Banking or Consulting (Banking & Finance Tips– #08-091316)

Banking and consulting both attract the elite, if you want to get in to either sector you will need a sack stuffed with academic achievements and a resume filled with the right sorts of activities. And as both banker and consultant you’ll be paid well, will operate at the ‘highest levels’ and will work considerably more hours than your friends in other industries. This is not to say that banking and consulting are equivalent careers though, they have their differences. Moreover, those differences are substantial. If you are toying with a career in consulting or a career in banking, here is how to decide which is best for you.

Pay in banking vs. pay in consulting? Banking pays A LOT more

Will you earn more in banking or consulting? From pay, banking is a lot more lucrative than consulting is. However, one consultant who now works in banking says that if you play a long game in consulting, you are likely to come out on top of the bankers. Sure – in the first ten years of your consulting career, he says you would almost certainly earn more as a banker. “In banking, you can be subject to volatility, both from the market and personal performance.

Job security in banking and consulting? Consulting is more secure

This brings us to the second point: job security. Your chances of having a 15-20 year career in consulting look a lot higher than your chances of having a 15-20 year career in banking. In other words, headcount in consulting just seems to rise and rise. While Consulting firms are quick to advocate cost cutting in other industries, their own staff seem secure. Guess who helps banks deal with the cost and regulatory pressures that make them cut people? That is right, consultants. Even when banking jobs are being cut, consultants still have plenty to get on with. Banking therefore looks like the more risky career option – you might get paid more, but it might not last.

Working hours in banking and consulting? At least you will be home during the week in banking

The hours you work in banking will depend upon the area you go into. If you go into sales and trading, you can expect very early mornings but clearly defined ends to your day as markets close. If you go into IBD (M&A or capital markets), the hours are much more protean. Even though banks have done their best to cut juniors’ working hours, most people still work 75 hour weeks (minimum) and non-banking friends tend to fade away as weekends and holidays are consumed by the demands of the job.

The hours are tough in consulting too. Do not forget that if you work as a consultant you can spend your weeks ‘on the road’ miles away from home. The ex-consultant we spoke to said weeknights are often a killer in consulting jobs – you are lucky to get in by 10pm. Unlike in IBD, however, consulting work rarely impinges upon the weekend. Like banks, consultancy firms are alert to the hours issue too.

Travel in banking and consulting? Consultants travel too much

The big downer about consulting is the lifestyle. If you work in banking, you will commute in and out of your office. Yes, you might have to do a lot of traveling if you are in a senior client-facing position, but if you are a junior M&A banker or a trader you will mostly be glued to your screen at the mother ship. By comparison, if you work in consulting the travel is immediate. Moreover, it is relentless. That client office could be nearby, or it could be hundreds of miles away. If it is hundreds of miles away, you will spend your weeknights in a faceless hotel. “The travel is a killer – you’re on the road non-stop unless you get a plush home city assignment,”

The work in banking and consulting? PowerPoint or Excel?

How about the work itself? Junior bankers in IBD spend their lives creating financial models in Excel and pitch books in PowerPoint. Consultants, meanwhile, spend their time creating diagrammatic models and PowerPoint presentations.

The key difference is therefore financial modeling in particular and finance in general. Junior bankers devote their time to studying the value of a company and its capital structure; junior consultants think about the strategy of a company and its organizational structure. In theory, life as a consultant should be more fulfilling as consultants actually get to implement the recommendations they make, but one ‘executive transition er’ who works with consultants moving into other industries says consultants get frustrated with the endless presentations and limited opportunities put their ideas into practice (a bit like junior bankers who put together endless pitch books for M&A deals that never happened). For this reason, he says they often move out of consulting and into management roles in industry instead.

Job prospects in banking and consulting? You can move onto bigger things from a consulting firm

What happens when you decide you do not want to work in banking or consulting anymore? If you work in consulting, you can always go off and become a senior executive in the sector you have been consulting in. By comparison, swapping out of banking can be more of a challenge. The best people from banking go into private equity or event driven hedge funds. Sometimes they go into corporate to work for ‘in-house deal teams.’ Nevertheless, often more people want to leave banking than there are places for them.

Interestingly, it seems very easy to go from banking into consulting and less easy to move in the opposite direction: If you are smart therefore, maybe you will start out in banking and then move into consulting as your career progresses. That way you will be able to sample both worlds.