Investment banking versus corporate finance

In a general sense, corporate finance and investment banking aren’t all that different. Investment banks raise capital for other companies through securities operations in the debt and equity markets. Investment bankers also help coordinate and execute mergers and acquisitions (M&As), offer advisory services to big clients, and perform complex financial analyses.

Corporate finance is a catch-all title for any business division that handles financial activities for a firm. This can make it a little tricky to differentiate it from investment banking because, depending on the context, investment banking might count as a type of corporate finance. An investment banking firm might have a corporate finance division.

However, there is a generally accepted distinction between corporate finance jobs and investment banking jobs. A corporate finance professional deals with day-to-day financial operations and handles short- and long-term business goals, while an investment banker focuses on raising capital, running private placements and conducting M&A deals. Put more simply, investment banking grows a company, and corporate finance manages a company.

Education and Skills

Investment banking is considered one of the premier fields in the financial industry. There are two standard paths into an investment banking career: attend a noted undergraduate university and enter on the ground level as an analyst, or go to business school, earn a Master of Business Administration (MBA) and break through as an associate.

There are many different viable career paths into corporate finance because there are so many different kinds of jobs in the field. Individuals can find their niches as accountants, advisors, account managers, analysts, treasurers, business analysts or any number of other jobs. There are a few necessary skills, such as an understanding of corporate finance and effective communication skills.

The academic and experience credentials necessary to become an investment banker are unquestionably higher than for most corporate finance positions. Interested investment bankers should focus on degrees in finance, economics, banking or investment analysis. Most intern or take low-level positions at large banks to gain experience, and many work as analysts before receiving their MBA.

Major investment banks, especially in New York and London, focus their recruiting efforts on the best-performing prospects from Ivy League schools – although it’s not unheard of for exceptionally analytical prospects with degrees in challenging subjects such as biopharmaceuticals or other medical fields to make their way into the industry.

Corporate finance positions are far more common and far less competitive, generally speaking. It’s still important to have a degree and/or work experience in an analytical field before finding a job, but the odds of landing one of these positions are more favorable to applicants.

Salary

It’s challenging – if not impossible – to nail down an accurate salary for the average corporate finance position; there are simply too many different kinds of jobs available. It’s much easier to speak about expectations for investment bankers.

According to research from Robert Half International in 2017, the standard rookie financial analyst at a small firm could expect a salary between $47,500 and $55,750 per year, while a first-year analyst at a large firm may make up to $66,000 a year. Seasoned analysts could see salaries between $80,000 and $142,000, depending on the size of the company. The standard chief financial officer (CFO) or other high-ranking executive earns triple digits and might even receive a salary in the $500,000-plus range at the largest firms.

Investment bankers stand to earn much more than their corporate finance peers. Even junior investment banking analysts could expect compensation of around $130,000 a year when signing bonuses and performance-based bonuses are factored in, according to data from Wall Street Oasis.

Work/Life Balance

As attractive as the huge starting salary numbers for investment bankers can be, many choose to walk away from their work after a few years due to intense burnout. Investment banking deals are executed by small teams (three to seven is standard) with one analyst, one or two associates, one vice president and a lead managing director. Workflow is bottom-up, and those lowest on the rungs are responsible for an exceptional amount of effort. Tales abound of investment analysts and associates working 80- to 100-hour weeks.

To put this in perspective, an 80-hour work week is the same as five consecutive 16-hour days or seven consecutive 11.5-hour days.

As noted, corporate finance jobs are difficult to lump together. According to the Bureau of Labor Statistics (BLS), roughly a third of financial analysts worked more than 40 hours per week in 2016. However, they generally travel less and receive more time off than investment bankers.

The finance industry is notorious for its long working hours and high demands of low-level employees. Neither job is ideal in terms of work/life balance, although investment banking is more demanding on average.

Occupational Outlook

The BLS expects finance positions to grow at a rate of 9% between 2016 and 2026 – slightly faster than the 7% growth expected for all occupations. Outlook for both fields is strong, although investment banking in traditional financial hubs has seen some competition for top-end prospects from private equity firms and Silicon Valley tech companies.

Which One to Choose

Corporate finance jobs aren’t easy to get, but they are far more plentiful and less competitive than investment banking jobs. Many individuals fall into corporate analyst positions after unsuccessfully applying to major investment banks, so it’s possible the decision could be made for you.

There are two overriding considerations for those debating a career in investment banking versus a career in corporate finance: workload and salary. The prestige and compensation for investment banking jobs are alluring to many and, for these individuals, intense working hours are a small hurdle to clear.

Others value their weekends, holidays and evenings enough to eschew investment banking. For these workers, corporate finance still offers an excellent career in business analytics and corporate culture.