Financial Analysts VS Financial Consultants: An Overview
At first glance, financial analysts and financial consultants perform very similar functions. Both act as financial, economic and investment experts, and help other professionals make more informed financial decisions. Dig a little deeper, though, and you’ll see that analysts and consultants focus on different things and enjoy very different work schedules.
Key points to remember
- Financial analysts research other companies’ financial statements, market trends, income statements and investments.
- Financial consultants are external contractors who work to provide advice and improve the financial situation of an individual business.
- While financial consultants have potentially higher earnings, financial analysts can benefit from a better work/life balance.
A financial analyst often works for an investment bank or asset manager. They examine financial and non-financial information, micro and macroeconomic data, and other variables to assess a company’s financial health. They frequently use this analysis to make a recommendation on the company they are analyzing, for example to buy or sell a stock.
Analysts must be comfortable working in a team-oriented environment. Most start at a junior level and support a senior team member while gaining work experience.
While financial analysts focus on external business valuation, financial consultants provide internal financial advice to companies. A financial consultant helps a company increase shareholder value and improve capital efficiency. Their job might be to help set up a mergers and acquisitions (M&A) package or design a compensation strategy for the company’s executives. Many consultants work within the corporate finance division of a company. Others may work independently or through third-party consulting firms.
It is also important to note that many personal financial advisors refer to themselves as “financial advisors”. These consultants focus on individuals, not businesses, and are not the types of consultants discussed here.
What kind of education and skills are needed?
Many analysts and consultants study economics or finance at the undergraduate level, and many earn an MBA. Many started their careers in banking or in financial consulting firms.
Consultants come from a variety of career paths, but there are two broad types of consultant paths. An entrepreneur typically works independently and on short-term projects for much of their early working life. Other consultants joined a consulting firm; this type tends to be older and can rely on a network of previous professional connections.
Every career path lends itself well to a reputable financial certification. After a consultant has three years of full-time business experience, as well as at least a bachelor’s degree, they may be eligible to enroll in a course for the Chartered Financial Consultant (ChFC) designation, which requires nine college-level courses or 27 hours. college credit in the field.Inasmuch asInasmuch as
Similarly, investment analysts frequently pursue a Chartered Financial Analyst (CFA) designation. To become a candidate for the CFA and register for the first of three exams, candidates must either have a bachelor’s degree or be in the final year of a bachelor’s degree program. Alternatively, applicants may have four years of applicable work experience or a combination of work experience and education. In order to receive the CFA designation, the candidate must pass all three levels of the exam and have at least four years of applicable work experience.Inasmuch asInasmuch as
What types of jobs are available?
Analysts are often divided into buying or selling positions, or they work for large banks. A buy-side analyst seeks investments for his company, often for an internal fund. A sell-side analyst provides research and makes recommendations (often to buy-side firms) or works to help promote certain investments.Inasmuch asInasmuch as
An investment banking analyst is a different type of work. These analysts use models and predictive forecasts in support of senior partners for venture capital transactions, stock valuations or other institutional decisions. Some even act as financial consultants and make recommendations for initial public offerings (IPOs) or M&A transactions.
Independent consultants generally have variable income. However, the most lucrative independent consultants are usually former high-ranking finance professionals who, late in their careers, decided to advise other companies in their field.
United States Bureau of Labor Statistics (BLS) periodically publishes a report on jobs called the Occupational Outlook Handbook. In this report, the BLS outlines the average salary, required experience, and projected future demand for a number of common jobs in the United States.Inasmuch asInasmuch as
According to the BLS handbook, there were 329,500 financial analysts in the United States in 2018, and the industry was expected to add another 20,300 by 2028. This is an expected growth rate of 6%. According to this BLS report, the average salary is $ 85,660 a year.Inasmuch asInasmuch as
The BLS has not released specific numbers for financial consultants, likely due to the vague and generic nature of the job title. However, the BLS notes that business and finance occupations are expected to grow faster than average.
Compare Work / Personal Life Balance
Except at the most senior levels, financial analysts tend to work 40-50 hour weeks, with weekends off and normal vacation packages. Work hours tend to be very busy and even intense, but there is still plenty of time during the week for family, friends and hobbies.Inasmuch asInasmuch as
This is rarely the case with financial consultants, especially those who work for large corporations as partners. Many junior-level consultants report working 65 hours a week or more, which means over 11 hours a day and a six-day work week. Consultants also tend to travel a lot and spend long periods of time away from home. It’s not uncommon for young consultants to make six figures but actually make less than $30 an hour.
Overall, the financial industry is well known (even infamous) for its long working hours and rigorous job requirements. There is evidence that major financial institutions are trying to reduce the workload and the workload of their employees, but most future finance professionals should be prepared to spend many overtime at work.
Choose between careers
An aspiring finance professional torn between a career as a financial analyst and a career as a financial consultant should focus on the two areas where these careers are most distinct.
1. Work / personal balance and remuneration: Generally speaking, financial consultants have greater earning potential, but they also tend to work longer hours and spend more time on business trips. Financial analysts tend to have more stable jobs and less stressful careers.
2. The type of investment analysis that each task performs: Large-scale thinkers who want to research at the macro level find it more appropriate to work as analysts. In contrast, those who enjoy business fundamentals and capital management are likely to feel more comfortable in advisory roles.