Management consulting and investment banking are popular career paths for individuals who are looking for a progressive and rewarding profession.
For those that are unfamiliar with the two industries, it is important to take note that there are some similarities. But there are also important differences. In order to understand how management consulting and investment banking are different, below highlights each field thoroughly with key points on each of the industry’s general lifestyle, compensation, benefits and type of services offered.
Management consulting is an industry that renders expert advice and solutions for businesses. Some of these advices could be related to operations, restructuring or merging. Additionally, clients may choose to seek the services of a consultant when launching a new product or when faced with decisions with potential risks.
Hiring a management consultant can be costly. Therefore, large or reputable companies usually make up a consulting firm’s client database. These days, the age of “general” consultants is slowly diminishing. Consultants have begun to form specializations depending on the type of projects they have experience in, or based on academic background.
Currently, consulting firms such as McKinsey & Company, Bain and BCG are the front-runners of the industry. With branches all over the world and focus in all larger industries and in the important functional areas, these firms have set the benchmark for other management consulting firms to meet.
A Closer Look at the Lifestyle
Even in the preparation stages, management consulting is demanding, highly competitive and busy. Often times, consultants are relied on to patch up or boost the current condition of the business. With that in mind, consultants are under a lot of pressure and work more than the usual 40 hours, with work carrying over through the weekends and some holidays.
Traveling is an aspect of the job that many consultants dislike. Frequent long trips, flight delays, adjusting to new time zones and busy airports can add stress to a consultant’s lifestyle. Management consultants usually work in teams; therefore, it is essential to have above average social skills. Client management is an aspect of the job that consultants are expected to carry out. This could mean spending time with a client during one’s free time such as dinner or a short weekend trip.
The turnover rate in management consulting firms is relatively low. Many professionals consider the rewards of the job to outweigh the arduous workload. High compensation and above par benefits are common, even for entry-level consultants (compared to other entry level positions in other industries). Depending on the firm, management consulting generally has consistent promotional value. This is due to the fact that the criteria to become a management consultant are very strict.
Furthermore, those who are not able to cope with the job scope often switch careers. Having a foundation as a consultant opens many doors for other careers, primarily within management and strategic positions. Management consultants rely on their network throughout their career, from landing a consulting job to exit strategies (to other consulting firms or careers).
Meeting the Requirements
Due to the competitive nature of the field, it is essential for prospective consultants to have great resumes. The right organizations and internships can also boost the qualifications of an individual who is aiming for an entry-level position after graduation. Those that transfer from another industry are not exempted from the academic criteria and are often subject to more scrutiny and questions during the application process due to the lack of relevant experience and background.
Investment banking is a financial service provided with the objective to create capital for individuals or businesses. This can be done through the modes of equity securities or debts. Additionally, investment bankers also render advice for real-time market strategies in order to minimize risks and maximize the return on investments.
Another aspect of the job scope of an investment banker is assistance in mergers, restructuring and acquisitions. Like management consulting, investment banking has evolved to suit the needs of its clients by providing other services related to proprietary trading and asset management.
There are different divisions within an investment banking company. The Investment Banking Division (IBD) deals with industry coverage sectors such as public finance, media, financial institutions and technology, while product coverage sectors primarily specialize in equity, mergers and acquisitions. Both divisions work together depending on the requirements and needs of a client.
Trading is a large part of a role of an investment banker. This usually includes purchasing and selling products in the financial sector. In order to maximize the return of each trade, this part of investment banking is divided into several parts or specific departments. A basic sales team focuses on orders and trading, while others work on structuring, the details and clauses of each product to bring in higher returns.
Analysts and Risk Management
Research plays a big part in the investment banking industry. This may include research in the global economy (macroeconomics), credit and fixed earnings. Based on the studies done by analysts, investment bankers are able to advise their clients on which trades to execute at a given moment or timeframe.
A chunk of an investment banker’s role is risk management, which can help solidify the advice being rendered. This can be related to credit, forecasting and market activities. Because of this, it is common for investment banking companies to hold or facilitate mergers between two high-capital companies. Reputable companies such as J.P. Morgan and Barclays provide additional financial services that make them well rounded. This includes restructuring, hedge funds, and legal and operational risk.
Similarities in Lifestyle and Benefits
The professional lifestyle of an investment banker is very similar compared to a management consultant. An investment banker on average works more and usually more than 70 hours per week. One should take note that not all of this time is devoted to work. Many investment bankers make it clear that some of the time is spent on transportation, client dinners, etc.
Compensation is another similar factor that these two industries have in common. The investment banking industry has been known to provide consistent benefits with above average compensation rates. Bonuses, annually and quarterly (depending on the position and company), are also common. However, investment bankers feel that they work for every cent of their salary, as most confess to sacrificing their personal lifestyle for the purpose of career development.
Due to the competitive nature of both sectors, the type of characteristics and personality of individuals present in the industry are generally the same. Social and career driven professionals populate the fields, as well as extroverts. Skills such as mental math, data analysis and spreadsheet composition are other assets that are needed in both professions.
Client Services and Networking
Because both industries are client and service oriented, networking plays a vital role in the success of both management consultants and investment bankers. Besides the closely-knit alumni, colleagues and associates, many rely on diverse connections to overcome career related obstacles. This can be beneficial for individuals in both fields who want to shift in each other’s respective industries.
The Fork on a Road
Where does management consulting separate from investment banking and vice versa? For the answer, we look at why companies seek out the services of these two fields.
As mentioned earlier, businesses that require the services of a management consultant are usually in a compromising situation. Consultants are brought in to shine light and implement new strategies with hopes to turnaround the direction the business is heading towards. When a company faces new problems due to unpredictable trends and shifts in the market, a management consultant can help provide effective solutions.
On the other hand, investment bankers are used by successful businesses that are looking for alternatives in boosting profits or increasing market value. Based on the two comparisons, one industry (management consulting) deals with more patchwork and new strategies, while investment banking is more suitable for individuals who want to “push the envelope” when it comes to growth, acquisitions and mergers.
To Each His Own
In conclusion, the basic skills and requirements needed for investment banking and management consulting are nearly the same. The compensation and demanding lifestyle are also almost identical. However, when it comes to which part of the company’s needs you want to meet; they are very different. It is essential to highlight that there are times when advice from both fields is needed by a company such as mergers and legal matters.
For individuals who want to deal with strictly the financial aspect of a company’s growth, it is recommended to go into investment banking. If forming strategies, reducing operational costs and restructuring are your ideas of an engaging profession; then management consulting could be what you’re looking for.