How engineers get into banking. And why they stay there

How engineers get into banking. And why they stay there

by Sarah Butcher 25 March 2019

 

If you graduated in a STEM (science, technology, engineering and mathematical) subject, you may already have considered a career in finance. After all, Goldman Sachs and JPMorgan are all over STEM graduates, and banks' existence is unlikely to have passed you by - especially if you went to a top school. However, a new study suggests that STEM students should avoid banking jobs, which may be a career dead end.

Nandini Gupta and Isaac Hacamo at the Kelley School of Business, Indiana University, studied the resumes of 70,000 'engineers' who graduated from the U.S.'s top-ranked engineering schools between 1998 and 2008. Students studied a range of subjects, including civil engineering, computer science, electrical engineering, mechanical engineering and chemical engineering. The academics then looked at what happened to their careers over a five year period.

The schools and the STEM majors that will get you a job in finance

If you study STEM at some schools, you're more likely to end up in the finance industry than if you study at others. The academics found that engineers from Cornell University, Northwestern, MIT, Carnegie Mellon and Stanford were the most likely to go into finance. Coincidentally (or not), these were also the schools with the strictest admissions policies. 

Some subjects are also more likely to deliver you into a finance career. Around 7.4% of computer science graduates go straight into finance, for example. Just 1.8% of civil engineering graduates do.

The first jobs that make it more likely you'll move into finance later 

The academics were particularly interested in engineering majors who went into non-finance jobs after college and only moved into finance a few years later.

Curiously, they found that some first jobs have a far greater propensity for delivering engineers into finance careers than others. For example, 15% of people in the real estate industry move into finance within five years compared to less than 3% in education and health. 

This might be due to personal values as much as anything else. - Or it might be due to perceived similarities between the two professions. Law and consulting jobs are likely to deliver you into a finance career for the same reason.

What kinds of jobs do engineers do in finance?

Just because you're a computer science or an electrical engineering graduate, don't presume you'll be a computer scientist in bank. 

The researchers found that only 24% of the engineers who gave up their careers in other areas to go into finance ended up doing traditional 'engineering jobs' like working on banks' IT systems. 76% of them went into other occupations like trading - although this number may be substantially overstated due to the researchers' lack of comprehension of banking job titles (they presumed that analysts and vice presidents weren't working in IT, although this clearly wasn't necessarily the case....). 

Is a finance career really a dead end for STEM majors?

Using what might be slightly flawed logic due to this categorisation error, the academics then suggested that these engineers doing 'finance' rather than 'engineering' jobs in banks were at risk of losing their cutting-edge engineering skills. They noted that comparatively few of the engineers who went into finance set up their own entrepreneurial ventures later on, and concluded this was because their skills had atrophied.

In other words, don't go into finance if you want to stay sharp as an engineer. "These results are consistent with the view that talented engineers who move to finance due to financial sector growth, may fail to develop entrepreneurial ideas because their engineering skills depreciate in the financial sector," say the academics.

Really? The researchers' category mistakes not withstanding, there are plenty of other reasons why STEM majors who've gone into banking might not want to leave again to become entrepreneurs. For example, they might be self-selected bureaucratic types who like working for large organisations. Or, they might stick around in finance for the money. - When you're a successful trader or a quant in finance, you're likely to earn at least six figures (probably a lot more). Quitting your job and setting up as an entrepreneur is therefore going to seem far more of a financial risk if you work in finance than if you have a career in the construction sector.  This is likely to be the real reason that engineers in finance don't become entrepreneurs. - And given the high rate of failure in the entrepreneurial sector, can you really blame them?

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