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Investment Banking vs Consulting: A Comparative Study

Did you know that the Consulting industry is responsible for 25.4 percent of global employment? Consultants earn a salary close to one lakh ninety-two thousand dollars. But hey! Investment bankers are not that far away because they are anything close to one, like eighty thousand dollars or higher. Now, let’s compare them side by side here. This article, Investment Banking vs Consulting will give you a detailed idea of the concepts, and their key aspects and differences.

Investment Banking vs Consulting

Investment Banking vs Consulting – Key Aspects 

Number one: degree for a career in Investment Banking. You can opt for various degrees for this MBA specialization: an MBA in financial management and a master’s in finance. Whereas for a Consulting career, you can go for an MBA in general management or strategy and Consulting.

Number two: recruiters for a career in consulting; you can target top MBB firms like Bin and Company, BCG, and McKenzie. You can target EY,  JP Morgan, Morgan Stanley, and Goldman Sachs in investment banking.

Number three is universities for a Consulting career. You can target top business schools like Chicago Booth, Duke Fuqua, Colombia, and Tuck University. Whereas for investment banking, Harvard, MIT Sloan, and NYU Stone will be great.

Today, we will compare the career path in investment banking with management consulting. Now, both these career paths are extremely lucrative, offering a range of opportunities for students.

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So, I am writing a blog to compare both options more systematically and give you my final verdict on which career path I consider better. I will cover six specific points in this blog: I will help you understand the nature of work in investment banking and management consulting.

Second, we will understand the working hours and the lifestyle involved in both these career paths. Third, we will look at the exit options and opportunities once you leave investment banking and management consulting. What type of jobs can you get?

Fourth, we will analyze what types of profiles and people get into these career paths and what are some of the key and core skills required. Fifth: we will talk about money and salaries. How much money do you make?

And which career option gives you better salaries? Finally, I will leave you with some quick inputs and tips on how to get into both these career paths, so let’s start this blog.

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Investment Banking vs Consulting – Nature of Work

So, let me quickly explain what investment bankers generally do. Investment bankers do a range of work, but predominantly, they do two types of major work. So, investment banks help their clients invest in different asset classes. That is one of the key goals of an investment banking firm.

Second, an investment banking firm also provides financial advisory slash transaction services. For example, if a major company like Zomato or Bumble wants to enter the stock market, then investment bankers will help these companies get into the stock market. They do something called underwriting.

Now, predominantly, these are the two major works that investment banks do, but they also engage in a wide range of other buy-side and sell-side transactions, which would be very difficult for anyone to define.

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So I always love to give this analogy that honey bees get attracted to flowers that management consultants get attracted to money. So wherever money is to be made, you will always find investment banks doing some work there now. If you move on to management consulting, if you look at firms like BCG, Bain, and McKinsey.

 

They solve something called cases. Now, cases are business problems, so imagine that Amazon comes to McKinsey and says, Hey! McKinsey, we want to start a new venture to take people from Earth and put them on Mars.

Can you help us design a business strategy or plan for such a venture? Now, this is business analysis and broad business analysis, and firms like BCG, Bain, and McKinsey solve this kind of business case.

This is the primary difference between investment banks doing finance-oriented work, and it’s more focused work. Management consulting firms solve a broad range of business problems, which can be related to space travel. This can be related to retail. This can be related to oil and gas and a range of industries.

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Investment Banking vs Consulting – Comparison of Lifestyle

Now, if you look at the lifestyle of investment bankers and management consultants, both live a very comfortable life from a monetary compensation perspective. They also have a very hectic lifestyle. But to give you some numbers, an average working week for an investment banker a five-day average working week would be somewhere around 65 to 70 hours.

It can change depending on your role and the type of deal that you’re starved for. Usually, mergers and acquisitions deals are very hectic, and investment bankers must spend approximately 90 to 100 hours per week working and getting started on such deals.

On the flip side, the management consulting lifestyle is slightly less hectic. A management consultant would spend 55 to 60 hours a week working on a case. This, again, depends on the type of office you have been staffed in and the type of project.

A general rule would be that investment bankers spend around 65 to 70 hours, and management consultants spend 55 to 60 hours weekly. This might look like a minor difference, but you should remember that spending 10-15 additional hours a week can cut into your sleep-eating routine.

It can disturb your mental peace and sleeping patterns, so remember. That is a very important consideration to be aware of. It would help if you also noticed that management consultants travel a lot.

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The general routine at McKinsey and BCG is taking a flight from your home city every Monday and then going to the client’s location. You will work out till Thursday.

And you will return on Friday or Thursday night and spend time with your family over the weekends. Investment bankers do not engage extensively in travel, but they also get to travel.

But the bottom line is that traveling can be an advantage and disadvantage in management consulting. The advantage is the sense that you get to explore new cities, the disadvantage could be that you have to spend time away from your family.

On the flip side, in the case of investment banking, the working hours are very hectic. The second point that you need to notice in terms of lifestyle is that the work of investment bankers is very, very focused.

Let me explain that via an example. So you might have watched a show called Shark Tank; now several entrepreneurs have come, pitching in front of Mark Cuban and Kevin O’Leary, and get a deal done. Now, you watch the front end of the show.

The deal has been finalized, but someone needs to verify that deal; like, is the entrepreneur giving out the right numbers? Is the entrepreneur giving the right profit, revenue, and cost numbers? Do they have that existing business in place?

Do they have their legal regulations and permutations and combinations in place? Do they have the patents in place? This is called due diligence, a highly focused work investment bankers generally do. The work in investment banking is very, very focused. Please keep this in mind.

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This can both be an advantage and a disadvantage. You would hate the work if you like doing only a few finance-oriented things and have become an investment banker. So keep that in mind. On the flip side, if you enjoy doing broad business analysis and case solving and interacting more with clients, then you would enjoy working in consulting.

So now that I have briefed you on these major points, you must ask yourself a question: is the lifestyle of a management consultant and investment banker sustainable? So, I would love you guys to comment in the comment section.

 

Is this lifestyle sustainable if you work more than 60 hours weekly? So, a final note from my side is that many of you might get scared that investment bankers and management consultants work around the clock, and they probably do not even sleep. They are very efficient people.

You must also remember that if you are looking at any high-end career path, be it investment banking management consulting, VC, private equity, or hedge fund jobs. Any high-impact work will demand a major part of your life, so you must see this from a pragmatic point of view.

You need to understand that when starting your career path, you will spend a lot of time gathering and gaining skills. Both investment banking and management consulting career paths are wonderful from that angle that they help you develop these core skills.

Yes, on the con side, it is there that your personal life suffers a little bit, but this is something that you can get over in terms of exit opportunities that both these career paths provide.

Investment Banking vs Consulting – Exit Options

Let’s start the third part of the blog, which concerns exit options for management consultants and investment bankers. Now, when it comes to investment banking, most people, after they get out of investment banking, end up joining buy-side firms.

For example, they will work with private equity, VC, and hedge funds. These are called buy-side rolls, and most roles are buy-side here. Many of the investment bankers end up doing an MBA. They switch to working in consulting or technology firms.

Now, the range of options is truly dynamic for investment bankers. After being an investment banker, even if you join a tech firm, you will most likely work in a finance-oriented finance-oriented role.

Now, many investment bankers choose to do an MBA or a master’s degree post there. They take a break from investment banking and then explore new career options.

Still, again, the most likely exit option, even after an MBA for prior investment bankers, is either in investment banking or buy-side firms like private equity, hedge funds, VC firms technology, and corporate HQ finance jobs.

Now, it is a management consulting firm, given that it presents you with a wide array of options or a bouquet of options you can execute. For example, you might know that Sundar Pichai was a management consultant, and even Isha Ambani was a management consultant at McKinsey.

 

Now, since the nature of management consulting jobs, in general, is that you work one day on an operations project, the next day on a marketing project, and the next day on a technology project, you can take up a range of work or range of jobs in the corporate domain after you exit from a management consulting firm.

I am not saying that investment bankers do not have a business sense. They, of course, do, but the point is that investment banking work is highly focused on finance compared to management consultants. Their broad business skill could be stronger.

Investment Banking vs Consulting – Suitable Profile for the Job

Let’s quickly look at what type of people get into management consulting and investment banking. So, first and foremost, almost any firm will look for high-caliber students and participants.

Now, for both these jobs, you must be a high performer, whether you want to work at JP Morgan, Morgan Stanley, McKinsey, or BCG. You must have a high GPA, GMAT, and  GRE scores. These are all value-adding points.

Now, I do not mean to discourage you and say that if you are from a tier 2 college, you will not get into top-tier investment banking or management consulting firms. Now, these firms consider your brand value and equity very prominently. That’s one.

Second point: both these career paths require their candidates to have firm discipline in quants. So, if you are an engineer, that’s an add-on. If you have a very high GMAT or quant score, that’s an add-on.

This becomes especially prominent if you work in investment banking, a numbers-driven industry. They explicitly test out your interview in such a manner that they get to assess your number-crunching skills.

Conversely, if you’re interviewing with management consulting organizations, they will look for your broad business skill set and broad business knowledge. How you analyze cases, and along the way, they will test out your number skills.

An additional point is that investment banking or management consulting industries are client-facing. So you engage and interact with clients a lot, so your communication skills need to be top-notch. Therefore, problem-solving and communication are the first two skills required by management consulting and investment banking.

 

Investment Banking vs Consulting – Salaries

Now comes the interesting part, which is about money. So how much money do you make if you’re working as an investment banker vis a vis if you’re working as a management consultant? So, let’s first talk about management consultants.

Now, of course, there are different hierarchies. If you join a management consultant as an analyst right after your undergrad, you will make approximately 10 to 12 lakhs in Indian rupees.

Now, join a management consulting organization as an associate, which is usually a post given out to master’s level degree students, MBA students, or MPP students. You will make somewhere around 25 lakhs INR as the base pay.

Investment banking salaries are much higher. They are approximately 30 percent higher compared to consulting jobs. For example, if you work as an analyst at JPMorgan in India, you will make around 15 lakhs, and your bonus will kick in early.

Similarly, if you are working post-MBA at JP Morgan, you might make approximately 35 lakhs. So, that is the general rate for investment banking associate rules. Your salary structure will change as you grow in your investment banking or management consulting career path.

But approximately, there will be that 30 difference that will exist; that’s point one. And point two, even your bonus will take a major hit now to quickly talk about the bonus component that investment bankers make much higher bonuses than management consultants.

Now, I need help to give you an estimate of what the difference in the bonus and management consulting and investment banking industry are. However, the bonuses can cloud your base salary since the entire investment banking industry operates on commission depending on a good year.

So your bonus can be higher than your base salary, so please keep that in mind. Lastly, investment banking is a much more lucrative career path if you want to make money in the short term.

Investment Banking vs Consulting – Few Tips for Jobs

Now, this brings me to the final part of the blog. What type of people get in, and what are the skills? I briefly touched upon this earlier in the blog. But let me give you a quick summary: first and foremost, there is high mobility from investment banking to management consulting. For example, after their MBA, many investment bankers become management consultants.

 

Similarly, after graduating from business school, many management consultants work on the buy side roles, not necessarily in investment banking. Still, they can explore options in venture capital and private equity funds. So, what I am trying to get at is that both these career paths have a strong confluence. As a result, the recruiters look for similar kinds of skills.

  • They will look at your brand value, so if you can attend a top-tier master’s or bachelor’s program, do it. That’s useful.
  • Build your quantitative abilities to show your recruiters you are comfortable with numbers.
  • Be a very good people person and improve upon your communication skills.

Suppose you enjoy finance and are very active in finance and interested in finance. Develop your core finance skills if you want to work in management consulting.

On the flip side, if you need clarification about his career and what you would eventually want to do, being in management consulting can give you great exposure and a learning environment to develop your understanding of the entire business world.

And then subsequently choose to move into VC or private equity space. What is my final verdict on which career path is better? So, both career paths are perfect, but it suits certain people.

For example, management consulting might be a better option if you are like me and want to explore a different type of work. If you are very interested and passionate about entrepreneurship, then being in management consulting can help you kick start that career journey.

Slightly more easily. On the flip side, investing in investment banking can again be a valuable opportunity if you enjoy finance and are mad about finance.

FAQs Related to Investment Banking vs Consulting

1.     What does a management consultant do?

Suppose you have chest pain, and your health is bad; what will you do now? You will go to a doctor. When you go to a doctor, you will be aboard. What will be written on the board? He is a Heart consultant/Chest consultant. It can be anything. But the consultant is now the particular thing in which your problem is. If you have a problem in the skin that is not going away, you have to see a doctor, skin consultant/dermatologist.

What do doctors do? If there is a problem, you need to become an expert. You will go to the doctor. The doctor will advise you and write the medicines on paper in half an hour. Now you have to buy those items and do your treatment. Then he will check what happened. This is the job of the consultant. The problem is not of the body but of the business. Imagine you have a big business.

Let’s say Reliance, Flipkart, and Amazon. They have big problems. They can invest two crores to solve the problem since it is 50 crores. To whom will you go? You will go to McKinsey Consultants. There will be a team among these consultants of McKinsey. If there is an HR problem in Reliance’s company, it has to be solved. So, you will go to the HR consulting team of McKinsey.

2.     Is management consulting worth it?

First thing, the lifestyle would have been fancy. You would get up and sit with the CEOs. If you want to solve the problem of Flipkart CEO, then Flipkart will sit you in 5-star hotels. Ambani will make you stay in 5-star hotels. They call you into their office and get a presentation where people do not go. You have to work in the Nariman Point office, Which means you will get a fancy lifestyle.

Your exit options will be better. You are advising your CEOs by solving the problem. Suppose you still need to solve the problem of Reliance. You did it to Flipkart; you did it to the Myntra for one and a half years. Then Myntra will tell you that my strategy role is an in-house strategy role. You come here, it happens, and they give a lot of hikes.

3.     Is management consulting stressful?

With great money, stress comes. It is not about the stress but how you manage it in your own life.

Concluding Thoughts on Investment Banking vs Consulting

This article is an in-depth comparison of investment banking vs consulting. I have covered the maximum points I could within the word limit. But if you choose any field of the two, both are wonderful as a career prospect. At last, it is a personal choice of liking the options.

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