Consulting vs Investment banking - How to choose your career
As an undergrad I quickly built up a decent idea of what I wanted from my career: a job that was prestigious, fast-paced, well paying and stimulating.
After doing my research it looked like there were mainly two career-paths that fit what I wanted quite well: Consulting and investment banking. Ultimately I decided to choose consulting (eventually taking an offer from McKinsey & Co). Here are the top five reasons why:
Hours
It’s no secret that the life of an investment banker isn’t exactly friendly to lifestyle. 80-100 hour work weeks are the norm and it’s not unusual to get calls to come back to the office some evenings as well. Consultants definitely work hard too, but there seemed to be a significant more degree of certainty to the lifestyle of a consultant. This was for a couple of reasons:
Consultants work directly with clients. Most of the time clients don’t work 80 hours a week, and most of the time you only see your client Monday-Thursday. This creates a natural buffer and weekend protector, most of the important work gets tabled for in-person meetings.
Consultants work on projects, which are scoped and planned out. By contrast, investment bankers are more at the mercy of individual deals—M&A talks can sometimes accelerate unpredictably, for instance.
Exit opportunities
It’s not that investment banking doesn’t have great exit opportunities… it’s that consulting has the same exit opportunities as finance, and then some. It wasn’t uncommon to see McKinsey alumni in the world’s most prestigious PE and Hedge Funds. I wanted to keep my option value high so consulting was an easy choice. There were three distinct advantages McKinsey had over investment banking.
Network. McKinsey does a great job organizing its alumni network, and McKinsey alumni are generally very warm and welcoming to helping each other out—such a program does not exist at any investment bank that I’m aware of.
Breadth. McKinsey consultants were everywhere — from politics, tech, finance, and not for profits. It truly seemed like there was a tremendous option value to choosing a career in consulting.
Brand. McKinsey’s brand was universally respected and immediately bought intellectual capital in the room. By contrast, investment banking had lost some of its polish in the post-2008 hangover.
Skills
There is a natural incentive to develop skills as a consultant. At McKinsey, the finished product is the combined thinking of the team, so having stronger team-members directly results in a stronger finished product. Furthermore, in consulting, it was common for firms to try to keep consultants for a long time. By contrast, investment banking is an exercise in accessing the financial markets. A good investment banker may get their client a better price but ultimately price is at the mercy of the market — the finished product is ultimately underwriting a transaction. There isn’t the same incentive to keep analysts for a long time. In fact, most investment banks know their analysts will leave in two years—thus they don’t invest a lot in training beyond the bare minimum.
It’s no secret that investment bankers make more than consultants on a cash-basis. However, the gap closes considerably when you consider a lot of the perks that consultants get. With the right credit-card, hotel, flight and car rewards programs, you can do a lot to monetize on the travel and high-expense lifestyle that being a consultant often require
Credit-card—This can be tricky as a lot of consultancies have corporate cards and if you get rewards they might be difficult to access. Talk to HR and if possible, try to get a flat cash-back cards. It’ll make putting down your AmEx for those 1k+ team dinners a hell of a lot sweeter.
Hotels – There’s really only one word that you need to remember here: Starwood. Easily the best rewards program out there for consultants.
Flights – booking with the same airline alliances to collect the same types of points no matter where you’re flying is key and can generate up to 10 free trips a year if you’re really optimizing things right.
The work
I’ll be honest. There isn’t a whole lot of interesting work that investment bankers do… especially at the entry-level. It’s going to be a lot of updating comp tables as financial statements are released, and then a whole lot of pitch books (most of which have templates and will consist of you just pulling the correct data and getting yelled at for any misplaced punctuation or alignment). By contrast, consulting work is significantly better:
Contrast. Every project is truly different—you can be doing strategy for a mining company one project, and trying to assess HR issues at a clothing-retailer the next. This was extremely valuable to me as I still wanted to explore the world of business before choosing finance as a specialty. Also, it meant the likelihood of me being bored was significantly decreased.
Travel. I could go on and on about consulting travel, but that’s for another article. I will say that the prospect of being able to visit places I’ve never been, while travelling extremely well (business class anyone?) was definitely a lot more appealing to me than being stuck in the same grey office night after night.
Conclusion
So there you have it — my top 5 reasons for choosing consulting over investment banking. The choice certainly turned out well: The McKinsey brand has treated me well since I left — and I’ve actually held jobs in finance as well, so I saw first hand how my exit opportunities in finance weren’t harmed at all. In addition, I got to see a bunch of new places I wouldn’t have otherwise… and also funded some pretty sweet vacations to some amazing places.
Consulting has a lot of benefits over investment banking to be sure… but at the end of the day it depends on the individual and what they’re seeking. If you know for sure that finance is the life for you, and you value cash over perks and don’t mind putting in a lot of hours early in your career… then it’s hard to make an argument against investment banking. However, if you’re still in the mood to explore the world of business while travelling a ton , doing interesting work and keeping all your options open… then consulting is for you!
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