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Financial Services Vs Investment Banking – A Comparative Analysis

November 25, 2023 Investment Banking, Knowledge

Financial Services vs Investment Banking both are individually important components of the global financial system. Clients of financial services are typically a businessman and corporate officials, who seek assistance with their finances. In Investment banking, bankers frequently advise and support particular types of deals for corporate clients, whom they work with more frequently. According to the Bureau of Labor Statistics, financial services operate in a range of contexts and about 25% of them are self-employed. Commercial and investment banks are where most investment bankers are employed. For top students at elite institutions, careers in financial services and investment banking present opportunities to make a lot of money right out of college, usually with only a bachelor’s degree. Financial services and investment banking positions do not have rigid educational requirements for entry, in contrast to careers in medicine, law, or pharmacy. Instead, the requirements are set by the individual hiring companies.

Financial Services vs Investment Banking

Despite this, due to the fierce rivalry throughout the application and interview processes, the bulk of the top corporations that pay the greatest wages only hire the best applicants from the most prominent colleges. The possession of an MBA, particularly one from a prominent program, has never hurt anyone’s chances of success in either career.

Financial Services Vs Investment Banking: Definition

Financial Services:

An analysis of a company’s operations is necessary for a financial services provider to spot inefficiencies and pinpoint places where processes could be streamlined or dropped altogether.

Having great people skills is essential for the financial services industry, even though it provides you with a big advantage in either career. There are numerous occupations in the background for lawyers who are excellent at reasoning and problem-solving but lack negotiation skills or are introverted. Financial services, on the other hand, must discuss problems and persuade clients of their conclusions. It is not a career for the timid or misanthropic.

Financial services providers frequently work fewer hours than lawyers do to earn their high salaries, but frequent travel interferes with their ability to strike a healthy work-life balance. Many people in the financial services industry still travel frequently; they frequently leave on a Sunday night to arrive at their place of employment on Monday morning and don’t return until Friday afternoon. Since the COVID-19 pandemic, this dynamic has shifted a little bit, and some advisors now only work with local clients, although many financial service providers are still based overseas. When local clients become available, senior workers are given preference since firms expect new associates to be willing to travel.

Investment Banking: 

Investment banking employs a wide range of people, including advisors, banking analysts, capital market analysts, research associates, trading professionals, and many more. Each requires a particular level of training and expertise.

A degree in finance, economics, accounting, or mathematics is a good place to start for any financial career. This may be all you need for entry-level commercial banking positions like teller or personal banker. Those interested in investment banking are strongly encouraged to pursue an MBA or other professional certifications.

Strong social skills are extremely beneficial for any financial career. Even devoted research analysts spend a lot of time working in teams or offering advice to clients. Being comfortable in a professional social setting is vital since some occupations require more of a sales touch than others. Additional essential traits are the ability to communicate effectively (explain topics to clients or other departments) and a high level of initiative.

However, an associate in investment banking usually works between 75 and 100 hours per week, and sometimes even that is insufficient to complete the massive amount of research required. Even if junior bankers are not required to report to work on weekends, banks nevertheless want workers to be approachable via email.

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Financial Services Vs Investment Banking: Skills Required 

Whether one chooses to work in financial services vs investment banking, they both require strong problem-solving and diplomatic communication skills. Financial services require a thorough knowledge of a client’s frequently intricate management structure. Then inefficiencies and places for improvement are found, solutions are created for these problems, and ultimately the information is broken down into language the client can understand so that the changes may be implemented. Financial services need to have strong critical thinking skills as well as outstanding communication skills.

The two jobs require a mix of qualities, including a near-supernatural capacity for diplomacy, an analytical, problem-solving emphasis on mathematics, and a variety of other capabilities. Financial services must comprehend the management structures of their client firms to identify issues and describe what has to be done to resolve them. This calls for expertise with PowerPoint as well as communication and interpersonal skills as well as the ability to concentrate on business operations. I-bankers need to be strong Excel users, have a firm grasp of financial modeling, and be able to put in long hours.

Investment banking is where the best quantitative talent belongs. Although not to the same extent, financial services also require certain talents. Senior i-bankers are given more chances than younger bankers to pitch clients. 

Through financial services, you can see business from a larger perspective. An expert in multiple fields, financial services is likely to be conceptually thorough. Financeresult.net lists some similarities between entry-level jobs in the two industries. Both positions include a large pool of candidates, in-depth training, excellent remuneration, amazing exposure to corporate clients, and high turnover rates. Many workers leave their jobs after two or three years to enroll in an MBA program or to pursue other careers in finance or strategy.

Investment banking requires many of the same abilities. Investment bankers deal with significant sums of money, thus they must be highly disciplined and possess strong mathematical skills. Many times, businesses lose millions of dollars as a result of simple errors. Given the breadth of the science, some subfields of interpersonal communication are studied more frequently than others. An investment banker’s profile and demand are increased by having strong interpersonal skills. Investment bankers need to daily manage corporate discussions or mergers and acquisitions (M&A) and require good and strong diplomatic skills.

Financial Services Vs Investment Banking: Salary

One of the primary appeals of financial services vs investment banking is the opportunity for substantial financial gain. Which one pays more, though, financial services vs investment banking? Even better, new associates routinely earn over $100,000 in their first year out of college, while frequently only having a bachelor’s degree.

The starting salary for first-year financial services providers with bachelor’s degrees ranges from $65,000 to $100,000 depending on the company and the region of the country.

It is still a pittance compared to what financial services firms make when they initially enter the industry after receiving an MBA, even though any number in that range is greater than the normal wage in the US.

Fresh out-of-business school financial services providers may anticipate earning between $165,000 and $200,000 per year, depending on the organization, the location, and many other criteria.

Many aspiring financial service providers choose to complete an additional two years of education as a result before beginning their employment.

Higher remuneration is provided for new hires with bachelor’s degrees in investment banking. The majority of banks employ a basic salary and bonus structure for compensation. A person’s base salary is frequently in the neighborhood of $100,000, but if they receive all of their bonuses, their yearly income will be closer to $180,000.

Pay is undoubtedly the biggest attraction for the two professions. At least for the first ten years, I-bankers performed better in terms of take-home income than financial services. Beginning salaries for financial services providers range from $65,000 to $100,000, while those for investment bankers with a bachelor’s degree range from $80,000 to $150,000.

According to the study, entry-level financial advisors with an MBA from a reputable university might anticipate earning between $125,000 and $200,000. However, they typically are ignorant of the large bonuses offered to e-bankers. When bankers and advisors reach partner/managing director roles, their wages may be comparable at the $500,000 threshold, according to wayup.com. 

Pay is influenced by a variety of factors, and an article claims that I-banker incomes occasionally exceed financial advisor salaries by 50% to 100%. The gap dramatically expands as you climb the ladder. However, the report also notes that one of the advantages of advising is trip reimbursement. Benefits for retirement and health should also be enhanced. At the end of the year, bonuses account for nearly half of the bankers’ annual compensation. Bankers often earn between $30,000 and $60,000 more than financial service providers in their first year of employment.

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Financial Services Vs Investment Banking: Difference in the Work environment

A more laid-back workplace is usually preferred by financial advisors. In contrast to the banking industry, there is less tension between management and staff, and people are more likely to stick together when times are rough. Social events improve relationships between offices and offer financial services chances to network.

However, the position of financial services is very demanding. After all, struggling businesses turn to them for support and solutions. A financial advisor needs to be able to work long hours and under pressure. The turnover rate in the financial services industry is low, even though financial advisors occasionally switch jobs to become analysts or entrepreneurs, occupations for which they are well-suited.

Investment banking and i-bankers are thought to have a hierarchical organizational structure and less pleasant bosses than financial services firms, according to what may be a little skewed image of these professions. Because everyone wants to get the greatest bonus, coworkers see one another as competitors and are less likely to offer assistance.

more unfavorable coverage of investment banking With coworker quality, a visitor asserts that advisors come across as more knowledgeable than bankers at work. They often have a greater understanding of the many industries, and their reputation in the field nearly seems to consume them.

Financial services tend to be less cunning, less pompous, and extremely knowledgeable about their business, even though they may lack the alpha-male component. If you want in-depth knowledge, flexible hours, and a high salary, consider becoming a financial advisor. However, a guest post suggests going into banking if you want huge incentives, excellent reviews, and powerful partners.

Contrary to the claim that individuals are more concerned with credentials in financial services, investment bankers have a great work environment despite the lack of transferrable skills and the repetitive nature of their tasks. The pay in banking is higher when “the perfect time in life.

Financial Services Vs Investment Banking: Work/Life Balance and Life Style

No career, especially in the early years of employment, ranks highly for work/life balance. Go somewhere else if you’re seeking a job with a nine-to-five schedule, free weekends, and four weeks off the first year.

An entry-level investment banker often puts in between 75 and 100 hours per week. New employees rarely get a full weekend off during their first year; if they’re lucky and things aren’t too busy at work, they could get a Sunday. Some investment banks even have basic rooms with bunk beds for employees who stay at work past midnight. Even after a hard day at work, an investment banker is expected to be at their desk the next morning when the markets open.

A financial advisor works fewer hours each week, yet it is impossible to compare like without accounting for travel time. Although more advisors may work from home now than ever before, especially in the beginning, many still travel for a significant portion of each workweek. This aspect of the job is adored by wanderlust without husbands or kids but is typically despised by those who have family obligations. It normally takes years of experience to reach a level of seniority where you are only assigned local clients.

It is commonly known that i-bankers frequently work longer workdays and weeks than advisors, even though both i-bankers and financial advisors have busy, challenging lives. First-year bankers put in between 70 and 90 hours per week of work, with only the occasional free Sunday and even fewer full weekends, according to Investopedia. Financial advisors put in fewer hours, 60. In contrast to banking, there may be a lot more travel needed.

The advisor left around 7 am, a little earlier than the banker, who arrived back at the residence at 2 am. According to a scenario presented, the banker and advisors were roommates who had not seen one another in days. As a guest on efinancialcareers.com, a former i-banker who made the switch to financial advisor claimed to have worked very little on weekends in his present role. Certain work might be delayed until the next day or, if a weekend intervened between, till Monday even if a customer deadline was present.

Financial Services Vs Investment Banking: Switching Careers 

Even after earning an excellent MBA, a large fraction of financial advisor remains in the industry. According to tracking data, this percentage is 50% of advisors and corporate finance professionals move into investment banking after getting an MBA.

A famous firm’s executive director who switched from financial services providers to investment banking is the subject of a story on Thegatewayonline.com. His motivation came from a love of banking and finance that he discovered while enrolled in the Master of Finance program at the London Business School. He contends that the disadvantage of advising is that it frequently takes clients years to implement your advice, postponing your work’s satisfaction.

In IB, results are displayed more promptly and clearly. A planned takeover or a market listing, for instance, has immediate effects. Additional advantages include having access to important business decision-makers and taking part in large transactions that make front-page news.

A financial advisor trying to break into the banking industry, according to Quoran, should focus on providing the recruiter with the right personal and professional story. If you want recruiters to be interested in you, you must exhibit enthusiasm for IB and persuade them that you are capable of putting in extra work. Another Quoran asserts that the simplest way to switch from advising to banking is to enroll at a respected university where bankers actively recruit.

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Financial Services Vs Investment Banking: Career Paths 

The career paths for services-providing firms and investment banking are comparable, according to a wayup.com article. I-bankers start with a summer internship, advance to entry-level jobs as financial analysts for two years, associates for two to three years, and lastly managing directors or vice presidents for the final two to three years of their careers. MCs begin their careers as business analysts and gain experience for two to three years before becoming associate or senior advisors.

MCs may not start their careers with an internship as commonly as i-bankers do because banks hire the majority of their interns. However, internships are a great approach for MC aspirants to gain industry knowledge.

Even though the precise path depends on the company size, both industries offer a lucrative and well-defined professional path. In general, smaller companies are likely to offer less structure and probably lower pay than larger companies.

One key difference between financial services and investment banking is that you can expect more job stability in financial services. Financial services-providing firms are less vulnerable than investment banks because their clients will suspend fundraising but may still hire advisors to aid with cost-cutting.

So how do you progress in these fields? Directors manage customer contacts, Managers supervise the work, and Analysts/Associates carry out the analysis. Both businesses are fairly hierarchical, having a similar set of rungs.

The amount of time needed to reach the highest level is equivalent. You should plan on taking 10 to 15 years to advance from an analytical position to a senior one. The “up or out” ethos in every industry makes it impossible to stay in a position for an extended period. Either you need to find a new career or you need to develop the skills required for the next level.

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Frequently Asked Questions 

Q1. In Financial services vs investment banking, is there a difference?

Yes, financial services and investment banking are different. Financial services entail offering businesses a range of financial services. A corporate service firm is a long-term partnership that provides funding, risk management, and traditional banking services to businesses. Contrarily, transactional investment banking helps businesses with one-time transactions like mergers and acquisitions and initial public offerings (IPOs). 

Q2. Financial services vs Investment Banking which is a Good Pathway?

Financial services are typically not a viable entry point into investment banking. Budgeting, operations, cash management, planning, and accounting are all corporate finance tasks. The same abilities needed in investment banking, such as financial modeling and valuation, are not necessary for corporate finance employment. 

Q3. Exit Opportunities: Financial services vs Investment Banking: What Are They?

Compared to investment banking, financial service offers you more exit opportunities in strategy, operations, non-profits, startups, and other areas. You have improved access to financing exit opportunities in private equity, hedge funds, and business expansion thanks to investment banking!

Almost all of them agree that financial advisors are the best option if you want to work in an operational or strategy role for any business or organization.

Conclusions: 

Healthcare Financial Services claims that it is easier to transition from investment banking to advising than the other way around in Financial Services Vs Investment banking. They claim that there are three basic motives for people to change. Compared to IB, where a financial background is necessary, financial advisors hire more people with experience and MBAs. Financial advisors can still manage work-life balance despite the business trips, and IB compels professionals to work lengthy hours. Additionally, financial services firms use more experienced workers than Investment Banking.

Financial experts, graduates, and postgraduates with a business mindset and strong analytical abilities can pick between advising and IB. In reality, the only way to know which is better is via experience in both businesses. A newcomer’s best bet is to conduct thorough research and make a solid educated judgment as to where they belong. Could they question themselves if they would love the work? Equally crucial: Would I enjoy being with those people?

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