The decision was relatively straight forward for me. The negatives of investment banking - long hours, repetitive work, lack of non-finance exit options - mattered more to me than the money.
I considered sales & trading (in fact, I spent a summer at CSFB in NY), and was tempted to continue in that line of work after graduation.
Instead of defining the characteristics of each industry (there are plenty of resources out there for that, including my Management Consulted blog), I will address a short list of differences between the two career paths.
Let me caveat by saying THESE ARE NOT YOUR ONLY OPTIONS. People get carried away into thinking thats all there is.
#1 SALARY
This is the primary superficial distinction. Thats not to imply that salaries aren't important. Banking salaries average 50-100% higher than consulting salaries, with the gap increasing as your seniority increases. Consulting attempts to compensates with small perks - from better travel allowances to more generous 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 similar base salaries, and at the end of the year, bankers are given a huge bonus which can be 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
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 roommates in New York (both investment bankers at Goldman Sachs) would sometimes go several weeks before wed even exchange a word. Which meant not only were they getting in after I went to sleep (around 2am), but going back to 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 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 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 banking versus business consulting continues tomorrow! - 15275
I considered sales & trading (in fact, I spent a summer at CSFB in NY), and was tempted to continue in that line of work after graduation.
Instead of defining the characteristics of each industry (there are plenty of resources out there for that, including my Management Consulted blog), I will address a short list of differences between the two career paths.
Let me caveat by saying THESE ARE NOT YOUR ONLY OPTIONS. People get carried away into thinking thats all there is.
#1 SALARY
This is the primary superficial distinction. Thats not to imply that salaries aren't important. Banking salaries average 50-100% higher than consulting salaries, with the gap increasing as your seniority increases. Consulting attempts to compensates with small perks - from better travel allowances to more generous 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 similar base salaries, and at the end of the year, bankers are given a huge bonus which can be 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
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 roommates in New York (both investment bankers at Goldman Sachs) would sometimes go several weeks before wed even exchange a word. Which meant not only were they getting in after I went to sleep (around 2am), but going back to 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 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 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 banking versus business consulting continues tomorrow! - 15275
About the Author:
Management Consulted is a resource for understanding management consulting. Written by a former McKinsey consultant, its main purpose is to help readers recruit for consulting jobs. Read the Ultimate Management Consulting Guide today!
