Because an earlier article on investment banking versus consulting was so well-received, I decided to write another one on sales & trading (aka S&T).

In general, both S&T and management consulting are great career options. They’re both meritocratic, well-compensated, and have better lifestyles than investment banking.

They both provide optionality if you decide to choose another career.

Two disclaimers:
1. My experience was primarily in equity derivatives trading, so this is a mashup of personal experience, anecdotes, and feedback from friends and former colleagues.
2. There are exceptions to every rule. I’m trying to make a point, not writing a scientific paper

What are the biggest differences?

1. Lifestyle – S&T wins

Sales & trading wins because their hours are fixed, and generally no travel is required. On a sales desk, you can expect to travel a bit to see clients, but it’s not comparable to spending 3 months in Dearborn, Michigan on an insurance turnaround project.

Now to the details.

Location – generally S&T is centered around a few hubs (New York, London, Hong Kong, and San Francisco). When you start a hedge fund, you’re more than welcome to pick any city, but until then, if you’re serious about sales & trading most likely you’ll be in one of those 4 cities. Consultants are located in more cities so you have greater flexibility in where you want to live and where you can relocate while staying in the same industry.

Travel – consultants travel more frequently and for longer durations. While this is all expensed and you’re generally comfortable, it’s a fact of life unless you’re at a boutique like Slalom or are senior enough to pick your engagements (and even this is only partially true).

There is some degree of travel in S&T, particularly if you’re on a sales desk, an international desk, or working at somewhere like a hedge fund or prime brokerage company.

Hours – S&T has better, and more structured, hours. Consultants do not work significantly longer hours, but the nature of it is more unpredictable, there’s more weekend work, and it does not get significantly better over time.

S&T is more similar to investment banking – as you become more senior, your hours can get better because much of the work can be delegated to junior folks.

It is also dependent more or less on market hours – so when the market closes, much of your work is done (especially if you’re market making, flow trading, etc).

This can be a downside, however – you can’t just ask the markets to close for 2 weeks so you can take that Thai beach vacation

2. Compensation – S&T wins

In general, S&T is compensated better over time, particularly at the top. This is because compensation is directly tied to the bottom line – if you’re making your company a ton of money, you can expect to be paid accordingly. The connection in consulting is looser.

S&T is compensated similar to investment banking – a respectable base salary, and a large annual bonus.

As a trader, you can expect to start around the low 6 figures, and hit 7 figures 5-7 years into your tenure (please see disclaimers above). In sales, the timeframe can be longer to hit 7 figures, depending on the type of security you sell (eg, bonds, foreign currency, derivatives) and the type of firm you work at.

While the difference isn’t pronounced in your early years (eg, after college, after MBA), it can be quite substantial as you become more senior. Top traders like Jim Simons (generally, those at hedge funds and prop shops) can make hundreds of millions – your most senior BCG partner won’t even come close.

*The median in both industries is probably comparable – I’m simply noting the outliers

Your perks in consulting (eg, expensed meals, sponsored parties, schwag) are better – but that’s also because you spend more time in the office and more time traveling.

Your benefits in consulting (eg, healthcare, retirement) are also better – for example, I haven’t heard of anyone in S&T getting automatic contributions to their 401(K). I’ve also seen S&T healthcare benefits at Goldman Sachs and McKinsey’s is definitely better.

3. Exit Options – Consulting wins

Consulting comes out the clear winner here – they simply have more flexibility to jump into entirely different industries and career functions (eg, government, non-profit).

I’ve explained exit opportunities from consulting before, but let me cover sales & trading a bit.

From S&T, your most likely exit options will be:

• Hedge fund
• Private equity
• Intra-firm (eg, moving from sales to trading, from market making to proprietary trading, from one security to another)

You may have a few more options if you’re on the sales side of the business – for example, you could join a prime brokerage (basically, a broker for hedge funds).

*This doesn’t include the options available to anyone (eg, business school, starting a company)

4. Skillsets – Consulting wins

Consultants learn more varied skills than S&T.

The incentives are simply different – in S&T, you’re rewarded for becoming an expert on a very specific thing (for example, fixed income interest rates in European countries) and doing that over and over as you make a ton of money.

In consulting, your goal is to acquire a broad set of skills that make you a good business leader (although, in my opinion, lacking on the execution side). This includes everything from content knowledge (eg, knowing the latest developments in the automotive industry) to process knowledge (eg, knowing how to lead teams and influence clients).

In addition, consulting firms provide more formal training (both pre-job and on-the-job) and more educational resources (eg, dedicated communications coaches, online and in-person classes).

S&T has a strong informal on-the-job training ethic, but this is highly dependent on the desk, the firm, and your boss/team culture.

5. Culture and People – Consulting wins

Both #5 and #6 are very subjective and personality-dependent, so I’m appealing to the “average person”.

On average, the people who work in consulting tend to have stronger interpersonal skills and more diverse backgrounds.

On average, the culture at management consulting firms is more employee-friendly, more tolerant of mistakes, and puts more effort into cultivating an enjoyable working atmosphere.

On average, people tend to enjoy working with their colleagues in consulting better and have more positive things to say about their firm culture(s).

6. Type Of Work – Toss-up depending on your personality

This is partially covered in #4.

In consulting, your day can vary widely – there is no easy way to predict a typical consulting day (even though I tried, hah!). Everything from your hours to projects to people you interact with vary on a daily basis.

In S&T, your day is fairly structured – click here for a good rundown of a typical S&T day. Your hours are the same, the people you interact with don’t vary significantly, and the type of work you do is consistent (for a trader, that’s identifying and executing transactions; in sales, that’s building relationships with clients and handling their requests).

Now that you know the major differences, are you more or less interested in consulting?

If you’re a current sales or trader, what’d I miss?

Comment away!

This is an important question for prospective applicants (in particular, undergrad/MBA students) looking for summer internships and fulltime jobs alike.

The decision was easier for me than for most people. The cons of investment banking – the long hours, the repetitive and unengaging nature of the work, the lack of non-finance exit opportunities – mattered far more to me than a 6-figure salary. I seriously considered sales & trading (in fact, I spent a summer at Credit Suisse First Boston in NY), and was tempted to continue in that line of work post-graduation.

Instead of defining the basic characteristics of each job (there are plenty of resources out there for that, including the Vault and Wetfeet Guides), I will address a laundry list of defining differences between the two professions.

Let me caveat by saying THESE ARE NOT YOUR ONLY OPTIONS. People get carried away into thinking that’s all there is.

#1 SALARY

This is the biggest superficial difference. That’s not to imply that salary doesn’t matter. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your seniority increases. Consulting compensates with perks that banking does not offer – from better travel allowances to more generous health and retirement packages.

Consultants always like to say this:

“I know investment bankers make more money. But from a cashflow perspective, it’s exactly the same!”

This simply means that consultants and bankers make comparable base salaries, and at the end of the year, bankers are awarded a bonus which can comprise more than 50% of their total annual compensation. Cashflow or not, the extra money is substantial and a defining driver of why many people do investment banking. This is also a difficult issue for consulting firms with respect to employee retention. In my time at McKinsey, easily half the people who left the firm went into the financial world (from hedge funds to PE), and salary was undoubtedly a major factor in the decision.

My advice is this – if after considering all 5 factors I’ve listed here, you still think the pay difference (for 1st yr analysts, averaging between $30-60K/year) would mean a substantial difference in your personal and professional job satisfaction, choose banking.

Further reading: Consulting salaries from analyst to partner

#2 LIFESTYLE

The key differences here are:

-Hours. Bankers work brutal hours, no surprise. They can average 14-16 hours/day but it can get FAR WORSE.

My roommates in New York (both investment bankers at Goldman Sachs) would sometimes go several weeks before we’d even exchange a word. Which meant not only were they getting in after I went to sleep (around 2am), but going back to the office before I woke up (around 7am).

Your second year as an investment banker gets better – in the 10-14 hours/day range but also with unpredictably tough periods.

Consultants average 12 hours/day, with the typical variations depending on client, team goals, etc

-Travel. Bankers do some for roadshows, due diligence, etc but spend 90% of their time in one office until you’re partner-level (this is investment banking; you can expect more travel in private equity and investment management). Consultants – depending on firm – travel anywhere from 25-75% of their time. At the Big 3 (Bain, Boston Consulting Group, McKinsey), you can expect travel 50-75% of the time. I’ve heard of boutiques

-Relationship with coworkers, managers, and firm. This is less discussed but equally important. Consulting firms have a very collegial atmosphere, where the focus is on getting the work done but also ensuring your professional success. This attitude permeates all interactions. Managers rarely yell, coworkers try to help each other out whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, networking is important at consulting firms, and social events are focused on helping consultants build contacts and relationships throughout the firm.

Investment banks, on the other hand, have a more competitive, hierarchical setup. You can expect more tense relationships with your bosses, you’ll probably be yelled at from time to time for mistakes, and coworkers are much less willing to help each other out (they’ve got enough on their plates, and your success means theres more competition for the biggest bonuses). In addition, you’ll have limited exposure across the company to other groups, departments, etc – less ability to network across the company.

Further reading: Consulting travel; Day in the life of a consultant

#3 SKILL DEVELOPMENT

Call me biased, but I received the best years of business training possible in my time at McKinsey. Thorough and at times intense exposure to textbook business principles and practices. In addition, the project team model leads to mentorship opportunities with managers, partners, and coworkers. Finally, you have constant client interaction which develops “client skills” – from managing client teams to running meetings to learning how to navigate different corporate environments.

That being said, here’s a quick list of what you can expect to learn in both fields:

By “hard skills”, I mostly mean software (ie Microsoft Office Suite), analytics (ie financial valuation). By “soft skills”, I mean the interpersonal, qualitative interactions that you have with coworkers, the broader firm, clients, etc

CONSULTING

Hard skills:
1) Microsoft Powerpoint – you will (and have to) become a master at this, and will eventually have the ability to produce presentations quickly, concisely, and meaningfully
2) Microsoft Excel – less exposure than investment banking. Still, “modeling” is a meaningful component of a consultant’s work, and something every consultant is expected to have significant exposure to. Note -firmsodeling” done in case work may not be directly comparable to the financial modeling more common at investment banks
3) Business knowledge – typically broad exposure across different topics like strategy, operations, organization and several areas where you’ll have expertise. This expertise may be as broad as “operations turnaround” and as specific as “benchmarking for insurance companies”.

Soft skills:
1) Client interaction (explained above)
2) Heavy team interaction
3) Presentation skills – this is a cornerstone of consulting work. After all, findings don’t mean anything if you can’t convince the client to believe in and adopt them
4) Project/workflow planning and execution – this is subtle but important. Much of the time at investment banks, you are given incremental work – eg, add these updated numbers to the model, bind these presentations, insert a graph on chart 11. Consulting is focused on you OWNING a piece of the entire project, setting your own deliverables and timeline, and executing against that framework. This helps you develop the ability to be “standalone” in consulting lingo.

INVESTMENT BANKING

Hard skills:
1) Microsoft Excel – clearly you will become a master at this, and is a mandatory for success. You’ll know the ins-and-outs, every keyboard shortcut known to man (and then some), and so forth
2) Microsoft Powerpoint – much less exposure here depending on the focus of your work (for instance, more in Corporate Finance, less in Mergers & Acquisitions). Very little experience in building a presentation from scratch.
3) Financial valuation – self-explanatory. Differs based on group/focus, but at the very least you’ll understand financial statements inside and out, and have strong knowledge of how companies are financed

Soft skills:
1) Work endurance – this is the upside to those 100+ hour weeks, which is the ability to work incredibly long and incredibly hard. Basically, every job you take post investment banking will feel somewhat like a vacation. It’s a great trait to have
2) Seeing deals get done – investment bankers have, at times, better access to the leading business leaders of the day. As a junior banker, you may not have direct interaction but will be exposed through countless meetings, conference calls, etc to these people and see how deals are done and groundbreaking changes in business emerge day-to-day.

Further reading: 5 big mistakes that will get you fired

The last 2 points in this post are shorter, because I plan to write separate entries on each of them in the future

#4 NETWORKING

Less discussed but important. Consultants move on to a vast array of fields – from industry to academia, government to non-profit. Investment bankers do so less – most continue within the financial world. Your professional network and future career opportunities will be heavily influenced by your colleagues and your firm alumni.

In addition – my perspective is that consulting firms (similar to point #2) facilitate more interactions between alumni and current employees as well as future networking between alumni than investment banks. However, bulge-bracket investment banks have a much larger alumni base, and it certainly isn’t impossible for you to build strong connections provided you are proactive and innovative enough.

Further reading: How to get a consulting job in a tough economy; Networking 101

#5 EXIT OPPORTUNITIES

Corollary to point #4, this is influenced by your firm’s alumni and also the following:

-the different recruiters/headhunters that reach out to you
-the different paths your “hiring class” takes and the knowledge and opportunities you share with each other
-the relationships you’ve built with more senior colleagues and the doors they can open for you

When it comes down to it, the conclusion is similar: if you want maximum career flexibility, consulting provides that in spades. If you want maximum career flexibility WITHIN finance (and corporate financial roles), investment banking provides that.

Interested in sales & trading? Click here for the major differences between consulting and trading.