Choose a Career: Investment Banking or Commercial Banking?

By Robert Half January 15, 2016 at 2:45pm

Considering what careers in banking might be right for you? Which is the right path for you — commercial banking or investment banking? This seems to be the million-dollar question for many financial professionals in the career planning phase. As you consider various careers in banking, it’s important to understand the key differences between these two sectors, which sometimes seem worlds apart.

Here are a few factors — types of employers, work duties and salary — that distinguish between careers in investment and commercial banking:

Types of employers and work

If you choose an accounting career in commercial banking, you’ll likely work for a bank branch or a bank’s corporate headquarters. Commercial banks offer customers and businesses an array of financial services, including checking and savings accounts, mortgage loans, auto loans, credit cards, IRAs and more for consumers. And for commercial businesses, banks will offer commercial loans, equipment financing, cash management, real estate financing and more.

At the branch level, financial professionals can choose from a variety of career options ranging from bank teller and retail loan officer to sales professional, operations specialist, trust officer, branch manager, commercial credit analyst and commercial banker. The most skilled financial professionals often land positions at the bank’s corporate headquarters, where they can expand into more complex areas, such as international trade finance, risk management, credit administration and investment management.

In comparison, investment banks act as intermediaries between corporations and investors. Because these companies often include a number of different divisions with varying responsibilities, there is a wide variety of career options within the investment banking sector.

Investment bankers facilitate the issuance of securities and make these securities available for investors to purchase. These professionals also offer investment advice to corporations and individual investors, handle mergers and acquisitions, and trade stocks, bonds and other securities.

Investment banking salaries

For some professionals, compensation is the primary driver behind their career planning. For the most part, professionals in investment banking careers negotiate a higher salary than those in commercial banking.

Expanding business for investment banking firms is prompting more hiring in that sector, according to Robert Half's latest Salary Guide. In-demand specialties include private equity accounting, hedge fund accounting, fund administration, trade clearance and settlement operations, asset management, and collateral and derivatives expertise.

Leading investment banks like Goldman Sachs, JPMorgan Chase and Bank of America said in Bloomberg Business they planned to increase salaries for junior bankers by at least 20 percent beginning in 2015.

Research from the Salary Guide shows a managing director or partner in investment banking can expect a salary range of $183,750 to $297,250, not including bonuses, in 2016, which is up 4.6 percent from the year before.

At the level of vice president, compensation also varies widely. Investment banking vice presidents earn a base salary of $139,500 to $204,750, according to the Salary Guide. Associates earn a base salary of $86,500 to $116,250, with the range for analysts in investment banking at $72,500 to $92,750, which is 4.6 percent higher than in 2015.

Visit our Salary Center for an up-to-date overview of the hiring environment and salary data for banking positions.

Commercial banking salaries

For commercial banking, there's a rebound, too. From small community institutions to national firms, banks are adding staff to handle relationship management, business development, credit analysis, and operations and compliance positions in the mortgage sector.  

Salaries vary greatly depending on the position and experience. Research from the Salary Guide shows a commercial lender with one to three years of experience can expect a starting salary in 2016 of $57,000 to $89,000, up 4.3 percent from 2015.

For a commercial lender with five or more years of experience, starting salary ranges between $95,750 and $150,000, according to Robert Half financial services executives. Most commercial lending positions offer annual bonuses that range from 20 to 50 percent of base salary. A private banker with five or more years of experience can expect a starting salary of $85,750 to $140,000, with bonus potential up to 50 percent of base salary.

It’s important to weigh all of these factors as you consider your career in banking. As you try to choose the right path — commercial or investment — think about which of these sectors most closely aligns with your long-term interests and goals.

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