In this article you’ll learn:
- The skills management consultants and investment bankers develop
- The professional exit options available to both
- If it’s easier to move from one to the other
Within the world of ‘business’, there exists a rivalry as old as the Montagues and the Capulets of Romeo and Juliet, Management Consulting vs Investment Banking. Economics, finance, maths, MBA, etc., graduates are often faced with a very important decision upon completing their degrees, to become a ‘Jack of All Trades’ or a ‘Master of One’. In an increasingly diverse job market, where people tend to move around far more than previous generations, it’s safe to assume that the value of professional exit opportunities has grown exponentially.
To begin with, let’s dispel the common misconception that either a career in management consulting can be considered as “better” than investment banking or vice versa. This is simply not the case; both backgrounds are exceptionally desirable for employers across industries and offer you a wide range of opportunities.
In fact, if you’re a management consultant or investment banker contemplating your next move, you’ll likely find that you’re considering the same exit options as your counterpart: further education, join the Corporate world, join a Startup, found a Startup, join a PE/VC firm, assist a nonprofit or NGO.
Therefore, when comparing the exit options from a career in management consulting vs investment banking (specifically M&A, ECM and DCM), what’s important to understand is the slight advantage each background provides. This perspective is well-emphasised by Kevin Jon, former top-tier management consultant and Hiperpool collaborator – “If you want to characterise the exit options of management consulting vs investment banking by taking just one word– for consulting, it would be endless and for investment banking, it would be exclusive.”
Management Consulting: Endless Options
One of the main reasons cited by top-tier management consultants for choosing their career path is the fact that it allows you to keep your options as open as possible while providing a highly-coveted experience. The most common exit options for management consultants are:
- Private Equity / Venture Capital
Unlike any other career path, a simple LinkedIn search will show that you can find examples of management consultants transitioning to almost every role and industry imaginable. What’s more, by exiting a top-tier management consultancy you also have a good chance of quickly climbing the ranks of any company you join, whether a high-growth startup or a leading corporate. In fact, leaving consulting is very much seen as a positive and natural step in the career progression of a management consultant. There are more common roles within corporates/startups where you’ll find ex-consultants, but we’ll give more insight into this in another article.
From an employer’s perspective, ex-management consultants are highly desired for their:
- Problem-solving and strategic skills
- Entrepreneurial mindset
- Interpersonal and communication skills
There is an important point to make about Private Equity. Most PE firms will be divided into two teams, ‘Investment’ and ‘Portfolio Operations’. The latter is the operational division of the firm, where you’re likely to find ex-consultants from a variety of backgrounds. The former is the division that seeks out new acquisition targets where you are likely to find more bankers than consultants. It can be quite challenging to join the investing team unless you have explicit consulting experience in PE.
The consulting skillset offers a very diverse and practical experience. Although quite a strong foundation, it is often considered to be quite broad. This will make specialized roles more difficult to attain and at times can limit ex-consultants to strategy based roles. However, in today’s job market there is far more flexibility and opportunity to climb rank in the corporate/startup world, opening even more doors and providing endless opportunity.
Investment Banking: Exclusive Options
Investment banking is an exceptionally popular career path, most assume that it is purely from a financial standpoint, but it offers far more than that. Similar to consulting it offers a unique perspective on the economy and the way businesses operate. It also provides an array of options if you ever choose to leave. The most common options are:
- Private Equity / Venture Capital
- Hedge Funds
Albeit similar options to management consulting, there is a distinct difference. Investment bankers have access to highly exclusive and competitive options, that are not impossible but certainly a lot harder to access as a management consultant. That is to say, the most prestigious PE firms and biggest Hedge Funds that are shaping the world economy will be most accessible to investment bankers.
Considering the scope of work and role of an investment banker is far more specialized, so are the skills that will be developed:
- Investment expertise
- Extensive financial modelling skills
- Attention to detail
When considering the exit options from a highly specialized background, like investment banking, the options will be more focused and play to the strengths outlined above. PE firms and Hedge Funds require a level of modelling and financial expertise that isn’t impossible to gain from consulting but still incomparable to investment banking. In the PE world, bankers tend to naturally transition into the ‘Investment’ team at a firm. It would be very unlikely for them to work within the ‘Portfolio Operations’ team like their consulting counterparts.
Investment bankers aren’t limited to PE/Hedge Funds and still have access to the corporate and startup world. However, not in the same capacity as consultants, as their investment experience won’t specifically prepare them well for a role outside of the finance function. Which is why Kevin Jon argues that the options for ex-investment bankers are far more exclusive than endless.
Moving Between Management Consulting and Investment Banking
Having looked at the skill set that each profession develops, and understanding the potential exit options you have from both, there is one final consideration: moving between the two. Depending on where you are in the world there are a number of variables, however, there are a couple of assumptions that do remain consistent globally.
Moving between the two is less common than most might think, and the aforementioned exit opportunities are far more likely. By nature, a ‘Generalist Consultant’ role is quite broad, as are the essential skills; exceptional verbal and written communication, the ability to lead and work as part of a team, and outstanding analytical and quantitative problem-solving. This skill-set isn’t exactly exclusive to consulting and can be developed through a number of commercial professions, including investment banking.
A role in investment banking requires specific experience and expertise in financial analysis and modelling, that’s unlikely to be developed in the first few years of consulting. Therefore, consultants rarely make the move into investment banking, but again, it’s not impossible. Those skills, though, are in part why investment bankers are attractive hires for management consulting firms. It’s far more common for investment bankers to transition to consulting, as they will already possess some of the essential skills like modelling, communication, client readiness, etc. However, not every investment banker makes a great consultant so it really does come down to the individual.
The Bigger Picture
Both careers are exceptionally well regarded and can transition into anything really. Consulting does provide far more flexibility to pursue different careers whereas banking is great if you’re already thinking about PE/Hedge Funds.
Exit options should never be the only reason you choose investment banking over consulting or vice versa. You need to find the right match for your personality, your strengths, what you will actually enjoy doing every day. No matter what stage you’re at in your career, your last year at university, the second year in investment banking/consulting, the middle of your MBA; exit options should most definitely be a factor in any decision-making process. But they are exactly that, only one factor.
IN COLLABORATION WITH
“Former strategy consultant turned entrepreneur and VC. He gained valuable experience working with corporates and startups at the intersection of consumer and digitization topics.”
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