The decision was easier for me than many. The cons of investment banking - the long hours, the repetitive and unengaging nature of the work, the lack of non-finance exit opportunities - mattered far more to me than a 6-figure salary.
I seriously considered sales & trading (in fact, I spent a summer at Credit Suisse First Boston in NY), and was tempted to continue in that line of work post-graduation.
Instead of defining the well-known characteristics of each job (there are plenty of resources out there for that, including my Management Consulted blog), I will address a key list of differences between the two industries.
Let me warn people that management consulting and investment banking are not the only 2 options available. Don't get too caught up in the hype.
#1 SALARY
This is the biggest superficial distinction. Thats not to imply that salary isn't important. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your tenure increases. Consulting compensates with small perks - from better travel allowances to more generous health and retirement packages.
Consultants always like to say that:
I know investment bankers make more money. But from a cashflow perspective, its exactly the same!
This simply means that consultants and bankers make comparable base salaries, and at the end of the year, bankers are awarded a large bonus which can comprise more than 50% of their total annual compensation.
The extra money is substantial and a defining driver of why many people do investment banking over management consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my previous management consulting career, at least half the people who left the firm went into the financial world (from hedge funds to PE), and salary was definitely a major factor in the decision.
My advice is this - if after considering all 5 factors Ive listed here, you still think the pay difference (for 1st yr analysts, averaging between $30-60K/year) would mean a major difference in your professional job satisfaction, choose banking over business consulting.
#2 LIFESTYLE ISSUES
The big differences here are:
-Hours. Bankers work very long hours. They can average 14-16 hours/day but it can get MUCH WORSE.
My New York roommates (both investment bankers at Goldman Sachs) would sometimes go 3 weeks before wed even have a conversation. Which meant not only were they coming home after I went to sleep (usually around 2am), but going back to the office in the morning before I awoke (around 7am).
Your second year as an investment banker gets better - in the 10-14 hours/day range but also with unpredictably tough periods.
Strategy consultants average 12 hours per day, with the usual variations depending on client, team goals, scope, etc
-Travel. Bankers do some for roadshows, due diligence, etc but spend 90% of their time in one office until youre partner-level (this is investment banking; you can expect more travel in private equity and investment management). Consultants - depending on firm - travel anywhere from 25-75% of their time. At the Big 3 (Bain, Boston Consulting Group, McKinsey), you can expect travel 50-75% of the time.
-Relationship with firm employees and coworkers. This is an important but oft overlooked issue. Consulting firms have a very collegial atmosphere, where the focus is on getting work done and ensuring your professional success. This attitude permeates all interactions. Managers never yell, coworkers are supportive whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, networking is critical at consulting firms, and social events are focused on helping business consultants build contacts and relationships throughout the company.
Investment banks, on the other hand, have a more hierarchical and competitive setup. You can expect more nervous relationships with bosses, youll probably be yelled at from time to time for mistakes, and coworkers are less willing to help each other out (simply put, your success means more competition for the biggest bonuses).
In addition, youll have limited exposure across the company to other groups, departments, etc - less ability to network across the company.
Part 2 of this series on banking versus business consulting continues tomorrow! - 15266
I seriously considered sales & trading (in fact, I spent a summer at Credit Suisse First Boston in NY), and was tempted to continue in that line of work post-graduation.
Instead of defining the well-known characteristics of each job (there are plenty of resources out there for that, including my Management Consulted blog), I will address a key list of differences between the two industries.
Let me warn people that management consulting and investment banking are not the only 2 options available. Don't get too caught up in the hype.
#1 SALARY
This is the biggest superficial distinction. Thats not to imply that salary isn't important. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your tenure increases. Consulting compensates with small perks - from better travel allowances to more generous health and retirement packages.
Consultants always like to say that:
I know investment bankers make more money. But from a cashflow perspective, its exactly the same!
This simply means that consultants and bankers make comparable base salaries, and at the end of the year, bankers are awarded a large bonus which can comprise more than 50% of their total annual compensation.
The extra money is substantial and a defining driver of why many people do investment banking over management consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my previous management consulting career, at least half the people who left the firm went into the financial world (from hedge funds to PE), and salary was definitely a major factor in the decision.
My advice is this - if after considering all 5 factors Ive listed here, you still think the pay difference (for 1st yr analysts, averaging between $30-60K/year) would mean a major difference in your professional job satisfaction, choose banking over business consulting.
#2 LIFESTYLE ISSUES
The big differences here are:
-Hours. Bankers work very long hours. They can average 14-16 hours/day but it can get MUCH WORSE.
My New York roommates (both investment bankers at Goldman Sachs) would sometimes go 3 weeks before wed even have a conversation. Which meant not only were they coming home after I went to sleep (usually around 2am), but going back to the office in the morning before I awoke (around 7am).
Your second year as an investment banker gets better - in the 10-14 hours/day range but also with unpredictably tough periods.
Strategy consultants average 12 hours per day, with the usual variations depending on client, team goals, scope, etc
-Travel. Bankers do some for roadshows, due diligence, etc but spend 90% of their time in one office until youre partner-level (this is investment banking; you can expect more travel in private equity and investment management). Consultants - depending on firm - travel anywhere from 25-75% of their time. At the Big 3 (Bain, Boston Consulting Group, McKinsey), you can expect travel 50-75% of the time.
-Relationship with firm employees and coworkers. This is an important but oft overlooked issue. Consulting firms have a very collegial atmosphere, where the focus is on getting work done and ensuring your professional success. This attitude permeates all interactions. Managers never yell, coworkers are supportive whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, networking is critical at consulting firms, and social events are focused on helping business consultants build contacts and relationships throughout the company.
Investment banks, on the other hand, have a more hierarchical and competitive setup. You can expect more nervous relationships with bosses, youll probably be yelled at from time to time for mistakes, and coworkers are less willing to help each other out (simply put, your success means more competition for the biggest bonuses).
In addition, youll have limited exposure across the company to other groups, departments, etc - less ability to network across the company.
Part 2 of this series on banking versus business consulting continues tomorrow! - 15266
About the Author:
Management Consulted is a resource for understanding management consulting. Written by a former McKinsey consultant, it covers topics such as consulting interviews and resumes. Read the guide to getting a consulting job today!
