Experience

Strategy consulting vs. financial advisory consulting – both are consulting. Can they really be that different?

We get at least 5 questions a month from readers about this either-or, and in honor of all of you we put together our 5 major differences between the 2 prominent types of consulting, and why – if you have a choice – we recommend strategy consulting as your top pick.

First, a 101 on strategy consulting for you newbies to the site – having an insider view into the strategy and operations of a company requires that you quickly become an expert on day-to-day activities in light of the overall company vision. That’s a pretty big ship to steer, and with the CEO as your ultimate boss, more influence – plus the perks that come with it, like a bigger paycheck – are a part of the package.

Financial advisory consultants address how a company spends cash, manages debt, and issues equity for specific internal projects, acquisitions, or other key growth plans. In light of what the leadership has already decided to do, how can the firm maneuver its assets (or raise capital) to make things happen?

One note – we’re addressing here specifically financial advisory consultants who work for large companies – not personal financial advisors. Please don’t confuse these two – from the eyes of an MBB firm, they are nothing alike!

We are also not talking about consultants like Oliver Wyman who have a strategy consulting practice that is focused on the financial services sector, or the financial services practice at a strategy consulting firm – those groups are much more like strategy consulting than financial advisory consulting, so we won’t be addressing those here (perhaps in an upcoming article).

Beyond definition, there are many other factors that put strategy consulting and financial advisory consulting in different camps. As a member of the field, the differences will influence who you run with, what work you’re involved in day to day, and even where you can land a future career.

As a quick disclaimer – both strategy and finance are imperative to the health of any company, so we’re not trying to argue that strategy is more important than finance or vice versa. Instead, we’re exposing the “real world of consulting” to help you cut through firms’ marketing pitches so you can see the day-to-day difference and long-term impact of your work in both consulting fields.

Here are the top 5 factors that create the chasm between strategy consulting and financial advisory consulting (and why MC recommends strategy consulting as the best choice):

1) Strategy consulting exposes you to a wide variety of business problems in multiple industries.

In financial advisory consulting, consultants go very deep in one industry. The dynamics of finance, and the legal/compliance implications within each specific industry will be very focused, so you will likely serve a small number of clients during your tenure and become an expert in one area.

In contrast, strategy consulting allows an individual to work across industries. In a matter of months, a consultant in strategy may jump from discovering how to cut costs in a shipping corporation to finding ways for promoting a new product in the technology industry. Strategy and operations is optimal if you want to stay on your toes, experience diversity in your work and/or if you have professional ADD.

Financial advisory consulting will be more broad than working for one company specifically, but more narrow than strategy consulting.

2) Strategy consulting offers the opportunity to work for a global corporation’s CEO.

Financial advisory consultants typically work for the company’s CFO. You may be assigned exciting tasks like mergers and acquisitions or you may find yourself restructuring debt – perhaps you’ll find this interesting, but perhaps you’ll quickly find it monotonous and extremely detail-oriented.

Strategy consultants generally work for the company’s CEO, and you work with the firm’s most pressing and broadest issues. The engagements you’ll work on are more likely to be short (3-6 months), high-impact (one of the CEO’s top 3 issues) and relevant (time-sensitive), which means you have a direct impact on the future of the company.

3) Strategy consulting emphasizes intellectual curiosity over expertise.

A real upside to strategy and operations consulting is that it offers opportunities to work on a variety of projects, and firms like BCG boast about their creative approach that is new for each company. For the avid learner, your intellectual curiosity will be stretched and your hunger for new challenges met as you will always be doing something new (at least for the first 2 years).

In the financial advisory ball game, your goal is to be as much of an expert as you can be in one area – there are legal and compliance implications to all of your recommendations. While you can quickly become known as the expert in a specific area of financing for, say, airline companies, your role is defined narrowly and could quickly become monotonous.

Because financial advisory firms base billing and relationships off of expertise, and they often have much more headcount, the expert model works better than the required flexibility of a smaller strategy consulting firm (where analysts need to be easily interchangeable amongst a smaller subset of projects).

4) Strategy consulting firms offer training that is modeled at top global business schools like HBS and Stanford.

Both strategy consulting and financial advisory consulting put you right on track for the C-suite, but you’ll end up in different places – strategy consulting to CEO and financial advisory consulting to CFO.

In strategy consulting, you are in pre-CEO training. You face analytical questions about profitability and competition as well as team leadership and leadership development questions. You will face the things you’ll need to have experience in as a CEO, and address the company’s broadest and most pressing issues.

As a financial advisory consultant, you’re training to become a CFO. As a CFO, you will deal with more analytics and skills-focused questions – you’re developing the “how” to the CEO’s “what”. Again, there is a more narrow focus and a higher standard for being an expert in a specific field.

5) Strategy consulting offers unparalleled exit opportunities.

In strategy consulting, you are generally working across multiple different industries and multiple firms inside each industry. This prepares you for a broader range of work in strategy and operations, and also exposes you to a broad set of future employers. The prestige associated with MBB helps too; firms clamor for the small subset of “proven” and trained strategists that exit these firms each year.

Because of the tight-knit network the strategy firms offer, you’re also branded for life – even if you left the firm 5 years earlier and pursued entrepreneurship, you still bask in the favorable MBB glow if you go back to re-enter corporate life (referencing first-hand observation of my peers here).

Financial advisory roles will position you for yet another financial advisory role, albeit internal to a new firm. The main problem? Once you’re inside the firm, your career progress can stall as you become more and more of an expert in an industry and one specific company. Entering an industry role will provide minimal latitude to explore other career options, so if you’re in financial advisory consulting, try to stay in the external consulting role as long as possible.

If we haven’t yet convinced you of the differences, and you are still wondering if financial advisory consulting is right for you, please realize that financial advisory consulting is the perfect career choice for many people!