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    Consulting vs Investment Banking

    If right now you’re considering a career in either strategy consulting at a top firm or investment banking then you’re probably wondering which option is going to suit you the best.

    In this article, we lay out the pros and cons of each of the four most common banking roles versus strategy consulting to help you make an informed career decision.

    Trading vs. consulting

    As a trader, you’re on the phone with a lot to clients and buyers to package and agree on deals. This makes it a fast-paced role that’s great for people who love maths, deal-making, and the buzz of making money.

    You can expect large responsibility early on in trading because you’re soon managing your own book. This means that you can work independently and if you’re competitive, you’re likely to thrive in this environment.

    The compensation is typically very good and the hours are reasonable since you’re only working when the market is open.

    However, trading doesn’t lead to any other long-term career option, because you become specialised very early on. This specialisation is reflected in high compensation packages, but depending on your personality you may find that trading doesn’t keep you happy after a number of years.

    There is also a question mark over whether trading as it currently stands will be a job that still exists in the future. As a trader, you don’t develop a large number of transferable skills as you would in consulting due to the narrow and repetitive nature of the role, so you may find yourself out of a job with limited options if trading roles are displaced by technology. 

    Nevertheless, trading is a good option for people who thrive on the adrenaline of deal-making, are driven by money, and are successful at the job long enough to retire early. It pays more than consulting and can offer a better lifestyle in terms of hours worked, but it closes future career doors rather than opening them in the way that a few years in strategy consulting does.

    Equity research vs. consulting

    A role in equity research involves gathering information through desk research and interviews, and then projecting the performance of the business to create reports that educate investors on whether a stock is currently a good or bad purchase.

    One perk is that your name goes on the reports you produce, which means you can develop a name for yourself as being a particularly good researcher for certain types of stocks. Another perk is that you get incredible exposure to CEOs, as you get to interview them about their strategy and results as part of your research.

    However, equity research is typically the least well-paid role in investment banking because equity researchers do not directly generate revenue. The reports are offered free by the bank in the hope that readers choose to make brokerage transactions via their services. As well, the exit opportunities are limited to working in investment management, for instance as a Fund Manager. 

    The role is good for people who like to work fairly independently, who are deeply curious about the in-depth details of business, and who enjoy doing analysis. It’s also great for people who get a buzz from the stock market and investments in general.

    However, as an Equity Researcher you don’t get to influence the strategy of a business, rather you simply research, observe and report on the strategy. For some people, this can get a little boring and senseless after a while. As a consultant, your research and recommendations lead to the client making changes, which means you can have a greater overall impact in your work.

    M&A vs. consulting

    Simply put, in M&A you pitch potential acquisitions to clients and help them execute deals in return for a cut of the transaction value.

    As a junior, your role is to identify acquisition opportunities, model cash flows, and write pitch presentations.

    M&A is traditionally the more prestigious role within investment banking because you get the opportunity to work on some of the biggest transactions that can often make headline news. You also get to learn key skills like understanding corporate finance and you will likely have exposure to senior executives. 

    M&A has a potentially long term prospect of making a lot of money by going into Private Equity afterwards, or becoming a Managing Director within the firm.

    However, the work is highly repetitive and involves enduring extremely long hours, sometimes in a harsh environment where there is little concern for your well being. The intellectual challenge is also lower compared with equity research or trading. 

    The role is great for people who are driven by money, love deal-making, and have a high tolerance for hard and repetitive work.

    Compared to consulting, M&A offers better potential to make a lot of money, but the role is way more repetitive and transactional. The lifestyle can also be much worse. In contrast, consulting offers a more enjoyable work environment, lots of transferable learning, the opportunity to get involved in the operations of the business, and the chance to make a positive difference.

    Sales vs. consulting

    In Sales, you work closely with clients to support them in making the decision to buy investment products from you.

    Great salespeople are often motivated by money and feel satisfaction from reaching their targets and getting paid well for it. The perks are of course good compensation and nice lunches or entertainment with clients.

    You can expect to quickly become responsible of specific client accounts. You’ll have to keep a finger on the pulse of the market so that you can provide insightful recommendations to clients.

    The downside to sales is that is can often be perceived as the least prestigious area within investment banking and has fewer exit opportunities outside of lesser-paid sales jobs.

    It’s a great career for individuals who enjoy convincing others, reaching targets, making money, and don’t mind doing it all over again. 

    However, for some people the role lacks intellectual challenge, meaningful impact and, in some cases, exposure to the real world. If these are important factors to you, then consulting is often a better option overall.

    The verdict

    When weighing up the options, it’s important to recognise both the short and long term benefits of choosing investment banking versus strategy consulting.

    In the short term, you want to ask yourself whether you can imagine enjoying the work and whether you feel it’s a good way to spend three or more years of your career. Consider whether you’ll be good at the role and if you have the skills and interest to succeed. Then of course there’s the compensation and lifestyle you want to have, and how each potential option allows for goals to be met.

    The main benefits of consulting is that it offers:

    • Broader learning and greater transferability of skills to new roles, leading to many more open doors if you choose to leave, and better long term career prospects. By contrast, investment banking may pigeonhole you for the future
    • More tangible impact compared banking, which is often a zero-sum game
    • Exposure to a variety of industries and problems to solve, where no two projects are the same. Banking work is repetitive and limited to making the next transaction 

    However, if you’re the kind of person who gets a kick out of making deals, is fascinated by the market, and doesn’t mind repetitive work or is driven by money, then banking is likely a very good fit.

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