Careers in management consulting and investment banking are attractive to many young people preparing to enter the job market. Both jobs pay competitive salaries, and they both require high-level analytical skills that make the work challenging and rewarding.
However there are important differences between these two professional tracks that you should be aware of before you commit to one or the other. We will start off with definitions of what the careers entail and end the discussion with the kind of opportunities these jobs offer throughout your career.
What do management consultants do?
Management consultants are hired by companies to bring a fresh set of eyes to their businesses and suggest changes to improve them. Until recently, management consultants were expected to spend most of their time traveling to the headquarters and operational sites of the businesses they consult with to observe their processes and collect information.
After a team of consultants has examined the business, it will make a report that proposes a plan for improvement, such as by combining and streamlining operations, analyzing market opportunities, suggesting a path to growth through acquisition or any other appropriate strategy for making the business more robust.
This definition of management consultant does not include IT and data management consultants, who may propose a software solution to help the business get a better understanding of its operations, or financial consultants, who may advise a business on how to leverage its growth. Recently, however, some management consulting firms have added teams to address this kind of operational consulting.
Management consultants work in teams, and the firm bills the company that hires it for the hours the team works on the project. Because the work is primarily strategic and not project based, it’s in the firm’s interest to keep a project going indefinitely. Members of the consulting team may change or rotate to different companies, and the result is that most consultants are generalists who can provide insight and strategy for many different types of companies in different industries.
A key skill for management consultants is presentation. Creating slide decks and giving presentations to the senior management of a company is a significant part of a consultant’s work. People who excel as management consultants are very detail oriented and exceptionally polished when they step in front of a skeptical audience that needs to be convinced of the value of the analysis being presented.
What do investment bankers do?
When people think about becoming an investment banker, they usually mean the “front-office” advisory roles at an investment bank and not “middle-office” or “back-office” roles. Middle-office employees track and process deals made by deal officers in the front office, and back-office workers catalog the deals while making sure that the bank is following compliance regulations. Front-office bankers interact with clients, whereas mid- and back-office workers do not.
In their advisory capacity, investment bankers help businesses put together large transactions, like selling bonds to borrow money for the business, debt restructuring, listing the business on a stock exchange (also known as an initial public offering, or IPO), and mergers and acquisitions.
The primary goal of investment bankers is to execute transactions for their clients. Unlike management consultants, investment bankers become specialists, and the work they do has a definite end point for their clients. Investment banking deals are “processed,” which starts with accumulating the information needed to get the deal done, proceeds through finishing the documents required for the deal and ends when money from the deal – whether from a bond sale, IPO or merger – is deposited.
The work for most junior front-end investment bankers includes creating financial models in Excel, filling out regulatory paperwork and creating slide decks. More senior investment bankers will travel to businesses’ headquarters to pitch deals and in the case of a sale, merger or acquisition. They also find and connect buyers and sellers of businesses.
How to become an investment banker or management consultant?
To become an investment banker, it is often helpful to have taken courses in finance, economics, or other analytical disciplines during college. In addition, many candidates pursue an internship with an investment bank. After graduation, investment bankers start working at a bank as an analyst. After two or three years in this role, some candidates pursue a Master of Business Administration (MBA), which typically takes two years, a Chartered Financial Analyst (CFA) certification – or both. From there, candidates may return to investment banking as an associate, and if they are successful, they are promoted to vice president, then executive director and then to managing director.
The path to becoming a management consultant isn’t quite as narrow as the path to investment banking. Typically, the more creative and diverse your undergraduate studies are, the more attractive a candidate you may be to a consulting firm. That said, the most top-tier management consulting firms still take only an elite group of candidates to become analysts.
The career path at a management consulting firm is similar to investment banking. People start at the analyst level, and after two years, many are either promoted to associate or go back to school to get an MBA. From there, associates are promoted to senior associate or management consultant. After seven to 10 years, senior associates are typically promoted to senior consultants or project leads. After another five years or so in that role, senior consultants may be promoted to partner or principal.
Work-life balance
In the 21st century, and especially since the onset of the COVID-19 pandemic, emphasis has increasingly been placed on employees’ quality of life and mental health. However, management consulting and investment banking are both intense work environments, and burnout continues to be high.1 Firms are working to improve work-life balance for their employees.
What can you do after a job in management consulting or investment banking?
Experience in management consulting or investment banking, even if only for a few years, opens the door to other opportunities. Both roles make a person an attractive hire at the management level of private businesses and public corporations, startups, non-profits and private investment firms.
Former management consultants can be hired as chief operating officers (COOs) or vice presidents in sales, marketing, strategy and operations. Former investment bankers can move into private equity or hedge funds.
As with other aspects of these professions, people who come from the most prestigious (and often the most difficult) jobs can oftentimes find new roles at higher levels with greater compensation.
Sourced from Chase.com