Financial advisers and financial analysts perform essential yet different functions in the field of market analysis. Financial advisers give financial advice to their clients, help them save and build investment portfolios, and help others feel more confident and comfortable with their financial decisions. They are often employed by advisory or planning firms, though they may also work for themselves.
Financial analysts research financial statements, market trends, tax returns and investments. They advise businesses and provide consultations. While analysts often provide investment advice, they do so in a different manner than financial advisers.
Education and Skills
A college degree is likely a minimum qualification for any financial adviser or financial analyst position. Most firms are probably looking for advanced degrees, licenses and other professional designations. For example, a financial adviser can be expected to have the best opportunities if he or she is a Certified Financial Planner (CFP).
A degree in finance or economics is helpful for aspiring financial advisers; it is crucial for aspiring financial analysts. Both careers require an effective blend of interpersonal skills along with analytical problem-solving abilities. Financial advisers and analysts are required to explain complex financial concepts and products to clients or investors. For each position – but particularly for a financial adviser – self-confidence is a desirable trait.
Financial analysts and financial advisers should consider pursuing a Chartered Financial Analyst (CFA) designation. Sponsored by the CFA Institute, an applicant must have a bachelor's degree and three years of work experience in a related field. Other useful qualifications include the title of Chartered Financial Consultant (ChFC) and various securities licenses as required by the Financial Industry Regulatory Authority (FINRA).
There is not a tremendous difference in average pay between advisers and analysts, but there is a sizable difference in variance. Each job earns more than the average salary for Americans in every state. Among business occupations, advisers and analysts tend to earn more than insurance agents and compliance officers, but less than sales managers or marketing managers.
According to Payscale.com, the median salary for financial advisers in the United States, as of December 2017, is $58,539, but commissions can range from roughly $5,000 to $200,000 or more.
For financial analysts, the median salary is $58,509. While analysts generally have fewer profit sharing, bonus or commission opportunities, these additional sources of income could add as much as $50,000 to the analyst's base salary.
The salary for financial analysts is more stable in two key aspects. First, there is a significantly greater concentration of financial analysts around the mean salary for the occupation; in other words, there are fewer outliers. Financial adviser incomes are far more spread out.
Analysts have a more stable salary because they tend to earn a larger base salary, with the opportunity to receive bonuses on top. Financial advisers largely earn little to no base salary and instead work off of commissions and fees. The month-to-month income of an analyst has a lower ceiling and a higher floor than an adviser. (This is especially true among self-employed financial advisers.)
Perhaps the greatest difference between these two jobs centers around work-life balance. Most financial analysts follow the same general structure: long, intense hours with a predictable schedule and a steady workflow. Senior analysts may have to work off hours if they are responsible for managing a large company's or client's assets. Analysts also tend to work in teams, often supporting other departments or organizations in their work efforts.
Some financial analysts travel frequently, often to visit companies or talk to potential investors, which can be difficult for those with families but exciting for those who enjoy being on the move.
Financial advisers, on the other hand, experience a much wider variety of work schedules. Nearly a quarter of financial advisers are self-employed, according to the Bureau of Labor Statistics (BLS). Work schedules often center around the availability of client, which can mean large time commitments to weekends and evenings, especially early in the adviser's career.
Whereas senior analysts are more likely to take on extra hours and responsibilities, senior advisers normally work less later in their career. Once the client base has solidified and a structure has been established, many successful financial advisers work sub-40 hour weeks; it can just be a long, hard struggle to reach that point.
The ever-increasing complexity and regulatory interference in the world of finance means that financial analysts and financial advisers aren't going anywhere soon. The BLS expects 11% job growth for financial analysts from 2016 to 2026, and 14% job growth for financial advisers. This compares to 7% expected job growth for all occupations.
Financial advisers should also receive a boon from the aging population, which is living longer and spending more years in retirement. Additionally, younger workers are changing jobs more frequently and have a great need to roll over old retirement accounts.
Financial analysts are the go-to experts to help insurance companies, mutual fund companies, and other entities that require investment and market research. Competition for these analyst jobs is expected to be strong, which places even greater emphasis on qualifications and relevant work experience.
Most financial analyst positions are separated into buy-side or sell-side roles, each with a different outlook. A buy-side analyst develops strategies for entities with a lot of investment capital. These can include institutional investors, mutual funds or non-profits. Sell-side analysts offer support to companies or departments that sell investment vehicles, such as stocks, bonds and insurance. Buy-side analysts tend to make more money, work more intense hours and are more likely to travel.
Which One to Choose
It is more difficult to break into the financial analyst profession. Most analysts start out in a junior position and work under a senior team member for years before reaching an average salary. However, financial advisers may find it more difficult to survive once they have found a job.
Turnover is relatively low for financial analysts and relatively high for financial advisers. The financial adviser career path starts out much like an insurance agent: The adviser must find clients and build a book of business. This often involves cold calling and plenty of networking. A lot of hyper-analytical types don't enjoy this constant interpersonal salesmanship. However, ambitious individuals who don't mind the social aspects can earn a tremendous living as advisers.
Financial analysts' days are filled with research, meetings, conference calls and a lot of time in front of a computer. This is the better occupation for dedicated researchers who don't mind having a lot of responsibilities handed off to them in a short period of time, or those who don't want to perform the client acquisition duties of a financial adviser.