Investment Banker vs. Management Consultant: Why the Banker Wins with a Knockout in Round 1
“What’s missing from your resume is a focus on the results… I see all your recommendations and the projects you worked on, but I don’t see what happened as a result of your work.”
-McKinsey Recruiter to Me, 3 Years Ago
Some of you have asked about consulting (as in management consulting, not IT consulting – who in their right mind would do that?) vs. investment banking and which is “better” to pursue.
So here’s why investment bankers dominate management consultants, and why you should do banking.
The Myth: Bankers vs. Consultants Video
On the day the infamous Leveraged Sellout video was released, I received about 10 forwards from readers and friends, so I’m guessing almost everyone has seen it by now.
But just in case you haven’t, here it is again for good measure:
Although it’s fiction, the video does a surprisingly good job of summarizing the bankers vs. consultants debate.
“Be a Burnout Banker, Teaching Math at My Prep School”
There’s a lot of burnout in both fields. My management consultant friend almost quit after he had to work 14 hours on his birthday once. True, consultants get uninterrupted weekends… sometimes… but regardless of whether you’re a banker or consultant, you’re going to work a lot.
To imagine the schedule of a consultant, just take my Week in the Life series and add traveling to Idaho at the beginning of the week and coming back at the end of the week. Also delete all references to quantitative work and replace them with finger-painting.
“Nothing but Grunt Work”
Not quite.
There’s a lot of grunt work in both industries. In banking, it’s more quantitative and no one cares about offering “strategic insight” and putting things in quadrants – they just care what the Pro Forma EPS is.
“Make a Really Significant Impact and Get Home by 7:15″
I know of no consultants who get home by 7:15. One of my friends is an IT Consultant and even he doesn’t get home by 7:15.
So far, banking and consulting might seem similar… but let’s take a look at the first part of this claim – “Make a Really Significant Impact.”
Despite what the consultant argues, bankers typically make far more of an impact than consultants. True, some transactions fall apart, but when they happen you get a new public company or a new conglomerate.
By contrast, you never know if the recommendations consultants make will be implemented.
Got results?
“Mining for Gold out in Saskatchewan”
“Business travel” sounds cool to people who haven’t traveled much before, but it’s less appealing when you’re flying to Saskatchewan every week in February. Consultants are always on the road, and while bankers do travel occasionally, it is much less of a burden.
It’s fun to live in another country for an extended period, but it’s much less fun to travel back and forth every single week.
Plus, even if you are stationed in Saskatchewan you probably won’t discover any gold.
“You Try to Add Value… I Straight Create It”
At the junior level, no banker or consultant “creates value” and they rarely even “add value.” Senior bankers who negotiate on their clients’ behalf can sometimes “add value” by getting the buyer to pay more, but even that is rare.
Both banks and consulting firms are in the business of giving advice: advice on what to do financially and what to do operationally. Companies actually “create value.”
“House in the Hamptons and a Penthouse Loft”
Even at the market peak in mid-2007, 1st Year Analysts made only $150K ($60K base + $90K bonus). While that’s a lot of money for someone fresh out of school, it’s certainly not enough for a house in the Hamptons and a penthouse loft – especially after taxes.
Bankers do make more than consultants, but it will take quite some time to turn yourself into Gordon Gekko.
“But You Still Can’t Buy Bottles with Starwood Points”
True.
Consultants make a fraction of bankers’ bonuses – firms are notoriously secretive about exact numbers, but even in good times a $10K bonus isn’t unreasonable for consultants.
You could argue that they work a lot less and therefore make about the same hourly wage, but I’m not convinced. Sure, you won’t pull consistent 100-hour weeks in consulting, but it’s a lot more than 9-5, especially when you take into account the travel.
And even if it is more per hour, good luck having enough for bottles, let alone models.
“Take This Mouse and Get Back to Making $60K a Year”
Most consultants make more than $60K, but not by much.
However, they definitely don’t know how to use Excel properly – just ask that consultant we hired after I unplugged his mouse and he almost fainted.
The Consultant Formerly Known as Banker
One year, we hired a summer intern who was pretty good as far as investment banking interns go. He didn’t do anything stupid, he always smiled, and he even bought us drinks. But he “couldn’t take the hours” and he went to consulting full-time instead, in search of that elusive “work-life balance.”
I spoke with him the other day and he said the hours were pretty bad and he was being dragged around between 3 continents on clients’ whims – in other words, it was actually worse than banking, and he was getting paid less.
Damn, It Feels Good to Be a… Consultant?!
I didn’t continue with consulting because:
- I hated constant travel.
- I wanted to get tangible results rather than making “strategic recommendations” to management.
- Oh yeah, I couldn’t tolerate making $60K a year. Even $70K is pushing it.
That said, you may still want to consider consulting if your original plan was finance:
- Consulting is diversified in different industries, so the financial chaos won’t hit it quite as hard.
- No consulting firms have subprime anything on their balance sheets.
- You might still sneak into PE if you get lucky. Golden Gate Capital, for example, hires most of its Associates from Bain Consulting.
Rebuttal?
If you’re a consultant who now feels angered, feel free to write in with a rebuttal and I’ll publish some of the most entertaining responses. Make sure you also enclose some of those Starwood points.
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Hey,
Quick question about graduate schools. I started my own online company, and was making bank. However, nowadays my money has trickled to a fraction of what it was making. This was basically all passive income.
This was while I was in college. I traveled a lot, bought a new car, basically shat all my money out.
Naturally, I got a physical office job as as a buyer / seller analyst(40k) for a big retailing company. The pay sucks, but the area is cheap… so really id be saving the same amount of money…
The question is I want to get into a top MBA school. I know this job is going to do shit, so should I in my resume just highlight my own company? I made over $200k+ over 5 years through it, which isn’t much for you guys, but a lot for a college student. Do you think that my work experience would be sufficient?
Is a good plan to do good on the GMAT (700+), work for a few years, then apply to MBA school? And if i get lucky enough to get interviewed, just talk about my own business I ran on the side.
Also does my GPA hurt me, its a 3.38 at a top 10 undergrad business school.
Thanks for the help.
Probably split experience and write about both, maybe emphasize the company a bit. Yes working for a few years and then MBA can work but really depends on your goals, much easier to get in sooner rather than later, low GPA hurts you but won’t necessarily keep you out
Hi,
I wanted to know – if I join an investment banking firm, is it easier to switch into consulting later or is the switch easier the other way round? (What I mean by “easier” is if they are likely to hire you when you apply.)
I think it might be harder to switch from consulting to IB these days given banks are going through a v tough time and IB spots are limited. http://www.mergersandinquisitions.com/consulting-to-finance/
Thanks for the advice!
I’ve always been interested in consulting, but the order of placements in my grad school is uncertain, hence I applied for the first companies that came and have received an offer from an investment bank! I’m not sure whether I should take it up, but can’t take the risk of rejecting it and then not making it through another good company (the competition is tough). Hence I’m planning to take up the offer – and after becoming an investment banking analyst for 2 years or so hope to move to consulting…? Keeping fingers crossed that this switch will be practical…please do let me know if you think otherwise!
Thanks for all the help! And btw this website is the best introduction to investment banking I could hope for…It helped a lot when I was giving my interview. :) (though in retrospect I’m not too happy I’ve made it when I didn’t really want it!)
That sounds feasible – good luck and thanks for your comments!
Venture Capital. All the dealing of Investment Bankers, with all the consulting thrown in.
Hi,
My ideal career path was to go IBD at a BB, go to bschool, and enter a HF/PE/VC. But seeing as many 2nd year IBD analysts go to the HF/PE straight after (w/o bschool) I wanted to see if doing IBD pre-MBA would give me a huge advantage for HF/PE/VC recruiting. As in, if I am going to business school anyway with the intention of entering a HF/PE/VC, is the IBD experience really worth it (besides the learning)?
In other words, would it make a big difference to HF/PE/VC recruiters if you did IBD pre-MBA, S&T pre-MBA, or consulting pre-MBA? Or something that is none of those three, perhaps a corporate finance full-time at a Fortune 500?
IBD pre-MBA would give you an advantage. You might want to do a HF/PE/VC internship pre-MBA though – having an internship directly in that field would help
I don’t know if S&T/consulting pre-MBA would help PE/VC that much. Perhaps trading in an IB would help if you want to break into HF but not PE. PE firms would like IB experience though.
Another source you might find useful if you want to break into VC – http://blog.guykawasaki.com/2006/11/the_venture_cap.html
Corp F500 – not so sure if it helps.
Find the picture very offensive, well not really its a bit of a joke.
But for fairness sake have the guy knocking out the girl for once.. More realistic and Im getting sick of the constant P.C thing :P
Is it advisable to include management consulting internships on the resume when applying for an IB position? Will it make me look unfocused? I go to an Ivy, am an economics major, and have a 3.5+ GPA.
Thanks and thanks for your site!
(sorry in advance if this is not the best place to ask this question)
Not necessarily. If you don’t have other better experience to fill your resume, you should put your consulting internship there. Try to spin it as banking oriented as possible