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GUEST COMMENT: Investment banking vs management consulting (take II)

I love investment banking, and was a banker in a previous life, so I’m not about to embark on a spree of banker-bashing.

I enjoyed and relished every moment of investment banking (I’m not being sarcastic here): the long hours, the tight deadlines, the arrogance, the shallowness, and even the odd maniac director (who obviously had been caged up in his office for one too many years).

However, having spent some years (though not too many) in IB I decided it was time to taste the life of consulting. My fellow IB bankers of course couldn’t understand why someone would leave to do consulting – particularly if you’re not being made redundant or forced out. In their opinion, consulting was a step down. I agreed with them at the time, and funnily enough I still do today.

However, now that I’ve taken that step, I realise that consulting has three things to recommend it. And they are:


‘Work/life balance’

In the time I have worked in consulting, I have done maybe 2 weekends worth of work and a handful of all-nighters – not because I was being shafted by some managing director, but because at heart I was still an investment banker and real work only gets done after close of play on any normal day.

However, apart from these odd occurrences, my home time was anything between 5.30pm and 7pm. If there was a client deadline, I was told it could wait (if of course the client agreed – which they did ALL of the time).

The attitude was plainly that the world wasn’t going to trip up because of a delayed deadline so why work when you could be in the pub?

Since being in consulting, never have I had to rush an email or piece of work, or destroy a Sunday morning football session to finish off some financial model or complete some other piece of work which obviously could have waited until the following Monday.


Salary

When I made the move, I knew only one thing – there would be no huge bonus. But when I did the maths, I realized that, ok, I wont have that swimming pool by my country house but I would still be able to afford that country house (I’m by-passing the Chalet conversation here).

Come to think of it, the base salaries in both consulting and banking were +/-10% in the same bracket and certainly the same tax rate. My bonus will never be extravagant, but nonetheless, per hour worked, my salary is higher in consulting than in IB. Bonuses are evidently excluded, but bonuses in banking may never be the same again.


Calibre of colleagues

The most intriguing part of consulting was (and it hurts to say this) the discovery that consultants are, and always will be a more knowledgeable folk than investment bankers.

They may not be as shrewd, as cunning, or as arrogant, as the investment bankers I knew in my previous life, but whatever’s missing on the alpha-male-side is by far made up for by their thorough industry knowledge.

The most humbling experience is to be the industry-tsar in an investment bank, and then to be put in your place by some chap who has dedicated his life to understanding the fundamentals of a particular industry.

Be it energy or telecoms, I am yet to come across an investment banker who knows as much as the consultants in the same area.

And I guess, this is where the line is drawn. Investment bankers don’t need to know a lot to be experts in any industry. As long as they can get a transaction complete, then all is well.

Consultants however, take their mistakes to the grave, their personal reputation is on the line every time they give an independent judgement. So they have to embody their industry in order to really be the experts they are. If you want this depth of knowledge, reasonable hours, and a high salary, you’ll be a consultant. If you want big bonuses, big kudos, and alpha-companions, be a banker.

Comments (15)

Comments
  1. Here here – also have done both at top firms and this is a fair assessment of the playing field.

  2. Fair article, but i disagree in one thing. Both consultants and bankers don’t have any industry knowledge.

    They “advice”..so they don’t take any risks. Try to ask a technical question to a standard banker (technical=industry specific)…they don’t know anything.

    Only people from industry knows tech stuff.this is the reason why recently banks started to hire from industries.
    And this is the key as principal investor: take the right decision and make money from it

    GordonTheBigot Reply
     
  3. IMHO we should distinguish at least 4 categories: M&A, capital markets/sales/trading, strategy consulting in a top 3 (McKinset, Bain, BCG), consulting elsewhere (often called ‘strategy’ consulting even when it isn’t).
    Although I only worked as a trader, I have very close friends who worked in the other 3 areas, and they all confirmed that, in terms of work/life balance, strategy consulting for a top firm is only marginally better than M&A, and way way worse than anything related with capital markets or sales & trading. I’m not talking about a few comments, but about several experiences.

    What consulting firm did the author work for? Can he really say that his experience would apply to those working for Mckinsey Bain BCG?

    BankingAllTheWay Reply
     
  4. Nice article, very balanced (although i never worked in a consutlting role/firm, and I doubt they have any need for traders :-)

  5. Work life balance? Seriously?! Management consultants work their but off and often travel 80-100% of the time which make a normal social life difficult. On top of that they often work on weekends. I’m not a consultant (thank God) but I went to a business school where a very large proportion of students go to McBainConsultingGroup and I know that it ain’t no picnic to work at those firms….

  6. PE takes it all

  7. What firm does this guy work for? Missing a DL in my firm is pretty much the end of the world. I’m on the road 80% of my life and always scrambling to meet the unrealistic expecations of my clients. When I’m not sweating to create the next PPT, I’m writing a proposal for the next engagement. I agree, bankers do work harder by sterotype…but consulting is not the cake walk this guy described. What he described sounded like industry types – my clients.

  8. Get your ass over to the research department of any IB and you will find the most knowledge there.

  9. “Consultants however, take their mistakes to the grave, their personal reputation is on the line every time they give an independent judgement.”

    No offence mate, that is absolutely rubbish. I did it the other way around (1 yr at top consulting firm – BB – Buyside). I personally think consultants spew out more drivel than even ECM bankers (how about a fresh top school graduate going into a client, watching someone do their job then turn around and tell that person that they are doing it wrong in two weeks to sell their rubbish systems)!

    I am not saying banking is better but please! Dramatica is right, in financial services (consulting incl.) the only people who really understand sectors are research guys (not saying they make the right calls but operationally, their knowledge is second only to COOs).

  10. Another point which no one will confirm officially: strategy consultants are often brought in to justify decisions which were already taken, because this way “it looks better” or to divert blame. It wasn’t only my decision, McKinsey supported it, too!
    Also, ex consultants turned top executives will tend to hire executives among their ex colleagues. It’s a boy’s club.
    The matter gets particularly annoying when the public sector calls these firms. How much has the NHS spent on McKinsey recently? Was that the best use of that money?

    BankingAllTheWay Reply
     
  11. thanks Mike

  12. I’m just copy/pasting my comment from a 2009 thread on this subject. I’m far from alone in feeling this way:

    ————————————————————
    what a joke – i can’t believe i’m reading this.

    having done both jobs i can tell you categorically that being a management consultant sucks compared to working on a trading floor (don’t get me started on those fools in m&a)

    consulting: compensation truly awful, lifestyle truly awful, people truly awful (fascinated with qualifications)

    banking: ok can be repetitive, and lacks transferable skills, but so what? work environment is superb and you earn considerably more at the right time in your life.

    some figures – i worked 4y as management consultant and ended on 60k. have now been in ib for 4y and got paid 220k even last year. much more for 2009 i’d think.
    —————————————————————–

    p.s. paid 405k for 2009; reckon you need to be a partner, and probably in your 40s to earn that in “consulting”

    (and yes, the quote marks are necessary)

    roger (again, exasperated) Reply
     
  13. Disagree with work life balance with consulting…I regularly pull 60h weeks (no overtime at all) to meet deadlines and milestones the clients won’t let up on. It’s far more varied than banking though and different people, different experiences.No bonus is frustrating but at least I’m not pulling the 100+h weeks of my banking chums!
    http://consultingreality.com

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