Dream About Working in Finance on Wall Street? You Might Consider Law School.

Wall Street may be home to bankers, but it's the lawyers who have seen the biggest compensation growth over the last two decades. A recent Wall Street Journal article analyzed pay patterns for bankers and financial lawyers, and while bankers have historically made significantly more than lawyers, the data shows a reversal in this trend. 

Since the financial crisis in 2008, bankers’ pay has remained fairly stagnant among all but the highest performers. Managing Directors at banks, who do not hold company leadership positions, average between $1 and $2 million in annual compensation including their bonuses, which are typically paid in stock. This average has held steady for about 20 years, without adjusting for inflation. 

The opposite is true among lawyers. Equity partners at top law firms are earning about $3 million annually. This is about three times higher than the reported earnings 20 years ago. And, among the most productive partners, the upside is even higher. Partners at some firms, including at Wachtell, Lipton, Rosen & Katz and Kirkland & Ellis, are earning more than $15 million per year. Mark Rosen, an experienced legal recruiter, described his observations to the WSJ. “Things have changed. Lawyer compensation has grown unbelievably,” he said. 

According to the WSJ the reasons for this change are multi-faceted. There are regulatory pressures at financial institutions as well as an industry trend of downplaying individuals in favor of the bank’s brand name. The private equity market has also grown, expanding the client base for law firms and growing their business. 

The role of a lawyer on Wall Street has also changed. Once relegated to contract review, the lawyers now look more like “quasibankers,” taking on outsized advisory roles with clients. They now partner with banks on everything from regulatory matters to succession planning. 

Within the law firm, there have also been shifts. Firms have adjusted compensation models to reward productivity over seniority. The new productivity-based view on compensation has even resulted in “bidding wars” for talented lawyers, further driving up compensation. 

Lastly, while banking fees have remained relatively consistent over time, law firms raise their fees annually, and at a rate over inflation. 

NYU Professor Urges MBA Students to Think Beyond Consulting, Finance, and Tech

A recent WSJ op-ed by Suzy Welch, CNBC Contributor, Author, and Professor at NYU Stern provides career advice for MBAs: Although consulting, finance, and tech are the most commonly sought careers post-MBA, they are not the only routes to success. Welch advises MBAs to seek work, “at the intersection of their authentic values, their strongest skills and aptitudes, and the kind of work that interests and excites them intellectually and emotionally.” But, she points out, despite most students entering MBA programs feeling awash with career possibilities, most leave with jobs in just three industries. 

Finding purpose is an idea that she’s put a lot of thought into. After the loss of her husband, the legendary Jack Welch, she realized her need to find an “organizing principle” in her life. Welch then developed, pitched, and is now teaching a course at NYU Stern on the topic. Designed to guide MBAs on an introspective journey towards a fulfilling career path, the course is titled “Becoming You: Crafting the Authentic Career You Want and Need.” She describes it, according to Poets & Quants, as the class she wishes that she’d been able to take before graduating from Harvard Business School and entering into consulting. 

In her WSJ article, Welch identifies two key patterns emerging within MBA programs that are reducing opportunities for graduates. The first is internal: groupthink. She described this phenomenon In an interview with Poets & Quants. “You go to business school and you think about strategy and the digital economy, but what about thinking about what you want to do with your life? Most people go to business school to pivot into a new career... So you get there and you are looking around and the choices get narrower and narrower because of groupthink. You arrive big-eyed and you end up squinting. Investment banking and consulting are the two big funnels, or maybe tech,” she says. 

While she notes that some MBAs may also be seeking financial security and a way to repay loans, she purports that it runs deeper. That, for many, taking a job in one of the big three—consulting, finance, or tech—is fulfilling a “group instinct” and is good for “optics.” And as is so often the case with groupthink, MBA students who opt not to apply for these lucrative positions, or those who turn down such offers, can feel foolish or like risk-takers. But she warns that many who do follow that path as a means for safety and security often end up regretful. “A lot of very smart, very capable people, usually in their late 30s and early 40s, wake up miserable one day. Over my years as a journalist specializing in the workplace, I saw this phenomenon so often I came to dub it “The Velvet Coffin”—a state of cushy creature comfort encased in emotional or intellectual dissatisfaction” she writes.

Welch also observes a second pattern and it is external. Industry, she calls out, does a poor job showing up to recruit and sell itself among MBAs. Whereas, consulting, finance, and tech recruiters not only show up but have excelled in creating touchpoints and programming, and defining a consistent and compelling “narrative.” 

“I heard it repeatedly, because my students parroted it back to me: Even if you don’t stay long-term, with our credential on your résumé and professional development programs, we’ll set you up for your career! The big three are so persuasive and make it so convenient to get a job that it ends up feeling inevitable,” she writes. 

Welch concludes that MBA students, like never before, are seeking meaning and purpose from their careers and their lives. And she advises them to think carefully about their goals, listen, and dare to consider opportunities beyond the big three industries.