Without an iota of doubt, two of the most lucrative careers in the world are investment banking and management consulting. Both of these professions are highly well-paid and professionals in both industries are amongst the top in the echelons. Both these industries demand specific skill sets from prospective candidates. Fresh graduates at the beginning of placement seasons often find themselves at crossroads: where to make a successful career? I-banking and management consulting are often in the bucket lists of college graduates. This brings us to a question? What makes investment banks different from consultancies? Why are these careers one of the most sought ones?
Investment banking (IB) refers to a financial service that generates capital for individuals and businesses. Bankers play a critical role in the global financial system, and as a result, they are rewarded with exorbitant salaries and bonuses. Bankers advise investors on market strategies that will reduce their risks while increasing their returns. They help with mergers, acquisitions, and restructuring. Risk management is an important aspect of the job of an i-banker. Investment banks earn commissions and fees by underwriting new securities issues such as bond offerings and stock IPOs. Their role is one of the most important in capitalist economies: they assist their clients in raising capital to fund various activities and grow their businesses. Investment banks frequently have market-making operations that generate revenue by providing liquidity in stocks or other markets.
A management consultant advises businesses on operations, restructuring, and cost-cutting measures. They are tasked with developing strategies to assist businesses in making a turnaround. They examine what their clients are doing and make recommendations on how they can improve. A management consultant must be able to analyze a company’s operations and identify inefficiencies as well as processes that can be streamlined or eliminated.
A couple of skills are shared by both jobs: a number-driven, analytical approach to problem solving and almost supernatural diplomacy skills. Consultants must understand their client companies’ management structures, identify areas for improvement, and explain what needs to be done to improve their functioning. This includes critical-thinking abilities, interpersonal skills, the ability to focus on business operations, presentation abilities, and communication abilities. Bankers must have a strong understanding of financial modeling and Excel skills, as well as the ability to work long hours. Banking necessitates the sharpest quantitative abilities. Consultants require these skills as well, but not to the same extent.
As a banker, one spends a lot of time on the phone with clients and buyers, packaging and agreeing on deals. As a result, it is a fast-paced role that is ideal for people who enjoy math, deal-making, and the thrill of making money. The pay is excellent, and the hours are reasonable because one only works when the market is open. IB necessitates fewer travel hours. Consulting necessitates more interaction with clients as well as more time spent with respective teams in solving cases. After all, they are approached by troubled businesses that seek their assistance in resolving their issues. A consultant must be able to work under pressure and spend extra time on the job. However, turnover in the consulting industry is low, though consultants do change jobs to become analysts or entrepreneurs, for which they are adequately prepared.
If there is one thing that consulting and banking have in common, it is a reputation for working long hours. In fact, both industries are known for having some of the most dedicated employees. So, what are those hours really like, and which industries provide a better work-life balance? It is conditional. Although investment banking is commonly associated with longer hours (75+ hour weeks are common), it typically involves very little travel. Consulting, on the other hand, has more reasonable hours (typically around 60 hours per week), but can require up to four days of weekly travel. When deciding between these industries, it is critical to consider one’s level of comfort with one’s interest in travelling.
Investment banks are best known for acting as go-betweens between corporations and financial markets. That is, they assist corporations in issuing stock in an IPO or additional stock offering. They also arrange corporate debt financing by locating large-scale investors for corporate bonds. When a company is unsure of how to expand, it hires consultants to chart a course of action. Consultant duties and responsibilities differ depending on their area of expertise and the specific problems they are called upon to solve.
IB is specialized but repetitive, whereas consultancy touches on a variety of industries/companies; consultancies hire more people with experience and MBAs than IB, which requires a finance background; IB requires professionals to work long hours, whereas consultants, despite business trips, are better at managing work-life balance.
In terms of promotion, they are both equally competitive. Banks hire more people at first, but more people advance as well. Consultancies, on the other hand, frequently use an up or out mechanism in which people are asked to leave at every stage. Bankers, on the other hand, are far less forgiving. Mistakes and carelessness are dealt with much harsher than in consulting. This is most likely due to the fact that a bank’s own capital is frequently at risk, whereas a consultancy is not. It can be a double blow to a bank when a project not only fails in terms of reputation, but also results in the loss of large sums of money.
Both these careers are highly rewarding and choices depend upon individuals to individuals. Both these roles are of utmost importance in the industry and prospective candidates must make out well thought out decisions before joining any of these careers.
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Belonging to Gurgaon, he is currently a student at Kirori Mal College pursuing Economics Hons. Ishaan is a fun loving person, soft at heart and a confident and dedicated soul. You can typically find him working for his endeavours or attending a Model United Nations conference. He likes to keep himself aware about the happenings around the world!