Wealth Management vs Investment Banking: A Guide to Deciding Which Role is Right for You

Investment Banking vs. Wealth Management

Pursuing a career in either investing banking or wealth management is very competitive and usually attracts highly qualified candidates from leading universities. Deciding on which path is right for you depends on many different factors, including both qualitative and quantitative strengths and weaknesses. However, both roles can be very financially lucrative for the right candidate.

Regardless of role, both wealth management professionals and investment bankers must possess solid analytical skills, as well as excellent spoken and written communication abilities. While business degrees are not necessary, they certainly help. Wealth managers and investment bankers may also end up pursuing an MBA or the Chartered Financial Analyst (CFA) designation.

What is Wealth Management?

Wealth management is a bit of an umbrella term, including asset management or investment management. Essentially, wealth management professionals work closely with their clients (usually individual, high-net-worth investors) to understand their specific needs and goals and provide suitable solutions to meet the clients’ financial objectives.

Wealth management services include financial planning, growing an investment portfolio, tax planning, estate planning, and retirement planning.

What is Investment Banking?

In contrast to wealth management, an investment banker advises companies on mergers, acquisitions, divestitures, and raising capital.

As part of this, investment bankers prepare marketing materials if a company wants to be acquired, search for potential acquisition targets for a company that wants to grow, and works with companies on when and how to raise debt and equity capital.

Wealth Management Overview

Wealth management involves providing personalized investment advice to high-net-worth individuals (HNWIs — $1-10 million in investable assets) and ultra-high-net-worth individuals (UHNWIs — $10 million or more in investable assets). The goal of wealth management is to help clients achieve their specific financial goals while protecting their wealth.

Wealth managers work with clients to assess these goals, develop personalized investment strategies, and monitor and adjust client portfolios as needed. Wealth managers help clients grow and manage their wealth through a variety of investment vehicles, including stocks, bonds, mutual funds, and alternative investments such as private equity and hedge funds.

Required Skills for Wealth Management

Wealth management advisors must have strong analytical and problem-solving skills. They must be able to analyze complex financial data and develop creative investment strategies that meet their clients’ needs. They must also be able to communicate complex financial concepts to clients in a clear and concise manner and learn to engage with each client in the way that they want to be communicated with.

Wealth advisors need exceptional interpersonal skills. They must be able to build and maintain strong relationships with clients, as well as collaborate effectively with other professionals, such as investment bankers, portfolio managers, and even external attorneys or others outside of the financial services industry.

Investment Banking Overview

When most people think of investment banking, they typically think of M&A bankers working on various transactions. The M&A role involves working with clients to analyze and execute various transactions. This could involve advising clients on acquiring another company (which is known as a buy-side engagement) or advising the sale of the company itself (a sell-side engagement). M&A is a crucial focus to help clients achieve their strategic growth targets and potentially unlock additional value.

Required Skills for Investment Banking

Investment bankers must have an excellent grasp of financial analysis and valuation, and understand how to conduct due diligence. Negotiation skills are more important the further up you go at an investment bank, as is bringing in client business.

Strong communication and interpersonal skills are critical, as the banker will work closely with clients, potential buyers or sellers, lawyers, accountants, consultants and other potential stakeholders. Finally, attention to detail is of the utmost importance, as is the ability to work under pressure and meet tight deadlines.

Specific technical skill requirements include:

• Financial modeling
• Valuation
• M&A modeling
• LBO modeling
• General financial analysis

The personality of someone well suited for working in investment banking typically has the following character traits:

• Highly ambitious
• Competitive
• Detail oriented
• Quantitative
• Problem-solver
• Polished and presentable

Career Prospects in Wealth Management

Successful wealth managers typically have a secure and predictable career path. However, unlike investment banking, professionals will typically stay in the wealth management field. They may move up if part of a larger firm or potentially go into business for themselves.

Overall, private wealth management is not a place where you can expect to sit back and earn a steady six-figure salary; you need to build your book of clients as your compensation is ultimately driven by your volume of client assets under management (AUM).

Career Prospects in Investment Banking

Investment banking can be extremely profitable with generous incentives. However, due to the long hours and hectic pace, most investment bankers will leave the bank and take a role on the buy-side.

Private equity is a common exit path for investment bankers, given the focus on working on mergers and acquisitions (M&A) and leveraged buyout (LBO) transactions. Corporate development is another career path that investment banking analysts might consider. Corporate development is basically doing in-house M&A work for a corporation like Apple or Amazon.

Choosing Between Investment Banking and Wealth Management

Ultimately, whether investment banking or wealth management is right for you depends on what you enjoy, as well as your personality.

If you excel working in a hectic, fast-paced environment, and working on multi-million (or multi-billion) deals, then investment banking is a good fit.

If you prefer a better work-life balance, more client-facing interaction, and building a book of business, then wealth management would likely be a better career move.

Additional Resources

Thank you for reading CFI’s overview of Wealth Management vs Investment Banking. CFI is the official global provider of certification courses for aspiring investment banking and wealth management professionals. To learn more about career paths in wealth management and investment banking, please see these additional resources:

What is Financial Modeling?

Valuation Methods

Introduction to Financial Planning and Wealth Management: Industry and Careers

See all career resources

See all wealth management resources