Differences Between Finance and Consulting
As a student/professional what you would like to be? Do you want to increase the depth of knowledge or the breadth of knowledge? What do you think your inner structure is?
A professor was giving a talk at a small room conference. Students were listening to him deeply. When the professor paused and encouraged his students to ask questions, one of the students asked him – “What do you think, sir? What’s more important, depth of knowledge or breadth of knowledge?” The professor paused, gathered his thoughts and said – “If you want to be an expert, go for deepening your knowledge. But if you’re okay with becoming a non-expert, I would recommend, be a generalist and increase the breadth of knowledge.”
The answer the professor gave is subject to argument and can encourage a lot of debate. Here we’re talking about something of that sort. What should you choose? A career that needs a lot of depth of knowledge or a profession that needs a lot of knowledge in different subjects to effectively manage the tasks at hand? Who are you, a finance guy or a management consultant?
Here, in this article, we will do the analysis between a finance guy and a consultant. We will also provide all the details for you to make an informed decision. But the decision has to be made by you. We’re picking fruits and putting in two baskets. You need to choose which basket is yours – a basket with all cherries or a basket with different fruits!
Finance vs Consulting Infographics
Key Differences Between Finance and Consulting
Let’s talk a bit more about generalist and specialist so that you can have an idea of what characteristics are more of your kind.
If you’re a specialist, you tend to think about one thing. It comes naturally to you. You’re able to concentrate and don’t feel bored easily about one thing. And before going into depth, you don’t leave any subject. You’re someone who is a go-to guy for a specific thing. You love your one thing and you wholehearted want to pursue it.
You’re someone who is okay with knowing a little about everything. You get bored with things easily. You’re someone who picks up one book, reads it through and next, you pick another book of different subjects. You have a hard time concentrating on one thing most of the time. You feel that knowing enough is enough.
Now the description we have given above may not match who you’re complete; but while reading you may feel “this is me”, “no, this isn’t me”. Pick that/those and read the entire article while keeping those phrases in mind. We will be talking about finance and consulting.
Finance is for specialists, for professionals/students who love to play with numbers, think logically, base their decisions on reasoning and mostly get busy in increasing their knowledge in finance. On the other hand, the consultant has to do multiple things. They can’t only get around with finance knowledge. They need to understand business, administration, marketing, analysis, presentation, customer service and many more. So they’re a jack of all trades and mostly a master of none.
|Career Options||Investment BankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.,|
Equity ResearchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. ,
Project FinanceProject FinanceProject Finance is long-term debt finance offered for large infrastructure projects depending upon their projected cash flows. Moreover, an investor has to form a Special Purpose Vehicle (SPV) to acquire the same. ,
IT Consulting and other areas
|Hard Skills Required||Microsoft Excel, Powerpoint, Financial ModelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact., Valuation MethodsValuation MethodsDiscounted cash flow, comparable company analysis, comparable transaction comps, asset valuation, and sum of parts are the five methods for valuing a company., Sensitivity Analysis, Accounting, Corporate Finance, Fixed Income, Derivatives,|
|Microsoft Powerpoint (heavy), Microsoft Excel (less), Analytical Skills, Process vast data, Business Modeling, Business Strategy, Operations, Human Resource, Supply Chain|
|Soft Skills Required||Ability to work for the extended time period (80-100+ hours a week), Excellent Communication Skills Required, Writing Skills, Negotiation Skills||Ability to understand Clients Requirement, Communication Skills, Excellent Presentation Skills, Taking Ownership, Ability to work in Team|
Goldman Sachs & Co
Bank of America Merrill Lynch
J.P.Morgan Chase & Co
|McKinsey & Company.|
Boston Consulting Group,
Bain & Company
Booz & Company
Deloitte Consulting LLP
Ernst & Young LLP
|Work-Life Balance||It depends on which subdomain in Finance you are working for. Investment Banking – it’s brutal! Equity Research is still OK. Buy-Side Analyst has a balanced work life.|
Depending on the area, you may have to work for 10-18 hours a day
|In consulting the working hours vary depending on the client and project.|
On average, it is around 12 hours per day
|Travel||Mostly they are not required to travel much. You can safely assume that 90% of the time is spent in Office.||Consultants travel for 25-75% of their time|
|Key Words||Financial Modeling, Valuations, M&A, NPV, IRR||Top Level analysis, Insights, Findings, Facts|
|Exit Opportunities||Depending on the chosen area of interest, there are some amazing exit opportunities within the Finance sector.|
For example, Investment Bankers moving into Private Equity, or a Research Sell-side analyst moving into a Buy-Side Analyst profile
|Become senior executives in the sector you are consulting|
|Networking Opportunities||Mostly work within the Financial Industry. The alumni network is strong but not varied as found in the Consulting.||Consultants work for diverse industries – they get immense opportunities for networking with diverse groups of businesses, academics, government and also countries. They also have a very strong alumni network which helps them connect across various levels|
|Popular Certifications||CFA, FRM, PRM, CFP, CIMA, CMA, ACCA, CPA and more||CMC|
|Job Security||Chance of spending 15-20 years in Finance filed is a bit lower (especially Investment Banking)||chances of having a 15-20 year career in consulting look a lot higher|
Career in Finance
This section would be divided into two parts. First, we will talk about the possible certifications/degree you can take up to create an amazing career in finance. Then, we will talk about how to get there.
- Investment Banking
- Corporate Finance
- Equity Research
- Private Equity
- Risk Management
- Quantitative Analysis
- Project Finance
- Technical analysis
How To Get Into a Finance Role?
The first step is to decide what you want to specialize in. Is it something that you want to do at least for the next 5-10 years? If yes, then choose whatever speaks to you. But if you feel that specializations are not for you, you can read on. In the next section, we will talk about careers in management consulting. To thrive in a management consulting career, all you need to have is a mindset of a generalist. So if you think being a specialist speaks to you, choose any of the above certifications and get going.
Getting it is easy. The hard part is to choose something that you can continue doing for the next 5-10 years. To understand whether you would like to specialize or not, you can simply look at the lifestyle of the finance profession. Pick any profession and look at the lifestyle. Now ask yourself – Am I ready to adapt to the lifestyle this career offers me? Am I excited about that lifestyle? If the answer is yes, pick that specialization and you would be happier.
A career in Management Consulting
While finance careers are mainly built on the foundation of certification, management consulting needs a different route. Here’s what you should do to thrive in management consulting.
First of all, let’s talk about the skills required to do great in a management consulting career.
Skills Required for Management Consulting
- Effective communication & interpersonal skills: To be a great management consultant, you need to know how to express yourself so that the clients can understand where you’re coming from. Clarity is the key. While communication can be developed, interpersonal skill needs to be honed only by dealing with more people. You can’t just get great at interpersonal skills until you become well-versed in your social life.
- Understand trends: Your job is to see the past, be in the present and predict the future in such a way that the client can be positive about their business. And while getting there, you need to understand trends of the business and how to make sense in your prediction.
- Being able to analyze a vast amount of data: How would you know where the company is coming from? You need historical data to answer this question. Moreover, you need to know how to analyze the data so that you can change their future. Even if analyses are not always considered as a specific skill, but you need to know how to analyze the data in such a way that you can communicate the trend via statistical model, charts or presentations.
- Future orientation: As a management consultant, your job is to improve their future. So if you’re not focused on offering them better results in the future, you would not be hired again. Why would you get hired if you can’t sell them the possibility of the future or their most-cherished goal? Your job is to put the results on the table even before you start working with them. Be sound. Know a lot. Show past results to your present clients. And they’ll trust you.
Let’s see how you can get there.
How to Get Into A Consulting Role?
You’ve heard the expression – “When I do, I learn”? Yes, you need to do consulting to be good at consulting. How would you start? You can start by joining a –
Big Consulting Firm:
You can join a big consulting firm like McKinsey & Company, Boston Consulting Group, Bain & Company, Accenture, etc and can learn the art of the trade. Joining a big company is beneficial for you for these reasons –
- You will be a small fish in a big pond. So there’re no limits to your learning. You can learn everything about everything. And then can apply the same in your own domain of work.
- You will get a much better salary compared to a small firm.
- You will add value to your personal brand. Because later when a recruiter will look at your profile, you will definitely have an edge over others.
- You will also learn about how these big firms do business with clients and can learn a ton from the experience.
Small Consulting Firm:
Yes, you can join a small firm and be the king of your kingdom. Of course, you will be in a small pond, thus your chances of growth would be more. How? You need to take more responsibility and would run the firm mostly as an entrepreneur. Yes, the compensation may be less, but experience in a small firm is great if you want to start something on your own.
Start Your Own Consulting Firm:
Starting your own consulting firm is lucrative. Of course, it’s risky and not easy. You may lose sleep nights after nights, but it’s worthy of every sleepless night. Owning your own firm will give you the autonomy of choosing your clients, expanding at your own pace, choosing your own schedule and making your own profits (yes, as much as you want). No. It’s not easy to start a consulting firm on your own. But if you have a few years of experience in big firms and in small firms, that will be enough.
Finance vs Consulting Video
The only difference between these careers that may bother you is the compensation. You would earn a little less while starting your management consulting career than your finance counter-part. But if you stick to your laurel, you will do well and eventually, you may earn much more than a finance professional.
A word of caution here – as a management consulting professional, you need to ensure your own growth as there’s no or limited scope for any professional certification. However, you can do a finance certification and choose a career in management consulting. Many professionals do that. Think about all the options and then decide what makes you tick at the end of the day.
This has been a guide to Finance vs Consulting. Here we do the analysis of finance and consulting careers along with the details such as skills, job role for you to make a decision. You may also have a look at the following articles –