Corporate Finance vs. Investment Banking: Which Career is Right for You?
What’s the Difference?
You should know that in a general sense, these two fields aren't all that different. Investment banks raise capital, or money, for other companies through securities operations. Investment bankers also facilitate mergers and acquisitions (M&A), advise clients, and delve into the area of financial analysis.
Corporate finance is a more generic term, in that it simply refers to the practice of managing financial activities on behalf of a firm. Investment banking might even qualify as a type of corporate finance. An investment banking firm might have a corporate finance division, so there can be some area of overlap.
Perhaps the easiest way to understand these two specializations is by looking at the day-to-day work of professionals in both domains. For example, corporate finance is concerned with the daily financial operations as well as short- and long-term business goals. For the most part, an investment banker spends his or her time raising capital, running private placements, and conducting M&A deals. You can think about it in these terms: an investment banker grows a company, and a corporate finance professional manages a company.
Landing an investment banking job is no small feat, as it’s considered one of the most elite fields in the financial industry. Most professionals attend a prestigious undergraduate program (finance economics or related discipline) then enter the workforce as an analyst. Another common route is to expand education with an MBA and attempt to break in that way.
What does “breaking in” look like? The positions can run the gamut: individuals might land jobs as accountants, advisors, account managers, analysts, treasurers, business analysts, or any number of other jobs.
The barriers to entry in corporate finance careers are less significant, however. A relevant degree and work experience, like an internship or co-op, can position a candidate for success.
Dollars & Cents
Investment banking careers are financially rewarding for those who make the cut. According to Mergers and Inquisitions, entry-level salaries are in the $60-$70K range, with potential future earnings reaching six and even seven figures. So, what about those in corporate finance? It's challenging to provide an accurate range for the average corporate finance salary because there are too many different kinds of jobs available. However, for the sake of comparison, the national average salary for a corporate finance analyst is $65,690. Suffice it to say that financial analysts stand to out-earn their corporate finance peers. An investment banker salary is among the highest in the world for those right out of school.
The future is bright for those who wish to pursue a career in finance. According to the Bureau of Labor Statistics, “Employment of business and financial operations occupations is projected to grow 9 percent from 2016 to 2026, about as fast as the average for all occupations, adding about 750,400 new jobs.” The BLS cites globalization, a growing economy, and increasing government regulations as factors that will create a strong demand for analysts.
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