we were specifically instructed to weed out those personality types. Furthermore, people who want to produce tangible products (software, automobiles) will also find Wall Street frustrating.

Sell Side vs. Buy Side

Firms are oriented either to the sell side or the buy side. Sell-side firms are what people traditionally think of when looking for Wall Street jobs. These firms underwrite securities and advise on mergers and acquisitions through their corporate finance divisions. Their sales and trading divisions make secondary markets in a variety of securities, including stocks, bonds, currencies, swaps, commodities and derivatives. Analysts in research divisions make both macro (overall investment strategy) and micro (company-specific) recommendations. There are entry-level jobs in all three areas, often straight out of company training programs.

Major firms include Goldman Sachs, Morgan Stanley Dean Witter, Citigroup/Salomon Smith Barney, Bear Stearns, Merrill Lynch, Chase/J.P. Morgan and Bank of America. Regulatory changes and mergers are rapidly eroding the division between commercial banks, like Citibank, and investment banks, like Merrill Lynch.

Buy-side firms generally manage portfolios on behalf of clients. They include insurance companies like Aetna, investment management firms like Wellington Management, mutual fund companies like Fidelity and hedge funds like Moore Capital.

Sell-side firms tend to be household names; buy-side firms tend to be less well known. Sell-side firms have higher salaries and higher turnover (i.e., more firings). Both buy- and sell-side firms have analysts (people who study investments) and traders (people who actually buy and sell the securities). Buy-side firms have portfolio managers, who make broad investment decisions. Sell-side firms have proprietary traders, who invest the firm's own capital.

There are also boutique firms (the Quantum Fund, Wasserstein & Perella, the Blackstone Group) that are highly focused on one activity, such as mergers and acquisitions or proprietary trading. Entry-level jobs in these houses are rare.

Sell-side firms tend to hire hyperactive people; buy-side firms are more laid-back. This reflects the fact that the sell-side firms take bigger risks and turn capital over faster. Buy-side firms are investing for a generation out in pension plans and the like.

Making the Cut

Getting a job on Wall Street is a very arduous process. Hundreds of people compete for each trading or corporate finance job, going through multiple screens and interviews along the way. Each screen and interview is designed to weed out prospects. Many years ago, when I was an associate at Morgan Stanley, we used candidates' SAT scores to cut 10,000 college student resumes down to 500. Four-year-old SATs were not relevant to anything Morgan Stanley was doing with new hires, but we needed some way to get a handle on the onslaught of applications.

Keep in mind that each resume receives a review averaging 18 seconds. So whatever talents you have, make sure they'll be seen at even the most cursory glance.

Educational Experience

People with degrees in mathematics and hard sciences have an edge. I have not seen any particular advantage to people with business, accounting or economics degrees -- these people tend to have specialized too early. I was a dual history/mathematics major, which turned out to be an excellent education, even though all my work since 1983 has been in using computers to implement investment strategies. Everything I know about computers or investment products I learned on the job. It was my analytical skills and ability to communicate these skills enthusiastically during the interview process that got me the job in the first place.

An MBA or law degree is required about 90% of the time if you want to advance beyond the level of senior associate in corporate finance. A higher degree is required about 50% of the time in sales and trading. These degrees are less certifications of ability than they are screens to limit the number of people seeking higher positions. On the buy side, having an advanced degree is a requirement nearly 100% of the time.

Look carefully into getting a CFA (chartered financial analyst) designation. This is a very challenging three-year series of exams. Just saying you're studying for CFA Level 1 is very impressive in a job interview. If you are enrolled in a first-year MBA program, I recommend taking the first level next June. (Level 1 covers first-year accounting, economics and finance.) More information is available at the Association for Investment Management and Research Web site.

Experience

Any job demonstrating independent thinking, creativity, entrepreneurship or risk-taking will help. I once hired a candidate who started out as a party DJ, and by senior year had bought a bunch of equipment that he leased to other DJs in the area, thus multiplying his income. Frankly, I thought he would be bored working for an investment bank, but he was keen on the job. Three summers working as a lifeguard is not going to have much impact, by comparison. Involvement in varsity sports, especially if the candidate was a team captain or a recognized important player, always makes a big impression. Most other extracurricular activities, like the student government or the campus newspaper, are of marginal value if the other criteria are not satisfied.

Finding Out About Companies

During my job search in college, on-campus presentations by companies were the most useful in learning generalities. In this era, it would be inexcusable not to visit a company's Web site to review career information, company history and so on. Obviously, there are vast volumes of information specific to these companies available over the Internet. Alumni contacts can be the most useful, but also the hardest to set up. (I prefer phone dates to meeting face to face -- they're easier to schedule.)

Start Early

Anything you can do to demonstrate you've thought long and hard about Wall Street early on is going to give you an edge.

You should start no later than fall of your junior year of college or fall of the first year of business school to develop contacts for a summer internship that will hopefully set you up for a job after graduation.

Get in the habit of skimming, in descending order of importance, The Economist, Barron's, Forbes, The Wall Street Journal, Investor's Business Daily and Institutional Investor. There are a host of trade magazines worth reading, but most are very expensive to subscribe to (some will be available in a business school library). Watch CNBC for an hour a day, listening particularly for the language of Wall Street. Why does this matter? Often interviewers will test you by throwing out buzzwords. If they perceive you have no idea what they're talking about, the interview usually goes against you.

Take one macro- and one microeconomics course somewhere in your college career. Also take writing, public speaking and computer science and accounting courses, and math, at least through multivariate calculus. Wall Street firms want to be assured that you won't be stumped by a little math.

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Business Schools Gird for Wall Street Woes

Career Offices Mobilize Resources for Students, Alums

The day after Lehman Brothers Holdings Inc. said it would file for bankruptcy-court protection, University of Chicago's Graduate School of Business career office had already made personal calls to all of their 26 alumni from the 2008 class who worked at the firm.


One former student volunteered to become the representative for the group and scheduled a conference call to discuss future career strategies with the business school, says Stacey Kole, deputy dean for the full-time program, which sent 20% of its 504 alumni hired to investment banks in 2007. By Friday, career-office representatives flew to New York to have dinner with 14 of the Lehman 2008 graduates to help them figure out a plan. Ms. Kole said they are ready to meet any demand. "We're like a tennis player on their toes," she says.

With the Bear Stearns meltdown this spring already affecting alumni, career offices were bracing for a tough recruiting year and the possibility of more layoffs and jobless alumni to come. Schools were largely unprepared for the onslaught of grads looking back to their alma maters for job help when the Wall Street woes began.

But many have used the summer to find ways to step up, in some cases sending career-service officials to check out the situation and adding extra services. And with the start of recruiting season around the corner, schools are providing additional help to current students as well.

At Columbia Business School, 2008 graduates who left school in May will continue to get access to several student databases and personalized counseling sessions from the Career Management Center, says Michael Malone, director of career education and advising. It's proved time consuming: "At this point we are not quite to the level of investment banking hours, but we are earning our keep," says Mr. Malone of the long hours he's putting in helping displaced alums.

The University of California-Berkeley Haas School of Business, is also extending invitations to its New York-based alumni for several career workshops hosted by Columbia, says Nicole Gerhmann, assistant director of M.B.A. recruiting for financial services and energy at Haas. Typically 5% to 10% of the about 240 students a year, pursue careers on Wall Street. Additionally, Rich Lyons, the dean of the business school and a former chief learning officer at Goldman Sachs, is visiting New York this week and will meet with alumni.

Schools are also working harder to support current students. At Cornell's Johnson School of Business, a former dean and four former associate deans have volunteered to meet for advising appointments with interested students who now see their career paths changing. Most schools, though, stress the same message -- expand your options. "There are many investment banks in other cities throughout the country -- not everything is in New York," says Karin Ash, the director of the career-management center at Cornell. Traditionally, about 50% of business students at Cornell end up working in finance in New York. Next month, Cornell's career services is organizing a panel with 2002 alumni who will talk about finding employment in the last recession, says Ms. Ash.

Career office staff members are also trying to steer undergrads to alternative careers. Patricia Rose, director of career services at the University of Pennsylvania, deals with undergraduate business students along with students in other majors. Typically, Wharton sends about 50% of its undergraduates into investment banking. Ms. Rose says she's recommending Wharton students look into technology or public-service jobs, which are more plentiful than coveted finance jobs. "We are encouraging students to think more broadly," she says.

Other schools like the University of Chicago used the summer to plan ahead. After it became clear that Wall Street hiring would be off for interns and for the class of 2009, the career office reached out to boutique and middle-market firms like William Blair & Co. and Perella Weinberg Partners to beef up finance recruitment, says Ms. Kole. "We sat down face-to-face with [people] at firms that are healthy and growing and implored them to think about their current hiring," says Ms. Kole.

The result? There are 40 new finance-related firms slated to come to Chicago's campus; they probably will be looking for one or two key recruits -- not the 20 or so grads a typical large investment bank hired at the school in the past. But Chicago officials hope the number of new recruiters will make up for the smaller volume.

Interest in banking among current students is already down. Typically, more than 50% of the nearly 700-person graduating M.B.A. class at Columbia head into finance jobs -- more than half of that group working in investment banking and brokerage. But, the day of the Lehman news, at an annual event called "Day in the Life of an Investment Bank" -- which included much-touted networking opportunities for first-year M.B.A. students -- attendance was down nearly 35% over years past.

At the University of North Carolina Kenan-Flagler School of Business, about 50 M.B.A. students are expected to make an annual visit to Wall Street this fall, instead of the 70 or so who made the trek in previous years, says Brandan Lingle, a second-year M.B.A. student who is organizing the trip.

Many students are even hesitant to search within the banking industry at all, says Al Catrone, career services director at the University of Michigan Ross School of Business. "In a typical downturn the students will kind of clamor to us in career services and ask us to find other companies. ... This time around it's been so deep that students aren't even asking," says Mr. Catrone.

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Where the Jobs Are For Wall Street Pros

As the latest crisis on Wall Street unfolds, recruiters say their phones are ringing off the hook with anxious finance professionals on the line.

The sale of Merrill Lynch & Co. and the bankruptcy-court filing of Lehman Brothers Holdings Inc. have prompted workers from those firms to launch immediate job searches. Recruiters say newly displaced finance professionals should consider other types of employers or fields, and consider opportunities at smaller banks -- which are ramping up hiring right now.

Case in point: On Monday, the number of ads at WallStJobs.com for positions at small and middle-market firms shot up by more than 25%, says Robert Graber, chief executive officer of the New York-based job site. Most of the ads were from small and midsize investment banks and hedge funds that are "taking advantage of the turmoil to attract candidates who would normally only move to large institutions," Mr. Graber says. "They almost seem poised to acquire the newly available talent that's out there."

So far this year, the financial sector has announced the largest number of job cuts, roughly 103,000 positions, followed by the auto industry, reports Challenger, Gray & Christmas Inc., a global outplacement consultancy. These losses mainly reflect downsizings at top-tier investment banks. In contrast, many small and middle-market banks, as well as employers specializing in other parts of the financial-services industry, say they are expanding and are eager to capitalize on the sudden outpouring of job hunters.

Among those employers is Gerstein, Fisher & Associates Inc., an independent advisory firm in lower Manhattan with plans to nearly double its 25-person work force over the next 12 months. "This is the biggest opportunity we've ever had," says Gregg S. Fisher, president and chief investment officer, of the flood of high-level, quality candidates who might consider a small firm. He is looking for people who have strong skills in business development, relationship management, analysis, research, trading and operations. "We've been really untouched by all the stuff we're hearing about," he says.

There is a potential downside to moving to a smaller firm. "Typically, initial cash compensation will be lower at smaller firms; however, there is often a greater opportunity to negotiate equity," says Deborah Markus, executive director at Gerson Group, an executive-search firm. There may be more of a salary setback for more junior employees, particularly if they change functions in the new role.

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