Probably a topic that is discussed during every student party at business schools (and beyond) is the comparison between consulting and investment banking (IB). Both industries tend to fish from the same pond, so it is a valuable discussion to have. When I refer to consulting, I don't mean necessarily MBB only (McKinsey, BCG, Bain), but the upper tiers of management consulting. We might need to have another post on the tiers of consulting firms.

Consulting vs. Investment Banking: The Big Debate

Both industries look for sharp, analytical minds and usually recruit from the same target universities. IB might not be that easy to get into if you are not quant-heavy or do not have a finance focus, whereas consulting is open to pretty much any field of study, and diversity is actively encouraged. You will see this in the people you are working with: IB is quite focused and has a high level of expertise in specific areas, while consulting unites people with lots of different backgrounds.

Career Prospects: Up or Out Models

When it comes to career prospects, both industries operate on an up-or-out model and are fairly hierarchical. Whereas you progress alongside your cohort in IB, consulting offers you time to grow at somewhat different paces and even take time out—educational leave for an MBA is much less common in IB. Constant 360-degree feedback in consulting is something you need to get used to, whereas IB is more meritocratic, and decisions are number/data-based rather than on (loads of) personal feedback.On the other hand, consulting is growing faster than IB, which means there are more opportunities for progression (BCG grew by 25% in 2021; slightly skewed comparison as the base year is 2020, but still impressive https://www.consultancy.uk/news/30901/bcg-achieves-stellar-25-percent-growth-to-11-billion-in-revenues). The flip side is that profiles might not be as strong as before, as consultancies need to add more people.

Experienced Hires and Career Switching

The good news for consulting is that there are more and more experienced hires, not only for specialist tracks but also for strategy teams, so you can switch careers into consulting later if you want to.Whereas you will gain deep expertise in IB, consulting will make you a generalist, seeing lots of different industries and functions, especially in the first couple of years before you specialize. Think of it like a CFA vs. an MBA.

Pay: IB vs. Consulting

Front-office pay in IB is better than in consulting, unless you make it to senior partner. Consulting can offer faster progress, though, and your bonus at later stages becomes less volatile as it depends more on personal/team performance than market conditions.

Working Hours in IB vs. Consulting

Both industries tend to have very long hours. In IB, it depends on where you work; for example, trading has more regular hours compared to M&A, where it gets particularly crazy if a deal is on (I had friends leaving dinner parties at 10 pm on Saturdays after receiving THAT email). In consulting, travel (see below) helped a bit to get some downtime (plane nap, anyone?). Lockdown was crazy, as juniors tended to work way past midnight five days a week (rather than the usual two). Nowadays, there is a lot of emphasis on finishing not too late, taking an evening out for sports, family, etc., especially at the beginning of a project. It is recommended that one day a weekend is off as well. And it happens more and more often; maybe all that face time is not necessary after all...A bonus of consulting is that you can take longer (unpaid) periods off without a problem: you finish a project and start your next one two months later.

Travel: IB vs. Consulting

IB sees almost no travel barring the odd client meeting or workshop. Pre-Covid, consultants lived out of their suitcases: Monday to Thursdays on client site and Friday in the office for admin/training/networking. Great for your mileage accounts, but it can become tiring after a while and is not very family-friendly. A 4 am start on a Monday to catch the 6:30 flight out of Heathrow is a sure way to ruin a Sunday. Obviously, there was a lot less travel (read none at all) during Covid, and it has only partly bounced back, depending on what clients ask for.Consultancies sometimes co-locate case teams in their offices, even if they are not working on-site. Choose your focus wisely and you may dramatically reduce (or increase) your travel. Some of my colleagues in the CW office serving British banks did not board planes for months but could walk to their meetings.

Switching Between Consulting and IB

Changing between consulting and IB after a couple of years is not that common, as you develop different skill sets. If it happens, it is usually from IB to consulting, as you can use your analytical skills in consulting rather than the project management and people skills from consulting in IB. Should you want to make the switch from consulting to IB, an MBA coupled with an IB internship or two is probably your best bet.

Exit Opportunities: Consulting vs. IB

In general, consulting will give you better/more exit opportunities, as you have gained broader experience and tend to interact more and over longer periods with clients. However, the big exceptions are PE and hedge funds, which offer much higher salaries and bonuses than consultants moving into industry.More and more, consulting firms are also offering expert tracks, where pay is lower but still very decent (with fewer hours and less pressure).

Current Outlook for Graduate Hires

The current outlook for graduate hires in consulting is mixed, though. While most of MBB had a good Covid crisis, some of the smaller companies in London even furloughed some of their staff and then slowed down hiring. After business picked up (clients needing more advice on how to deal with the current situation), they did not have enough juniors, so they hired a lot more in 2022, probably more than needed. Whether that means more “outs” for 2023 (and also saving on 15%+ salary increases) or less graduate hiring remains to be seen.

Conclusion: Personal Preference Matters

Long story short: there is no definitive answer, so it probably depends on personal preference, which makes the discussion so interesting. What is your take on this?