How much essential is an undergraduate degree in economics to break in the world of Investment Banking / Asset Management?

How much essential is an undergraduate degree in economics to break in the world of Investment Banking / Asset Management?

I'm an international law student with non-economics background who is planning to land in the UK/NY in a few years!

Do you think that the possibilities of getting a job there in IB/AM (long term: HF/PE) will increase if I get an US/UK MBA after MSc in Finance in my home contry?

Also, I'm not sure if the MSc (+ the MBA) will replace the lack of an undergraduate degree in economics... considering the competitiveness of the world of Finance (PE/HF/BB/EB) and my only legal background, I'm starting to believe that I won't get any chance if I don't start studying economics... What are your opinions about that?

Comments (20)

Jan 10, 2022 - 8:29pm

What you study matters far less than what school you attend. There are plenty of people in finance who did not study Econ. 

You cannot just do an MBA with no work experience, you won't get into any worthwhile program (T15) which means you will not get into IB.

Jan 10, 2022 - 8:52pm

Hi! Thanks! Supposing that I have the opportunity to do the MBA in universities such as:

US: Northwestern/Virginia/Duke/UCLA/Berkeley

or 

UK: LBS/Oxbrdige

after 3/4 years of work experience in my home country in a top national law firm in capital markets/M&A + MSc in Finance in my home country

Do you think that this scenario brings me a realistic opportunity for the career path I'm trying to pursue?

Jan 11, 2022 - 10:25am

Great! I understand. Honestly, that "maybe" is a hopeful word. I was starting to think that switching my career in that way was going to be impossible. However, I understand that it won't be easy.

I'll also take into account your advise about the US MBA 👍.

One last question: I know that PE/HF immediately after the MBA will be very very difficult. But breaking in there after some years in IB/AM? I've read that their recruiting process is much more selective, so, will my undergraduate degree be a disadvantage or is it still a possibility to replace/compensate it with my national MSc (+ maybe CFA) + US MBA + US IB/AM Experience?

I've been doing a lot of research in Linkedin and there is a HUGE number of economics and finance undergraduate degrees, and also some business administrators and accountants in Analyst / Associate positions in front office divisions. In contrast, lawyers seem to be destined to Compliance or Legal Counsel jobs in the world of finance. Maybe I've found 4/5 out of 60 JD (from US universities) who had made a successful switch to FO (what's more: My JD and MSc in Finance won't be from the US).

Understood that it may depend a lot on networking, interviewes preparation and the natural career path that a lawyer would follow... but I ask in order to broaden my perspective. That evidence makes me think that lawyers lack some skills needed to work in FO (which I want to compensate by obtaining the mentioned degrees!). However, I've seen many more undergraduate degrees from Political Sciences and International Affairs in these positions (I don't understand why, because as a Lawyer, you, at least, study corporate/banking law which I think is much more related with the word of finance than the courses in Political Science).

Jan 11, 2022 - 8:38am

I studied econ because I went to a smaller LAC that did not have a finance program, so I wanted to strengthen my quantitative skills. I thought especially macroeconomics was interesting / useful, since we learned a lot about the Federal Reserve and it's impact on the economy.

That being said, the vast majority of the skills I have acquired during my stint in banking have been learned on the job. I have several friends who studied political science, history, English, etc. who have all successfully broken into banking and are doing well at their jobs. Ultimately, it's up to you to network, put yourself out there, and study your behaviorals / technicals for you interview. I agree with the above that it definitely doesn't matter as much what you study. 

Jan 11, 2022 - 10:25am

Hi! Great answer! Thanks a lot!  Maybe you can give me your opinion about this observation and answer this last question (as I'm a new monkey here in WSO I don't know if posting this once under the other reply is enough for sending a notification to other repliers; so I post this here again):

I know that PE/HF immediately after the MBA will be very very difficult. But breaking in there after some years in IB/AM? I've read that their recruiting process is much more selective, so, will my undergraduate degree be a disadvantage or is it still a possibility to replace/compensate it with my national MSc (+ maybe CFA) + US MBA + US IB/AM Experience?

I've been doing a lot of research in Linkedin and there is a HUGE number of economics and finance undergraduate degrees, and also some business administrators and accountants in Analyst / Associate positions in front office divisions. In contrast, lawyers seem to be destined to Compliance or Legal Counsel jobs in the world of finance. Maybe I've found 4/5 out of 60 JD (from US universities) who had made a successful switch to FO (what's more: My JD and MSc in Finance won't be from the US).

Understood that it may depend a lot on networking, interviews preparation and the natural career path that a lawyer would follow... but I ask in order to broaden my perspective. That evidence makes me think that lawyers lack some skills needed to work in FO (which I want to compensate by obtaining the mentioned degrees!). However, I've seen many more undergraduate degrees from Political Sciences and International Affairs in these positions (I don't understand why, because as a Lawyer, you, at least, study corporate/banking law which I think is much more related with the word of finance than the courses in Political Science).

Jan 11, 2022 - 10:54am

Update: I mean US JD switchers with undergraduate degrees in non-economics fields. Because that's another reality: Those JDs who are more prone to switch have economics undergraduate degrees.                So, as I repeatedly said, due to my Linkedin research, I'm still not sure if the compensation of my lack of an economics degree with those masters will be enough to break in the world of IB/AM -> PE/HF

Jan 11, 2022 - 11:07am

Not necessarily. For example, my mentor during my summer internship last year had a JD and was a lawyer for many years before he switched to banking. Now he's an MD and runs one of the top product groups at our BB. One thing that stuck with me is how many transferrable skills there are between law and banking. Both are client-facing, both require very strong interpersonal and analytical skills. You have to think on your feet and convey info effectively. 

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Jan 11, 2022 - 5:06pm

its-accrual-world

Not necessarily. For example, my mentor during my summer internship last year had a JD and was a lawyer for many years before he switched to banking. Now he's an MD and runs one of the top product groups at our BB. One thing that stuck with me is how many transferrable skills there are between law and banking. Both are client-facing, both require very strong interpersonal and analytical skills. You have to think on your feet and convey info effectively. 

Former corporate lawyer here.  Your mentor probably graduated from law school before the tech bubble, when a JD was considered an all around smart person's graduate degree and switching over to finance was far, far more common.  You will see way more JDs in finance in their 50s/60s than in their 40s/30s and it is not because the latter cohort is biding its time.

There are not transferrable skills between law and banking.  Bankers know way more law than lawyers know banking.  Lawyers have no excel knowledge, cannot make a passable excuse of a powerpoint, and do not know what a discount rate is.  They do not know equity multiple, net present value, and I would venture to say 3/4 in big law could not explain what the federal reserve does in a short written paragraph.  This is because most are sociology/psychology/gender studies alums who worked two years in retail and took on more debt to get that JD.

Lawyers get some minimal client exposure several years into their associate stint, so that is a five years investment.  Extensive client exposure and building a book of business takes even longer.  Those clients will despise you and treat you like dirt.  They will scream at you to "turn over" some meaningless document by the end of the weekend, and they "do not give a fuck" if it is your daughter's wedding.  Serfs were in a higher position than lawyers in American corporate life.

I spoke to a V20 lawyer who left after two years in the his firm's corporate department.  Of his class of 23, only 6 remain.  Most did not have jobs lined up.  They saw no future in the profession that grinds people to nothing.  Their debt payments will kick in soon.

Jan 11, 2022 - 5:00pm

Good luck leveraging a law degree.  American JDs from top law schools who are would be career transitioners do not get far except in the most lucky of circumstances.  The "profession" is a cesspool of misery and welcomes the detritus of Americans BA holders (actually that is not accurate, some law schools take associates degrees).  The degree is not respected in terms of finance recruiting.

Jan 12, 2022 - 4:10pm

Law student here. Despite all the negativity thrown to law, I don't see much difference from working in banking and law. In both you will need to grind and stay in the office 14 hours a day, kissing ass, not sleeping, etc. But maybe I could make you consider another route. Look at all those who work in IB, 80% would prefer to be entrepreneurs or live from investments. So why would you take another field from 0 to get into another corporate job where of course, the pay may be higher, to end it hating in the same way as law? I also wanted to go from law to banking but all those things faded after I put foot into the corporate world.

The salary of an average law firm owner is 200k per year in US, so considering you're ambitious enough to get into IB, I would say that you can easily go a little upper than 200k if you open your firm and put the same work which you would put into banking. You will have some dignity as no client will come with the same ego as any CEO in IB to tell you how things are done in the business world because they know it better. The average citizen cannot even read a fine, so I would gladly sacrifice the cut in potential salary to get some respect.

Also keep in mind that lawyers have a monopoly on the legal professions which is already a barrier for competition and despite the numbers that there are too many lawyers, this is said since 1970 but guess what there is always place for the good ones which is like 5% of all those who graduate (just take a look at your colleagues, do you think that a sociologist with a thesis in sex genders will really fucking grind in the legal profession?). Just get into the Bar, pass it, put a table and a computer, network in the same way as you would network to get an IB offer and you will afford a middle-class lifestyle with the potential of getting into mid-high.

I think that in the Millionaire Next Door it is also mentioned that one of the top 3 professions to be a millionaire is being a lawyer due to the fact that they have a monopoly over a profession and is purely intellectual where there is no need of high expenses to get an income which would not be the case of those who want to open their Private Equity or Hedge Fund where they need immense capital from outside. The critique that you need to bill hours as a lawyer even at your own law firm happens only when you start. After a while if you do well you start to recruit paralegals and the extra income from their work goes to you.

And I will not start with the social perceptions of being a lawyer and a banker and who can solve more easily issues in their communities, help someone in need (where money would be corruption) or discuss policy/politics at a higher level. The perception which people have about high-finance finished in 2008.

But at the end, are you 100% decided that you don't want to practice law and wanna get into finance?

Jan 20, 2022 - 5:19pm

Survivorship bias, the predisposition to evaluate a data set by focusing on the "survivors" rather than also examining the record of non-survivors, is important to understand for peer groups, which tend to have a relatively large number of constituents that disappear. 

Deducing any probabilistic correlation between 'econ degree' and 'capacity to break into IB' is dangerous. 

Jan 20, 2022 - 5:22pm

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