How to Decide Between Investment Banking and Commercial Banking

Many banking professionals begin the career planning phase by taking some time to figure out whether they want to pursue commercial banking or investment banking. While both career paths can reap great rewards, each comes with a different set of responsibilities and skills. Here is a breakdown of some of the factors that separate careers in investment and commercial banking to consider.

Employers and Types of Jobs

Investment banks help to expedite the purchase and sales of bonds, stocks, and other investments. They assist companies in making initial public offerings (IPOs) and act as a liaison between corporations and investors.

Career options are much more varied with investment banking because they are often composed of so many different divisions, but investment banking jobs generally help to facilitate the issuance of securities and make them available to investors. Investment bankers also offer advice to investors and corporations, handle mergers and acquisitions, and trade stocks, bonds, and other securities.

Commercial banking jobs are primarily at a bank branch or at a bank's corporate headquarters. The nature of commercial banking work is mainly offering customers a number of different financial services, such as the ability to open and manage different types of accounts, take out loans on homes or vehicles, open credit cards, set up retirement accounts, etc.

Commercial banks can also offer businesses a variety of services, such as commercial loans, financing for equipment or real estate, and help with asset management.

If you choose to work at a bank branch, jobs could include working as a retail loan officer, an operations specialist, a branch manager, a credit analyst, a sales professional, or a commercial banker. A little higher up the totem pole would be a position at the bank's corporate headquarters, where a banking career might mean a role in international trade finance, risk management, investment management, or credit administration.

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Investment Banking Salary

In addition to having a firm grasp of what each job requires of you, it's also important to be aware of the typical salary different types of finance professionals receive. Generally, investment bankers tend to bring in a higher salary than those in commercial banking--in fact, it's one of the best-paid fields in the business sector.

The specialties that are in the highest demand, such as private equity accounting, hedge fund accounting, fund administration, and asset management, can usually negotiate a higher salary. A typical investment banking salary for a managing director can range from $180,000 to $300,000. Analysts could expect their salary to be in the range of $72,000 to $93,000.

Commercial Banking Salary

Salaries for commercial banking can vary greatly. A commercial lender with a few years of experience can expect a starting salary between $57,000 and $89,000, and that figure is expected to grow with the demand on banks to add staff to handle relationship management and business development.

Private bankers with more than five years of experience can expect a salary of $85,000 to $140,000. Keep in mind that bonuses can often be as much as 50 percent of your base salary.

Work/Life Balance

On the whole, commercial bankers have a more relaxed work life than investment bankers. They tend to work standard hours and have more flexibility when it comes to time off. It's not unusual for investment bankers to work 65-75 hours a week and tack on extra time for related research. It can be a strenuous career, but the salary reflects the added work.

If you're pursuing a banking career, it's a good idea to consider the nature and amount of work you'd like to take on and the differences in salary before deciding on whether you plan to work with a commercial bank or an investment bank. By planning ahead, you can be sure you're heading down the right path and into a rewarding and lucrative career.