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 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 basic characteristics of each job (there are plenty of resources out there for that, including my Management Consulted blog), I will address a laundry list of defining differences between the two professions.
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 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.
Cashflow or not, the extra money is substantial and a defining driver of why many people do investment banking over business consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my years as a McKinsey management consultant, easily half the people who left the firm went into the financial world (from hedge funds to PE), and salary was undoubtedly 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 major differences are:
-Hours. Bankers work very long hours. They can average 14-16 hours/day but it can get MUCH 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.
Business consultants average 12 hours per day, varying by client, team goals, partner, 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 coworkers, managers, and firm. This is less discussed but equally important. Consulting firms have a very collegial atmosphere, where the focus is on getting the work done but also ensuring your professional success. This attitude permeates all interactions. 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, networking is important at consulting firms, and social events are focused on helping consultants build contacts and relationships throughout 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 banking versus business consulting continues tomorrow! - 16036
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 basic characteristics of each job (there are plenty of resources out there for that, including my Management Consulted blog), I will address a laundry list of defining differences between the two professions.
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 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.
Cashflow or not, the extra money is substantial and a defining driver of why many people do investment banking over business consulting. This is also a difficult issue for consulting firms with respect to employee retention. In my years as a McKinsey management consultant, easily half the people who left the firm went into the financial world (from hedge funds to PE), and salary was undoubtedly 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 major differences are:
-Hours. Bankers work very long hours. They can average 14-16 hours/day but it can get MUCH 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.
Business consultants average 12 hours per day, varying by client, team goals, partner, 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 coworkers, managers, and firm. This is less discussed but equally important. Consulting firms have a very collegial atmosphere, where the focus is on getting the work done but also ensuring your professional success. This attitude permeates all interactions. 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, networking is important at consulting firms, and social events are focused on helping consultants build contacts and relationships throughout 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 banking versus business consulting continues tomorrow! - 16036
About the Author:
Management Consulted is the ultimate resource for prospective management consultants. Written by a former McKinsey consultant, it covers topics including recruiting, resumes, and consulting interviews. Read the complete guide to consulting jobs and interviews today!
