WSO Thread Master in Finance on a budget

Here is a WSO thread absolutely worth reading: Finance Master Programmes on a budget.

The best contribution was from a User called "UKtop" showing from which university the first year analysts at his bank came from:

(click on the pictures to zoom in)

Well, we can see that LSE, Cambridge, Warwick and Oxford placed the most graduates at this BB. However, we don't know how many people from these universities have applied for first year positions, so it's not possible to make any statements about placement rates (no relative numbers available). It doesn't necessarily mean that you have lower chances if you went to St. Gallen instead of Warwick.

Finally the guy, who started the thread, wrote:

I feel very happy for him, because he made a smart, rational choice against social convictions and refused to pay >20k € just for "brand value".

How to choose a Master in Finance

I already wrote here and here, why I think, prestige alone is worthless. So, what's the optimal strategy for choosing a Master's in Finance?

Here are a few criteria:

• Reputation in Academia and in the Finance Industry
• Total Costs of getting the Degree
• Quality of City and Student Life
• Curriculum, Teaching and Regulations

Carefully evaluating every criteria and you'll make an informed decision.

Reputation in Academia and in the Financial Industry

Ok, I know, I said prestige is not important. However, when applying to PhD programmes or to other high profile jobs, it's still useful to have a renowned name on your CV and it gives a few good points. Prestige helps, but you shouldn't overestimate it effects. 

To check, if your university has reputation in Academia, you need to check some rankings, where research weights a lot. Good rankings are the QS subject ranking, the Tilburg Economics Research Ranking or some other (inter)national rankings. A good role of thumb is if a university is one of the best in a country, there's a high chance it will also be known internationally in Academia. It's just important that the university is visible in the international research community. How high it actually ranks is not that important, since all rankings are somewhat biased and distorted.

To check, if your university is known in the corporate world, most people use the Masters in Finance Financial Times Ranking. I advise you not to use the ranking, as it's highly distorted. For example, you won't find any LSE programmes on the list, nor is it reasonable to place the University of St. Gallen or ESCP over MIT. Moreover, no HR manager on earth cares, if your Finance Master is ranked as 3rd, 7th or 18th in the FT rankings. 

A much better strategy is to check, if graduates are already working at certain firms. You could do so by searching for Linkedin profiles with Google. For example, if you want to check whether there are any St. Gallen graduates working in London at Goldman Sachs, you can type "site:linkedin.com master finance university of st gallen london goldman sachs" (search). As long as you can find some graduates working at your dream employer, everything is ok. Let those kiddies in message boards argue and fight, which university is "better". 

Total Costs of Obtaining the Degree

(Ignore this section if your parents are reasonable rich and you're not on a budget.)

I consider the total costs as the most important point of getting a Master's in Finance. You'll find lots of people on the web and in real life, who are willing to spend 20-50k € for a single year of study, just to put [name of a prestigious university] on their CV. Once, you got the job, nobody cares where you went to school. So why spending so much money for prestige, when you could get degrees almost for free in Europe?

The total costs of getting a Master in Finance include not only the tuition fees and books, but also living expenses, medical insurance and so on. A good source to compare the living expenses of cities is Numbeo. It's a nice tool to get a rough idea, how much it will cost to live in a city for a year or two. 

I want to mention it again, so it sticks in your brain: Prestige comes with high opportunity costs. Instead of paying 20k of tuition, you could buy a pre-owned sports car, a one year world trip, or a small one-roomed flat if you take an additional loan. It is NOT rational to pay a substantial amount of money for private education, especially not if you are from a country, where higher education is free and income taxes are high.

City and Student Life

This is an easy one. You're the best person of assessing, how much you would like to live in a certain city. I prefer cities with over 300k inhabitants, a vibrant night-life and good weather. Moreover it should be safe, the people should talk and understand English and it shouldn't be too expensive to rent central apartments.

I recommend to visit the city for a few days, before you accept an offer. 

Copenhagen - Capital of Denmark

Curriculum, Teaching and Regulations

People often underestimate this point, however I believe it's the second most important point right after the total costs. You'll be studying for a year or two, so you should attend a program, where you learn exactly those things you'd like to learn. It doesn't make sense to study Accounting & Finance at LSE, just because of the brand, when you'd like to learn something about Computational Finance. 

Moreover some universities have very restrictive study and exam regulations, especially french universities. At some universities it's not possible to re-sit an exam, at others you have to attend every single lecture or they kick you out of the programme. Furthermore, you have to check if it's possible to get admitted to PhD programmes - if you want to do research - and whether it's recognized in your country, where you'd like to work. 

To check the regulations, try to get in contact with (former) students, programme coordinators or read some experience reports on the web.

Prestige - Some Food for Thought

Let's be honest, everybody would be proud of having "Harvard" associated with their names. No doubt about that, I am no exception. And, I can understand that students base their decision solely on prestige.

Prestige matters, especially if you have to pay for college. In some countries, attending a top school almost guarantees a well-paid job and a high social status in society. To name a few countries and institutions, e.g. Ivy League in the United States, Grande Ecoles in France, HK University in China, University of Tokyo in Japan, Russell Group in UK, Seoul University in South Korea, and so on.

Now, something very interesting happened since Globalisation and the evolving of the Internet. Students from countries like Germany, Austria and Switzerland, where university reputation traditionally played a minor role, tend to place more and more emphasis on university prestige. It even goes so far, that some students are willing to spend 20-30k € on tuition fees to study at the University of St. Gallen, WHU or EBS just for a Bachelor's degree in a country, where higher education is already heavily subsidised by the government and income taxes are high. From an economic point of view, it doesn't make any sense. Of course, that raises two questions: does prestige help and why are students willing to pay hefty fees for prestige?

Prestige and the Job Market

Students from prestigious universities all over the world have one thing in common: they either want to work in finance or consulting. However, jobs in finance or consulting are limited, which means there aren't enough places for every snob to be absorbed by the elite job market. The competition is fierce and global. What most elite students tend to forget is, your competitors aren't people from non-targets, your competitors went to the same schools like yours and their CV is like yours. Basically, you're just a copy of a copy of a copy, competing with another copy of a copy of a copy.

Even worse, prestige may actually hurt you. Suppose, you have graduated from LSE and you didn't find a job in the City, so you'd probably apply to small or middle-sized, regional companies in England. You can imagine, what they will be thinking about you. Just imagine a LSE graduate applying to a local bean producer. Yep, you got it. Attending an elite school is a lifelong obligation. You have to work for prestigious employers, otherwise you'll lose all the credibility you build from your university's "brand value". 

All in all, Prestige won't help a lot in job markets, where just about everybody has an elite education. It will get you a foot in the door, and you'll pass the initial screening, but no amount of prestige will help you to pass interviews and to perform well in ACs. This is especially true for international financial firms and banks in major financial centres, like NY, London, Singapore, Zurich or Frankfurt. And, don't even think about applying for local small and middle-sized companies.

Perceived Value and Debt Financing of Prestige

What's the difference between a 5k € and 20k € Rolex watch? Almost none, except the price. I couldn't even tell, whether a watch costs 200, 2k or 20k €, if there wouldn't be a price sticker attached to it. The same applies to universities. Every university delivers education as an almost homogeneous good, like a watch delivers the clock time function. But universities differ in reputation, like watches do in brands. 

Does "brand value" justify 20-30k € of tuition fees for a single year? I think the problem lies in the fact, how students perceive the value of university prestige. In my opinion, most students believe that you absolutely need to go to a top target university to break into finance and coming from a second tier or lower will hurt you a lot. Their perceived value of prestige against fees and costs looks like this:

However, it's simply not justified to place that high prestige premiums on top schools over lesser well known schools, particularly in Europe. HR departments have standardized procedures, application is open to everyone, your interview performance is much more important and there are lots of employees from other lesser known schools working in top jobs at top firms. The City market is no exception. It's not even clear, if HR Managers distinguish among universities at all, since we don't know how much students from which universities have applied to a certain company and as a result, it's impossible to calculate relative numbers. In reality, the curve looks more like this:

 

As you can see, a little bit of prestige loss, e.g. choosing SSE over LSE, can save you lots of money. Ironically, finance students, who should be one of the most rational people in the world with money, behave like a mindless herd chasing prestige above else and even go heavily into debt to afford top programes. Guys, with 20k or 30k you could start a business, afford a one year world trip or a small flat in some countries. Is prestige of a top tier target university really that much worth to you?

TOEFL vs. IELTS

It's definitely getting serious. I have to decide, whether I'll do the TOEFL or the IELTS test and I am not sure about it. The goal is to score >100 at the TOEFL ibt, or 7.0 at IELTS. 

Here's a very good list, how both tests differentiate:

Major Differences between the IELTS and the TOEFL

Reading
TOEFL - You will have 3 - 5 reading selections of twenty minutes each. Reading materials are academic in nature. Questions are multiple choice.
IELTS - 3 reading selections of twenty minutes each. Materials are, as in the case of the TOEFL, related to an academic setting. There are multiple type questions (gap fill, matching, etc.)

Listening
TOEFL - The listening selection very different from the IELTS. In the TOEFL, you will have 40 - 60 minutes worth of listening selections from lectures or campus conversations. Take notes and respond to multiple choice questions.
IELTS - The largest difference between the two exams is in listening. In the IELTS exam there are a wider variety of question types, as well as exercises of differing lengths. You will answer questions as you move through the listening selection of the test.

Writing
TOEFL - Two written tasks are required on the TOEFL and all writing is done on the computer. Task one involves writing a five paragraph essay of 300 to 350 words. Note taking is important as the second task asks you to take notes from a reading selection in a text book and then a lecture on the same topic. You are then asked to respond using notes by writing a 150 - 225 word selection integrating both the reading and listening selection.
IELTS - The IELTS also has two tasks: the first a short essay of 200 - 250 words. The second IELTS writing task asks you to look at an infographic such as a graph or chart and summarize the information presented.

Speaking
TOEFL - Once again the speaking section differs greatly between the TOEFL and the IELTS exams. On the TOEFL you are asked to record responses on the computer of 45 - 60 seconds to six different questions based on short descriptions / conversations. The speaking section of the test lasts 20 minutes.
IELTS - The IELTS speaking section lasts from 12 to 14 minutes and takes place with an examiner, rather than a computer as on the TOEFL. There is a short warm up exercise consisting mainly of small talk, followed by a response to some sort of visual stimulus and, finally, a more extended discussion on a related topic.

Source: esl.about.com

The IELTS is more appealing to me, since it's shorter (just 2h 45mins vs. 4h on TOEFL) and it's not multiple choice. However, there isn't that much of information and only a few IELTS preparation books. Furthermore, there is an Online Learning Course for just about 22 Pounds (~35€). And, I've heard this blog is somehow useful for the test.

What I like about the TOEFL is the helpful information on the web, the test is more widely recognized, it's internet-based (no handwritting!) and preparation books are really cheap. There are also more test date available. However, the TOEFL takes 4 hours to complete, I've read several complains about bad test centres, where one part of test takers took the listening section, while others had the speaking section at the same time. 

To conclude, I still can't really decide and I hope my friends can help me out. Both tests cost a lot (200€ +) and you have to study 20-100 hours depending on your English level, in order to be successful.

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Update: I found a very good interview on this blog, where TOEFL and IELTS expert Taichi Kono says, it might be easier to score a 7.0 at IELTS than 100 points on TOEFL.

Update2: I've wrote a very good article at my IELTS blog, where I compare the statistics of both tests and I've came to the same conclusion like the expert above. Check it out!

Why Top Target Universities won't help either

Yep, you heard that right, Target Universities won't help you to break into finance. "But, what's about all those debates and threads on the web? I have to graduate from a top tier university to get into IB!"

No, you don't, because there's lots of misconceptions and misinformation what target universities really are. Most message boards are populated by undergraduate students, who have never seen a bank from inside and who suddenly decided, they want to become Investment Bankers either because of high starting salaries or due to "prestige", compensation of inferiority complexes and false self concepts. Unfortunately, they just write down what they heard and read before, and the self-maintaining misinformation loop starts all over again.

What is a "target university"? 

Attending a target university will NOT lead to a job, automatically! It also doesn't mean that you're now somebody special, who deserves special treatment and service over a graduate from a normal university. It might be different in some Asian countries, France (Grande Ecoles) or the States (Ivy League), where society praises Elitism. However, in the majority of European countries the reputation of your Alma Mater plays just a minor role.

After all, what are target universities? As the name implies, target universities are targeted by banks and other financial institutions. Usually, HR departments just have a limited budget for recruiting. Since these corporations are very large and people often quit their jobs after a few years, there's a continuous demand for new talents, who are willing to work under the harsh conditions of Investment Banking. Due to budget constraints, HR departments hold recruiting events (presentations, career fair, etc.) only on some, selected campuses (see this list to get an impression), hence the name "target university". It's not just Oxbridge, but also universities you would've never imagined being a target.

The advantages of attending a target university are that you get information directly from the source and probably the career service is a lot better. Banks and other financial firms will regularly visit your campuses, telling you how great they are and how great it is to work for them. Beyond that, you won't have much of an edge, since online application is open to just about everyone.

Do banks hire from non-target universities?

Yes, they do. As stated above, all banks have standardized recruiting procedures and online application is open to everyone. Recruiters know, that not all excellent students are studying at prestigious universities and they also know that not every graduate from a top tier university is a good candidate. Moreover, university pedigree is just a small part of the equation. The competition for investment banking jobs is fierce.

Therefore, you have to be a very good candidate to have a realistic chance of getting an offer. And naturally, those bright students study at prestigious universities. And here's the point, why there is so much misconception about target universities: Recruiters are looking for excellent candidates, who are usually attending top universities. But, attending a top target university, doesn't make you an excellent candidate per se! The reason why recruiters target top universities is due to self-selection than superiority of students from top universities.

My recommendation is to check, if there are any graduates from your university working at your dream employer. You can do that by a simple Google search: Type in "site:linkedin.com [your university] [your dream employer]", e.g. "site:linkedin.com university of amsterdam goldman sachs". You can also further specify by adding terms like "master finance", "london", and so on. 

Introduction

Just a short intro:

I am a bachelor student of economics in Austria and I want to break into Finance (preferably in Risk or Portfolio Management).

Reading all those blogs and websites like Wall Street Oasis, Mergers and Inquisitions, studentroom, GMAT club, efinancialcareer, etc. and you'll soon get the impression that you can only break into finance if you pursue a prestigious Master's in Finance from a well known university. "Well known" means in this case top tier universities like LSE, Oxbridge, Imperial, Bocconi and HEC. Indeed, those universities keep placing well in the City, but they also have a big downside in common: enormous tuition fees.

What justifies tuition fees over 20k € for a finance master? Most students, who want to attend top tier universities, are confused about the question. Most of the time you'll get answers like top placement records, reputation, career service, alumni network, BB target, and so on, with an arrogant undertone making you feel stupid. But is that really 20k worth?

I don't think so and I believe, there's huge misconception and misinformation on the web. People are confusing the term "target university" and put ridiculously high premiums on prestige. Universities, in turn, respond by using their finance masters as cash cows. And the best thing: HR don't even care, where you studied. At least, it's not as important as most students believe (at least in Europe; in the States people care a lot more about pedigree).

HR departments receive thousands of applications every year. Of course, they care whether you have studied at the University of Warwick or at an Unknown University in Europe. But, they don't care much, whether you have graduated from Warwick or Paris Sorbonne University! While the former costs you more than 20k a year, the latter costs you almost nothing.

That's the whole idea behind this blog. I try to find undervalued and underestimated Finance Masters in Europe, which offer great curricula, good reputation and strong job prospects, for a low and affordable price. As information of these programs is scarce on the web, I'll try to get as much information as I could find.

Have a good time, leave a comment and I hope you enjoy my blog ;)