Decks vs Derivatives: 6 Differences between Consulting and Sales & Trading

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 less 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 did I miss?

Comment away!