If you're a student who wants to go into financial services, you may be wondering whether it's worth spending the extra time and money to get a PhD.
During the financial crisis two or three years ago, I would have unequivocally advised staying in school. Redundancies, downsizing, and hiring freezes made it a very difficult environment to land a good job. However, the tide has (or at least, had) turned and many financial institutions are gong back to their normal hiring modes.
So should you do it? Well...
Independently of the economic environment, the decision to do a PhD often comes down to the opportunity cost of spending another three years' in education. Personally, I believe a PhD is financially worthwhile: starting compensation packages for PhDs are generally higher than for non-PhDs. However, I strongly advocate participating in as many internships as possible to gain experience, network, and possibly even land some job offers before you finish your degree.
I also believe that a PhD really does separate you from the rest of the pack. Employers are generally keen to hire PhDs for a variety of reasons. These are the main three:
(1) A PhD proves that you can do independent research This is a huge positive. Even those with the best grades do not necessarily have the ability to conduct independent research. Having a PhD is an excellent indication that you can start and finish a large project with minimal supervision - a quality employers strongly desire.
(2) A PhD topic can demonstrate competence in a particular field In-depth academic research is probably the closest thing someone can get to experience without actual experience (though I reemphasize the importance of internships!). Moreover, if your thesis is closely related to the career path you are planning on, then this also shows some interest and initiative that a prospective employer will appreciate.
(3) Perception There is no doubt that many people believe that PhDs are smarter. Finance attracts all types of people but PhDs generally attract more respect. Admittedly, there are many people who could have achieved a PhD but chose not to. However, there are also others who might not have been up for the challenge. Getting a PhD removes all doubt.
Aaron Brask is a former banker at JPMorgan and Barclays Capital with a PhD in mathematical finance. He's also the author of the Wall Street Primer.