Consulting vs Investment Banking: Why Consulting Wins?

This article compares consulting with investment banking on five key aspects: Background, Culture, Salary, Work-life balance, Skills, and Career development.

While both are excellent for career development, the income of consultants is usually lower than investment bankers. In return, consultants in general have better work-life balance than investment bankers..

Consulting is more open for various backgrounds, while investment banking recruits almost exclusively from target finance schools.

Consulting vs Investment banking – Background openness

Both consulting and investment banking require tremendous preparation for recruiting processes. 

Investment Banking prefers people with a background in finance

In fact, you need an accounting/finance background to at least have a chance to get into the Technical Interviews. 

Therefore, you have to make up your mind early on and shift every important decision toward the “right” path to gain as much advantage as possible.

Consulting is open to various backgrounds

Meanwhile, consulting is more open to people from all backgrounds. While studying business in college still provides some advantages for a candidate, in reality, many junior consultants do not have a business background when they first join the consulting field.

The consulting recruiting processes are designed to get a diversified group of people. You can get in just fine if you are smart, have great people skills, and possess a solid logical sense.

Of course, a consulting candidate should have some basic business knowledge, but you can quickly learn those in a matter of days with our Starter Guide for non-business candidates.

Consulting vs Investment banking – Culture

Investment Banking promotes hard work and endurance

The highlights of Investment Banking culture are endurance and hard work. Alex Song, a former Morgan Stanley analyst, said this beautifully:

A consultant is a person of structure

On the other hand, the consulting culture can be summarized in one word: “structure”. Everything there is about structure - thoughts, charts, models, lectures, talks, etc. are always super structured.

I was in a McKinsey employee conference called “Value Day”, where the new hires are “invited” (a.k.a., required) to go on stage and share their thoughts and emotions about the firm.

 I sincerely expected to hear smooth and flowing speeches, seamlessly transitioning from the beginning to the end. But every single one follows this “awesome” ritual:

“I have three thoughts. No.1: … No.2: … No.3: …”

At that time, I knew this “structure” thing was religiously sacred and solemn in consultants’ minds.

Consulting vs Investment banking – Work-life balance

If anyone has heard of the work-life imbalance in the consulting field, that imbalance is even worse for investment banking.

Both consulting and investment banking have heavy workloads, but consulting has it “easier”

As a consultant, you can expect to work anywhere for an average of 60-80 hours a week. Meanwhile, an investment banker's weekly work may take up to 100 hours and sometimes even reach 120 hours a week. 

Furthermore, in consulting firms, you can expect to have protected weekends. Consultants rarely work on weekends, just on unavoidable demanding phases of projects. Your project managers and directors have many incentives to avoid it as much as possible. 

In contrast, investment bankers have no “protected weekend”. This is a part of their culture - everyone is expected to do so. Sometimes, they are even proud of it. If you are a workaholic, this is not a problem, but many others (even people with experience in the consulting field) cannot imagine how that is even possible.

Consultants travel more frequently than investment bankers

Entry-level investment bankers stay at the main office for most of their projects, and this only changes when you reach the partner level. In contrast, some consultants have to travel a lot while some others seem to always stay in the base city. 

In consulting, travel frequency depends on the requirements of the project. If the client sites were close to the office, then of course, a consultant wouldn’t have to travel much. Even so, a consultant might still have to take short business trips to client sites in different cities. 

For consultants that have to travel to client sites in another country, they might fly there on Monday and return to the office on Friday. At McKinsey, this is called “in-office Friday”. This means a consultant would spend the whole weekdays at the client sites, which also means that consultant has to travel 3-4 times per month.

Meanwhile, in investment banking, frequent traveling only comes to high-level personnel, who come to meet their clients to negotiate and settle the deals. 

Consulting vs Investment banking – Salary

Investment bankers usually earn more annually than consultants. 

However, while investment bankers typically earn more than consultants, it is worth remembering that bankers have much longer work hours per week (100 hours per week vs 80 hours per week). 

Furthermore, if we factor in the Reversed Diminishing Margin factor (meaning one hour on top of 100 is more taxing than one hour on top of 80), then a consulting career might be more profitable both for your health and payment per hour. 

For a more detailed comparison, let’s look at the average salaries of JP Morgan Chase & Co. investment bankers and MBB consultants in the below table. 

Average salary of JPMorgan Chase & Co. Investment bankers and MBB consultants.
United States, 2023. Source: Glassdoor.

Please note that the actual salaries of manager-level and director/partner-level personnel on both sides can be much higher than the number provided by Glassdoor.

Consulting vs Investment banking – Range of skills

Overall, consultants tend to be generalists, while investment bankers are specialists. Consulting trains you on all fronts, while investment banking turns you into a finance superman.

Of course, the higher you climb on the ladder, the more versatile and experienced a consultant or investment banker would be, so most of the difference in the range of skills appears more clearly in the entry-level personnel. 

Junior consultants have more to manage than junior investment bankers

In consulting, you are a manager from day 1. Even the lowest-ranked consultant has so many resources to manage: the client, the boss, and a dozen support teams around the globe (functional expert, industry expert, research & intelligence staff, visual specialist, writers, and translator, just to name a few). 

The top performer is usually the best at leveraging, not necessarily the one with the best analytical mind.

Meanwhile, first-year bankers typically work independently and gradually climb up the ladder to take charge of challenging activities involving more people. 

The top performer is not only the best in leveraging but also the best analytical mind.

Consultants have to communicate more than investment bankers

Communication is a weapon for consultants. Working with people requires advanced proficiency in this area.

You will interact with all possible types of people, from front-line employees and security guards to directors and C-level people, from your peer colleagues by your side to the industry expert sitting thousands of miles away.

For example, a consultant has to deal with those kinds of problems: “How do we make the client work for them even when they naturally hate us from day 0?”, “How do we navigate a complicated political scene with many diverse stakeholders?”, etc.

Meanwhile, investment bankers mainly communicate with their teammates for projects. They do meet clients, but solely from financial departments and not from various functions like consultants.

This means you can still be fine without excellent communication, at least before you climb high enough on the ladder and have more contacts and resources to manage.

Investment banking focuses on financial field

Investment bankers mainly work on how to push through a deal. An investment banker may have to spend over 90% of their time on the quantitative side. 

In investment banking, analyses are mainly deep finance oriented. For example, when assessing a new market, an investment banker has to conduct extensive research on industry trends, market conditions, competitor analysis, determine the price, forecast financial performance, assess the financial impact of different scenarios, etc.

Consulting works in various fields

On the other hand, consulting works with all sorts of problems (strategy, operation, governance, sales and profits, etc.). A consultant may spend half their time working on the quantitative side. This figure, while still tremendous, is much less than investment banking. 

Of course, this is not to look down on the amount of quantitative analysis a consultant does. Those analyses are often very diversified. For example, in a cement project, a consultant had to analyze how different levers would affect the bottom line: calculate the clinker factors to cut down costs, make a model on how boat transportation would save logistic costs, etc.

Read more: What Does a Consultant Do

Consulting vs Investment banking – Career development

Both consulting and investment banking give you many precious opportunities to develop your career. If you can get in, make good use of your time there, as it will be a life-changing experience.

Prestige

MBB or top investment banks really boost your value. Depending on which field you are steering toward, Consulting or Banking can be slightly more helpful. 

For example, if you wish to stay long in the financial field, then being an investment banker right after university is a powerful starting move. Meanwhile, being a consultant means you are exposed to various fields and knowledge, and therefore, helps you fit into many future careers, including the financial field. 

All in all, both are really good to have on a resume.

Exit options

Almost everybody quits Consulting and Investment Banking at some point. The great news is both Consulting and Investment Banking have great exit options. However, management consulting gives you a little more flexibility. 

For an investment banker, specialized finance skills can narrow an ex-banker exit options. The favored choice is to stick with the finance world - You can move into private equity, hedge funds, venture capital, etc. Some ex-bankers are invited to join the client firms and become their “in-house” dealers. Regardless, money will never be a problem. Your income will keep skyrocketing for years to come.

For consultants, the exit options are much more open. You can join the clients, taking high positions. You can join those hot unicorn start-ups, venture capital, or start your own business. Income level can be higher or lower than a peer exiting banker, depending on your will, capability, and luck.

Learning opportunities

Both consulting and investment banking offer you many chance to learning great new things. 

Investment banking will teach you deep financial skills: You are a number-savvy staff, a modeling Jedi, and above al, a super performer who always delivers triple ordinary output in every situation. 

On the other hand, consulting will teach you a variety of knowledge: how to talk to people, how to convince someone, how to organize big messes, how to write sharp sentences, etc.

The most vital skill a consultant will learn is how to learn and make things work without knowing too much about the field at first. With this skill, a consultant can do anything, and that is why we see such diversified exit paths that consulting alums pursue.

Networking opportunities

Both consulting and investment banking allow you to work with exceptional people within the firm. Everybody making it there is bright in their own way.

Regarding networking with the outside world, consulting offers slightly better chances. After all, consulting work requires you to interact with more types of people in more situations.

That said, the key to good networking is your own proactivity. For this, both fields provide you with equally good brand names you can leverage to meet pretty much anybody you want to meet. 

Remember, you will make it through in both fields if you are a good networker.