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 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 - after considering the 5 factors Ive listed here, you still think the pay difference (for analysts, averaging between $30-60K per year) would mean a significant difference in your professional job satisfaction, choose investment banking over consulting.
#2 LIFESTYLE ISSUES
The big differences here are:
-Hours. Bankers work brutal hours, no surprise. They can average 14-16 hours/day but it can get FAR WORSE.
My roommates in New York (both investment bankers at Goldman Sachs) would sometimes go 2-3 weeks before wed exchange a word. This meant not only were they getting home after I went to sleep (around 2am), but they left for the office before I woke up (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 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 the firm and your coworkers. This is very important. Consulting firms have a very friendly atmosphere, where the focus is on getting the work done while ensuring your professional growth.Managers rarely yell, coworkers try to help each other out whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, professional networking is important at consulting firms, and social events are focused on helping employees build relationships through the firm.
Investment banks, on the other hand, have a more competitive and tense work environment. You can expect more stressful relationships with your bosses, youll probably be yelled at occasionally for mistakes, and coworkers are much less willing to help out colleagues (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 consulting versus banking continues tomorrow! - 15224
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 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 - after considering the 5 factors Ive listed here, you still think the pay difference (for analysts, averaging between $30-60K per year) would mean a significant difference in your professional job satisfaction, choose investment banking over consulting.
#2 LIFESTYLE ISSUES
The big differences here are:
-Hours. Bankers work brutal hours, no surprise. They can average 14-16 hours/day but it can get FAR WORSE.
My roommates in New York (both investment bankers at Goldman Sachs) would sometimes go 2-3 weeks before wed exchange a word. This meant not only were they getting home after I went to sleep (around 2am), but they left for the office before I woke up (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 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 the firm and your coworkers. This is very important. Consulting firms have a very friendly atmosphere, where the focus is on getting the work done while ensuring your professional growth.Managers rarely yell, coworkers try to help each other out whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, professional networking is important at consulting firms, and social events are focused on helping employees build relationships through the firm.
Investment banks, on the other hand, have a more competitive and tense work environment. You can expect more stressful relationships with your bosses, youll probably be yelled at occasionally for mistakes, and coworkers are much less willing to help out colleagues (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 consulting versus banking continues tomorrow! - 15224
About the Author:
Management Consulted is a resource for understanding management consulting and the consulting industry. Written by a former McKinsey consultant, it covers topics including recruiting, resumes, interviews, and case studies. Read the comprehensive guide to consulting today!
