Management Consulting vs. Investment Banking: Which one is for you?

Alessandro Catapano
Aug 31, 2021
4 min read

Updated: Oct 20, 2021

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Most graduates from a business background will most likely encounter both professions, as these are some of the most sought and well-known jobs on the market. McKinsey, Goldman Sachs, Bain, JP Morgan and many more. These firms are known to be the home for some of the most talented people in the world with intense working hours and extremely competitive culture. Fresh graduates will fight tooth and nails to secure their offers from one of these top companies, but the seats are limited. MBB reportedly offers a job only to less than 1-2% of their applicants and the investment banking industry is also quite competitive. What is the attraction here? Why are these firms so sought by many fresh graduates and what is the difference between management consulting and investment banking? Well, let’s gather the figures and compare them!

Work/Projects

So what do the employees of these firms do? What is their exact job? While there are differences across the two professions, let’s first analyse the bigger picture, which is quite similar. In a nutshell, in both professions, employees are engaged in a project, where a solution or offer must be presented to the client. For the most part, this is the main similarity in terms of work. Consultants will usually deliver a solution to the clients problem or help them launch a new venture/product. Investment bankers have a central role in the launches of initial public offerings (IPOs) by young companies preparing to go public. Essentially, they are financial advisors to other firms.

Lifestyle/Working conditions

From an outsider’s perception, both professions are regarded as challenging and have long working hours. While this is true, if you look closely, there are obvious differences between the two jobs.

For the most part, you can expect to have a greater work-life balance at a consulting firm. The hours are not as intense as banking but they are not too far separate either. You can expect to work anywhere from sixty to seventy hours per week. Some firms make their employees work up to seventy-five hours per week. Usually, MBB-ers will work a tad more than tier 2 consultancies. Moreover, travelling will be very demanding during the week. Consultants are notorious for travelling, however, this has been tuned down during the pandemic and I am not expecting it to get back to previous levels. Lastly, you can rest assured, that most of the time, your weekends will be safe, as most MBB-s regard Saturday and Sunday as sacred cows.

On the other hand, hours in banking are going to be slightly worse, especially during the first few years. However, the "hundred hour work week "is overused; most analysts do not work that much but there are some exceptions of course. Generally speaking, you can expect to work 75 to 90 hours a week. On the flipside, you should expect some type of work during your weekend, as most investment banks will have immensely short deadlines and 5 days might not be enough for you to finish your work.

Total compensation

Base salaries are similar in banking and consulting, but the bonus varies significantly for each industry. In banking, the bonus received may be valued as much as 12 or 24 months of your base salary while in consulting the maximum bonus is probably 6 months of salary. There is generally a 20% – 40% pay difference between banking and consulting at all position levels. However, one extremely important aspect, that a lot of comparisons will neglect, that a big portion of your bonus at an investment bank, will come in locked stocks. This means that for 3-4 years you might not even sell your stocks, meaning that you have your capital parked in your firm, while bonuses at consulting firms are 100% cash. For some this might not be a problem, but not being liquid in some cases can be unfortunate, so bear this in mind when making your choice.

However, on the flipside, exit opportunities are more lucrative after banking positions compared to consulting roles. Private equity and investment management positions pay a lot more than strategy roles in big corporations. If compensation is an important role in your decision making, banking might be a better option.

Job stability

Job security in consulting is much less cyclical than banking. Regardless of good or bad economic times, consulting firms continue hiring and minimize layoffs of junior staff, thus you can be relatively safe in the industry. Investment banks, on the other hand, layoff more employees and enact hiring freezes during financial downturns. A friend of mine once told me that, the summer after he left JP Morgan, the company laid off 20 juniors and associates because the economy was in a steeper downturn than expected. Obviously, this is not always the case, but generally speaking, investment banks are really on the edge to bring the numbers that they have set for themselves and if this means letting the staff go, then they will likely take the harder path.

Brief summary

Both professions are surely extremely prestigious, pay very well and have powerful exit opportunities. You also have to endure a lot, if you choose either career, as you will encounter long working hours, stressful deadlines and many pressing responsibilities, but the intellectually stimulating environment combined with a fast paced work, will help you to grow quickly. If you believe your skills would be better nurtured through a more finance focused environment, then choose banking. If you prefer a more wide spectrum of projects with a lot of travelling, then choose consulting. Either career you will end up pursuing, you will grow yourself quickly and will have a lot of opportunities afterwards.