Monday, October 27, 2014

Banking vs. Consulting: Which is Right For You?

This post was co-authored with Steve Sears who writes on how students can prepare for management consulting interviews.

As a competitive college student, you are thinking about what will launch your career best and are considering this important question.
I would encourage you to take a step back and define your values and your career goals over the next five years before considering the question. You won’t be able to make the right decision unless you understand what you value and what makes you happy in the long-term. I highly recommend that you read the first two sections of Ray Dalios’s principles to help you through the decision making process. His thoughts on achieving goals are brilliant.
Once you know what you want out of life the rest is relatively easier. You only need to collect the information and weigh how it will help you get what you want. For me, knowing what I want, consulting was a better fit because of the variety of engagements and that I would actually have some ability to experience various types of projects and companies before actually deciding on a career.
Instead of defining the basics of each job, you can find that just about anywhere else, I’ll address six difference for you to consider.
Salary—Bankers make 50% to 100% more money than consultants and the difference increases with seniority. Consulting attempts to compensate with a few perks in terms of a higher, more stable salary, better healthcare, and travel bonuses from all the consulting miles. However it just doesn’t compare to a banker who makes a similar base salary to a consultant and can make 50% of her total compensation in a bonus. Many people leave consulting because there are opportunities to do similar work and get paid more, especially in private equity and hedge funds.
Overall Lifestyle—Most bankers have a terrible lifestyle and are in the office all hours of the day and night. You can expect to work all of your waking hours and then a few more when you would want to be sleeping. It is common for a first year banker to have 14-16 hour days or more. The second year in banking is better, usually 12+ hours, but it can be unpredictable and could have sustained periods in the 14-16 hour range. Bankers spend most of their time in the office and rarely travel at junior levels. Banking tends to be hierarchical and more competitive amongst peers and while you will likely have an in-the-trenches friendship with your class there is a lot of competition and less job security.
Consultants have a bad, unpredictable, but not universally unmanageable lifestyle. The typical consultant averages 12 hours a day, where the hours are highly dependent on staffing and the stage of the project. The partner, the client, or the type of case could all lead to long hours. The predictability isn’t much better in consulting than banking; though you may have more opportunity to manage up. Consultants travel frequently with most firms being on the road several days every week. With the largest firms you can expect to be on the road 50% to 75% of the time. Most firms have a helpful at times academic atmosphere, where the focus is on getting the work done but also ensuring your professional success. Managers rarely yell, co-workers try to help you whenever possible, and the companies that consultants hire are usually organized to provide the support to execute on the project.
Skill Development—Investment banking teaches mastery of excel, some PowerPoint, and a deep understanding of the product or industry group in which you work from knowing how to execute a finance process to how to value a company. You’ll also learn how to develop incredible stamina from working 100+ hour weeks
Consulting teaches PowerPoint / slide development, you have to make the slides in order to have the meeting; some level of excel and modeling, which generally includes using data, analysis, and in some cases market size or financial projections as support in making a decision; and knowledge of different businesses and business functions as you experience different cases doing different types of work. You will also master the ability to speak with clients, present and lead meetings, interact regularly in a team, and project manage a piece of analysis. All of this is of course geared to give the more senior team members leverage as the more you are able and trusted to do independently, the less day-to-day work the senior members have to do.
Networking—Bankers develop a deep network in finance and depending on the firm may have a supportive alumni network. Consultants develop a large network inside the consulting firm and the companies they work with. Networking is an essential part of what consultants do and it is a required part of the job.
Prestige—Banking has more press and coverage and more easily point to the results of their actions. If you work at a bank you will likely be able to point to something you work on that is published in the Wall Street Journal. Certain consulting firms carry prestige, but the projects they work are rarely if ever discussed.
Exit Opportunities—If you want to continue a career in finance Banking generally provides a broader array of exit opportunities, especially into Hedge Funds and Private Equity. If you are looking for a breadth of career options consulting is the clear leader as you will have relationships across companies, academia, and alumni are generally willing to help. More consultants apply to and are accepted to MBA programs. In both cases the headhunters, alumni, and senior firm members you develop relationships with will have a significant impact on your options.
About Steve Sears

Steve is the founder of He is a classic example of a management consulting lateral hire. After two years working for Aon Hewitt's Global Strategy Group Steve transitioned to the Monitor Group and spent two years working on a variety of corporate strategy and marketing projects across the luxury goods, health care, telecommunications, and auto manufacturing industries. After two years in consulting, Steve left to work for the hedge fund Bridgewater Associates. Most recently he joined HubSpot to help disrupt traditional marketing and promote the inbound marketing movement.

About Dave Bonnemort

Dave is the founder of Investment Banking Interview Prep. While attending a non-recruited university in the US, he learned the ins and outs of recruiting, applications, resumes, interviewing, and networking in the world of investment banking, which culminated with accepting an offer to work for Bear Stearns in New York City. During this process Dave found that many of the resources available to students were lack luster and he decided to start a blog and give students the information that he wished he had available to him during his interviewing and application period. Since founding this blog he has helped countless students across the globe towards their goal of working in investment banking.