Advisory vs. Consulting: How Are They Different?

Many corporations and organizations across the world leverage the services of consultants or advisors to solve a wide array of problems. Consulting and advisory firms have shaped many decisions in our modern world. From helping governments navigate tricky situations like the coronavirus pandemic to aiding corporations in the pursuit of increased market share, these nuanced services represent a unique set of problem-solving skills.

But often, to an untrained eye – or even to someone already in these firms – telling the difference between advisory vs consulting is a challenge. Let’s discuss the differences between the two and the profile each is best suited to.

Differences Between Advisory and Consulting

A consultant typically solves specific, granular problems for clients that result in substantial impact. On the other hand, an advisor often has a longer-term involvement with the client, and depending on the expertise of the advisor, may be involved in a broader range of issues. When thinking about advisory vs. consulting and discussing the differences, let’s start with the profession of consulting.

Consulting

1. Role and Nature of Work

A consultant is not involved in the long-term operations of the client and is typically staffed in a team to solve a specifically defined problem for 3-6 months. The engagement can be longer if implementation of the defined strategy is a part of the scope.

Examples of the type of short-term work consultants do:

• • Defining a path to greater profitability (EBITDA)
  • Creating a market entry strategy to introduce an existing product in a new geography
  • Determining the root cause for a sudden drop in revenue and developing a strategy to reverse it
  • Identifying process optimizations to cut costs

As you can see, the objectives are well defined, the impact is quantifiable, and engagements are undertaken on a project-to-project basis. Top consulting firms generally vie to maintain long-term relationships with clients in the form of multiple shorter-term projects. This is a main reason that consulting firms have been on an acquisition spree lately, acquiring specialist boutique firms. If the strategy team at McKinsey identifies sustainability as a core strategic objective, the firm can sell a downstream project with subsidiary Material Economics, a sustainability focused firm that McKinsey just acquired.

Strategy firms are usually comprised of generalists – individuals who focus on problem-solving agnostic of industry or function. However, industry-specific firms are gaining market share. Clearview Healthcare Partners is one example – they perform projects across the value chain, but in the healthcare and life sciences space only.

2. Exit Opportunities

Exit opportunities for consultants are two-fold: either join a more prestigious consulting firm or leave to join industry at a more senior level. Consulting is like dog years – it allows you to skip steps on the career ladder compared to if you had started in industry in the first place. Therefore, a vast majority of exits are to industry, as opportunities there generally offer better pay, better lifestyle (AKA less travel) and the opportunity to own a P&L. A quick look at a roster of Fortune 1000 CEOs will tell you that consulting molds more C-level executives than almost any other industry.

Advisory

1. Role and Nature of Work

An advisor’s nature of involvement is usually long-term and specific to his/her industry expertise. Some advisory services used by clients are:

• • Tax advisor: optimizing the client’s tax liabilities
  • IT advisor: helping the client build and optimize their IT backbone
  • Communications advisor: advising the client on how to deal with day-to-day press events, public relations, or even internal memos

The nature of advisory work is not as project based. The overall objective for the advisor is to help the client achieve its long-term strategic goals through influencing day-to-day operations. Thus, an advisor develops deep relationships with clients.

Advisors are typically professionals who have years of experience in a particular industry. Their selling point isn’t a problem-solving approach, it’s subject matter expertise.

2. Exit Opportunities

Seniority often plays a key role in exit opportunities for advisors. While they can join their clients or another industry player, they will most often join an advisory organization as a senior SME (subject matter expert) overseeing the department in their expertise.

For most advisors, their current role is their exit opportunity. Their long-term career goal has been to leverage their expertise into a role advising multiple organizations while removing themselves from day-to-day operations.

Conclusion: Advisory vs Consulting

Consulting vs advisory isn’t a battle, as they’re two distinct service offerings. If you’re a young professional, focus on a career in consulting for the interesting project-based work and meaningful exit opportunities. Work with our expert team to prepare your resume and get ready for the rigorous interviews!

 

Additional Reading:

• What Do Consulting Firms Do?
• Consulting vs Internal Strategy
• Consulting Vs. Venture Capital
• Investment Banking Analyst: A Day in the Life vs. Consulting
• Consulting Resume: Complete Guide