The Impact Of An MBA On Banking Salaries Is Short-Lived

Does an MBA always pay? Not always – even in the field of finance. According to a study by salary benchmarking site Emolument.com, the monetary impact of an MBA for banking professionals is often rather small. And even when it is notable, the effects are not long lasting, at least in the western world where the study was conducted.

“You have that short-lived bump up, but as time goes by and you progress through the ranks, people kind of forget you have an MBA, or you blend in with the mass of other bankers,” said Alice Leguay, COO of Emolument.

The firm analyzed salary data from 339 bankers working in London to measure the impact of holding an MBA from top institutions. It found that VPs with an MBA earn about 7% more than non-MBAs.

The impact of MBA on salaries

Among top-tier institutions, there is limited variation on the impact of MBA on salary. A degree from London Business School has the smallest effect, and one from Chicago Booth has the most. However, the gap is just 9%.

There is more significant variation in the time it takes to recuperate one’s investment in an MBA. Emolument.com’s data found that a Chicago Booth banker will recoup his or her investment within three years, while for someone graduating from London Business School, it will take four and a half years to make the money back. Other European MBAs such as those at INSEAD and Oxford as have a lower ‘years to payback’ number, but these programmes also cost almost half of their USA counterparts, so take that into account.

What’s the takeaway for would be students?

An MBA may not always be the path to more money, especially for those who plan to spend their entire careers in banking. “On a remuneration basis, if you’re going to go back to banking, it’s probably not worth it,” Leguay said.

Of course, it’s not all about the money – there are other advantages to holding an MBA as well. “The decision to take an MBA has to stem from a long term view that is not solely monetary, but a desire to enrich one’s network, broaden horizons and open the door to opportunities which may well veer off the initial course,” said Thomas Drewey, CEO of Emolument.com.

MBA careers in finance

Moreover, those who start their careers in finance, take a year or two off to get an MBA, and then return to the field often find that their former coworkers have moved up in the ranks without them. They’ve left as associates and returned as associates, while their colleagues have moved up to VP.

And as mentioned, any monetary advantages are erased over time. Emolument.com found that seven years after graduating, MBA-holders’ salaries and bonuses were in line of those of their peers.

Of course, it’s not all about the money – there are other advantages to holding an MBA as well. “The decision to take an MBA has to stem from a long term view that is not solely monetary, but a desire to enrich one’s network, broaden horizons and open the door to opportunities which may well veer off the initial course,” said Thomas Drewey, CEO of Emolument.com.

Leguay also noted that those with advanced degrees in business tend to carry more weight in the United States than in Europe, at least in terms of pay. “It’s more ingrained in the system, it’s more ingrained in the culture, whereas European banks tend to take [MBA holders] on as just another associate,” she said. “For people to do a couple of years in a bank and then go away and come back, it doesn’t really fit in with the [European] culture as it does with American banks.”