In this post Chris (an Australian investment banker) explains why management consulting is a preferred option for him, versus investment banking.

As I mentioned in previous posts, I have an internship lined up in a bulge bracket Investment Bank at the end of the year. (The Australian summer is in December). I have had a lot of doubts about pursuing banking. I think management consulting is a better fit for me.

I will first explain what I want:

  • Create value: I don’t want to perform a function. I want to create value.
  • Nature of the work: I want to be constantly challenged by a diverse range of work so that I will get exposure to different industries and aspects of a business.
  • Lifestyle: I want to work hard, but not brutal hours. I would still like some sort of life outside of work.
  • Networking: I want to be in an environment where I am constantly meeting new people.
  • Money

Value creation

Banking vs. Management Consulting: Even split

I believe both bankers and management consultants perform a function rather than creating value. Bankers are agents that facilitate an equity raising or advise on the approach and financing methods in a takeover bid.

Whereas a consulting house could be looked at as a “body shop”:

1. Management has an idea but has no time to explore it.

2. Hires consultants to explore the idea.

Or

1. Management wants to implement new strategies but require some sort of “objective expert opinion”.

2. Hires consultants to do a fancy report on the feasibility of the strategy so that they can bring the report as an important supporting document to the board of directors.

Consultants do not execute the recommendations either. This makes the work very wishy-washy.

I believe neither consultants nor bankers create value. But consultants have far better exit opportunities into a wide range of industries where I will have the opportunity to create value.

Note: by value creation, I mean creating something out of nothing, like establishing a new line of products.

Nature of work

Banking vs Management Consulting: Consulting wins

Consulting wins in this category in a few steps:

1. Heavy Client interaction – Constantly meeting new people is the most rewarding and satisfying part of a consultant’s work. I believe that the opportunity to have exposure to business leaders and decision makers will be one of the most rewarding aspects of consulting.

Banking on the other hand, especially in a junior role, will not give you the exposure to meet clients. In fact, you will be stuck in the office 80-90 hours a week.

1. Extensive development of presentation skills – This is the cornerstone of consulting work. Furthermore, these skills will be extremely valuable for excelling in any field.

2. Project planning and execution – In banking, especially in a junior capacity, you are given tasks, such as: update the numbers in the model, building a graph for a presentation. In management consulting, you own a piece of a project. You have set your own deliverables and timeline. In consulting, you will develop the ability to be independent.

3. Diversity of work – I left this part till the end, because this is crucial. Investment banking is known for the repetitive nature of its work. From what I understand, consulting also comes with a lot of grunt work. However, consulting gives you the exposure to different sets of projects throughout the year whereas banking has a very narrow focus. (A friend of mine is currently in the natural resources group within the M&A product team. Imagine how much variety there is!)

Lifestyle

Banking vs Management Consulting: Consulting wins

1. Hours – Consultants work hard, but you still get enough time to yourself to have a life outside of work. Banking hours on the other hand are brutal. I want to work hard, but I still want to keep a life outside of the office.

2. Travel – Consultants spend a lot of time on the road. I have no strong opinion on this yet. The pro: the travelling aspect of consulting will make some interesting stories to tell down-the-road and will be valuable life experiences. Con: Flying to a project at a coal mining site in the middle of nowhere might be exciting at first. I am sure it gets old very quickly. Yet, this is valuable and interesting life experience. Staying in the office for 18 hours a day doesn’t give you a lot of stories to tell.

3. Co-workers – Bankers have a reputation of being, put it eloquently, arrogant. Whereas consultants that I have met typically are a lot more courteous and humble. This could be due to the client facing nature of consulting. The other upside of consulting is that you get people with more diverse experiences and interesting life experiences. But this is also the downside of consulting. Banking analysts are typically young, fresh out of University. I often hear that it is like a frat house in a bank. I don’t think this is the case in consulting.

Networking and exit opportunities

Banking vs Management Consulting: Management Consulting wins

This is linked to the diversity of work and heavy client interaction.

In consulting, you meet a variety of clients and build your professional network very quickly. Furthermore, your consulting colleagues also move onto a vast range of fields.

Investment banking on the other hand does not provide the same exit opportunities. M&A bankers often move into Private Equity or some sort of venture capital work afterwards.

Salary

Investment banking wins by a huge margin

As an intern, my base compensation is higher than a management consultant from BBM. In Australia, some banks pay a base compensation of 30 percent higher than a consultant from BBM. There is no argument here.

Don’t forget that in banking, bonus could be anywhere between 30 – 50% of your base in Australia. In other places, it could be 50% – 100% of your base. (Australian Investment banks pay higher base but lower bonus).

Consulting aligns with what I want a lot more than Investment Banking does. The money really doesn’t matter.

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Image from Trey Ratcliff under cc.

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