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 caveat by warning people that management consulting and investment banking are not your only two career options. Don't get too caught up.
#1 SALARY
This is the biggest superficial difference. Thats not to imply that salaries aren't important. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your seniority increases. Consulting compensates with perks that banking does not offer - from better travel allowances to more generous health and retirement packages.
Consultants are known for saying:
I know investment bankers make more money. But from a cashflow perspective, its exactly the same!
This means that consultants and bankers make similar base salaries, but at the end of the year, bankers are awarded a significant bonus which can be more than half of their total annual compensation.
To be frank, the extra money is substantial and a defining driver of why many people do investment banking over strategy consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my years as a McKinsey consultant, half the people who left the firm went into the financial world (from hedge funds to PE), and salary was definitely a big 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 substantial difference in your personal and professional job satisfaction, choose banking over consulting.
#2 LIFESTYLE FACTORS
The key differences here are:
-Hours. Bankers work very long hours, no surprise. They can average from 14-16 hours/day but it can also 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.
Management consultants average 12 hours/day, with the typical variations depending on client, team goals, etc
-Travel. Bankers do a little travel for roadshows, due diligence, etc but spend 90% of their time in one office until youre partner-level (you can expect more travel in private equity and asset management). Depending on firm - management consultants travel a lot. 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 competitive, hierarchical setup. You can expect more tense relationships with your bosses, youll probably be yelled at from time to time for mistakes, and coworkers are much less willing to help each other out (theyve got enough on their plates, and your success means theres 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 management consulting versus investment banking will continue tomorrow! - 15246
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 caveat by warning people that management consulting and investment banking are not your only two career options. Don't get too caught up.
#1 SALARY
This is the biggest superficial difference. Thats not to imply that salaries aren't important. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your seniority increases. Consulting compensates with perks that banking does not offer - from better travel allowances to more generous health and retirement packages.
Consultants are known for saying:
I know investment bankers make more money. But from a cashflow perspective, its exactly the same!
This means that consultants and bankers make similar base salaries, but at the end of the year, bankers are awarded a significant bonus which can be more than half of their total annual compensation.
To be frank, the extra money is substantial and a defining driver of why many people do investment banking over strategy consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my years as a McKinsey consultant, half the people who left the firm went into the financial world (from hedge funds to PE), and salary was definitely a big 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 substantial difference in your personal and professional job satisfaction, choose banking over consulting.
#2 LIFESTYLE FACTORS
The key differences here are:
-Hours. Bankers work very long hours, no surprise. They can average from 14-16 hours/day but it can also 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.
Management consultants average 12 hours/day, with the typical variations depending on client, team goals, etc
-Travel. Bankers do a little travel for roadshows, due diligence, etc but spend 90% of their time in one office until youre partner-level (you can expect more travel in private equity and asset management). Depending on firm - management consultants travel a lot. 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 competitive, hierarchical setup. You can expect more tense relationships with your bosses, youll probably be yelled at from time to time for mistakes, and coworkers are much less willing to help each other out (theyve got enough on their plates, and your success means theres 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 management consulting versus investment banking will continue tomorrow! - 15246
About the Author:
Management Consulted is a resource for understanding business and strategy consulting. Written by a former McKinsey consultant, its main purpose is to help readers find management consulting jobs. Read the guide to management and strategy consulting today!
