Investment banking versus law: an overview
investment bank and law are popular career paths for ambitious young people who want the chance to earn a good salary right out of college. Since these career paths draw from the same vast pool of talent, many students have initial difficulty choosing between the two.
On the one hand, investment banking requires fewer years of study, which for many students translates into fewer student debt. On the other hand, law is a broader field and the paths open to young lawyers are more numerous than those of investment bankers.
Key points to remember
- Of the two careers, investment banking requires greater quantitative insight and mathematical skills.
- The educational requirements to become a lawyer are much more rigid than those to become an investment banker.
- Employment in law and investment banking is expected to increase between 2020 and 2030, according to the BLS.
Investment banking has less stringent training requirements. However, most companies require, at a minimum, a four-year degree. Investment banks recruit almost exclusively from top universities, such as Ivy League schools and the University of Chicago. Students who want to become investment bankers but attend less prestigious schools can improve their chances by earning a Master of Business Administration (MBA)preferably from an elite program.
Investment banking and law require many of the same skills, such as a strong work ethic. Recruits in either field can expect to face long hours and demanding superiors during their first few years. First-year turnover is high for these reasons. But hang in there and the rewards down the road can be immense.
Undergraduates who want to start making money immediately without spending three years in law school and racking up more student debt should look to investment banking. This is especially true if you are good at math. If your school isn’t considered elite, it’s hard to get your foot in the door. Obtaining an MBA greatly increases your chances.
Of the two career paths, investment banking requires greater quantitative acumen. Math geeks and numbers buffs alike should head in this direction. If you struggle with math and frequently make mistakes when calculating large numbers, be careful. Careless mistakes in the world of investment banking cost companies billions and sometimes cost investment bankers their jobs.
The educational requirements to become a lawyer are much stricter than those required to become a lawyer. investment banker. An aspiring lawyer must earn a bachelor’s degree and then attend law school – there’s no getting around that. Obtaining a law degree, for the vast majority of students, requires at least seven years of post-secondary education.
After law school, you must pass your state’s bar exam before you can practice law. While the test can be daunting, the first-attempt pass rate was 69% in 2018, the most recent figures as of Aug. 6, 2022, according to the National Conference of Bar Examiners.
Brilliant students who have prepared sufficiently should take the test with the confidence that they will pass. Because law is such a broad field, the skills required vary depending on the type of law you practice. Litigators must be persuasive, aggressive, energetic and quick-witted. Successful corporate lawyers are focused, thorough, and exceptional critical thinkers. Practicing international law requires being bilingual or multilingual, as well as the ability to understand and assimilate into various cultures.
According to Bureau of Labor Statistics (BLS)as of August 6, 2022, employment of lawyers is expected to grow by 9% between 2020 and 2030, about as fast as the average for all occupations. Law is a great choice for students who are open to furthering their education and want more avenues early in their career.
Getting into law school doesn’t require an undergraduate degree from an elite school; it is more important to have a strong GPA and perform well on the LSAT.
Example of corporate law vs investment banking
Expect work to dominate the early years of your life in either career. Investment bankers work an average of 70 to 90 hours a week during their first year. This includes almost every Saturday and many Sundays. Vacation days are rare, and leaving the office at 5 p.m. is a fantasy. Although working hours become more manageable as you gain seniority, investment banking is never a 9 to 5 job.
Corporate law follows a similar schedule, with long hours and lots of weekend work. The field of law, being vast, offers career paths with more traditional 40-hour workweeks, such as working in the local public defender’s office. These jobs, however, fall far short of the lucrative starting salaries you find in corporate law.
Investment bankers make big money right out of school with a bachelor’s degree. In 2020, a first-year analyst earns between $99,000 and $150,000 a year, according to Wall Street Oasis, largely thanks to aggressive bonus structures almost all companies pay; the average salary is $99,000 and the average bonus is $51,000. The better you are at your job, the more you earn as an investment banker.
A lawyer’s starting salary covers a wide range based on the area of law. Company law is considered the most lucrativeespecially for new associates, who, as of 2019, the most recent April 2020 figures, earned a median salary of $155,000 in their first year out of law school, according to the National Association for Law Placement (NALP).
Your position on this spectrum largely depends on the company and region of the country in which you work. For example, the NALP said in 2019, the most recent numbers as of June 2019, that first-year attorneys in markets like New York, Los Angeles, and Washington, DC, could earn $190,000 a year.
For young lawyers who avoid the corporate law route, the starting salary is harder to pin down. Litigators, for example, can earn six figures in the first year if they quickly develop an excellent reputation and have a warm and expansive market. Others take much longer to build a customer base and struggling to pay the bills at first.
Employment of securities, commodities and financial services sales agents, which is the category in which the BLS places investment bankers, is projected to grow 4% from 2020 to 2030, slightly below average of all professions. However, the BLS noted, “The services provided by investment bankers, such as assistance with IPOs and mergers and acquisitions, will continue to be in demand as the economy expands.”
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