At first glance, financial analysts and financial consultants perform very similar jobs. Both are experts in financial, economic, and investment matters, and both help other professionals make more informed money decisions. But if you dig a little deeper, though, you'll see that analysts and consultants focus on different areas and enjoy very different work schedules. This article highlights some of the key differences between these two financial positions and what it takes to become a financial analyst and a financial consultant.
- The roles of financial analysts and financial consultants may seem blurred but they're distinct from one another.
- Financial analysts research other companies' financial statements, market trends, tax returns, and investments.
- Financial consultants are outside contractors who work to provide advice and improve the financial condition of an individual company.
- While financial consultants have potentially greater incomes, financial analysts may enjoy a greater degree of work/life balance.
- Financial consultants need to travel for work quite often while financial analysts rarely leave the office.
A financial analyst often works for an investment bank or asset management company. These professionals examine financial and non-financial information, micro and macroeconomic data, and other variables to evaluate the financial health of a company. They frequently use this analysis to make a recommendation about the company that they analyze, such as to buy or sell a stock.
Given the fact that they help make important investment decisions, analysts must have excellent math and analytical skills, and they should be comfortable working within a team-focused environment. Most start out at a junior level and assist a senior team member while gaining work experience.
While financial analysts focus on evaluating external companies, financial consultants provide internally-focused financial advice to corporations. A financial consultant helps a business increase shareholder value and improve capital efficiency.
Their job may be to help put a mergers and acquisition (M&A) package together or design a compensation strategy for company executives. Many consultants work within the corporate finance division of a business. Others may work independently or within third-party consulting firms.
It is also important to note that many personal financial advisors refer to themselves as financial consultants. These consultants focus on individuals, not businesses, and are not the kinds of consultants addressed here.
What Type of Education and Skills Are Needed?
A lot of analysts and consultants study economics or finance in undergraduate school, and many go on to earn their master of business administration (MBA). Many begin their careers in banking or working with financial advising firms. Each career path lends itself nicely to a reputable financial certification. Here's a quick look at what's needed to become each.
Analysts frequently pursue the Chartered Financial Analyst (CFA) designation. In order to become a CFA candidate and enroll in the first of three exams, applicants must either have a bachelor's degree or be in the last year of a bachelor's degree program.
Alternatively, applicants must demonstrate 4,000 hours of applicable work experience or a combination of work experience and education. This requirement must be obtained over at least three sequential years before they register for the first level's exam.
In order to receive the CFA designation, the applicant must pass all three levels of the exam and have at least four years of applicable work experience.
Consultants come from a variety of career paths, but there are two broad types of consultant backgrounds:
- A contractor usually works independently and on short-term projects for much of their early professional life.
- Other consultants join consulting firms. This type tends to be older and is able to lean back on a network of prior professional connections.
After a consultant has three years of full-time business experience, along with 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 of college credit in the field.
A specific major is not required to enter either of these professions right out of college as much of the knowledge required is learned on the job. Keep in mind, though, that some majors provide a head start, such as finance, economics, accounting, math, business management, and statistics.
What Types of Jobs Are Available?
Analysts are often divided into buy-side or sell-side positions, or else they work for large banks. A buy-side analyst researches investments for his firm, often for an in-house fund. A sell-side analyst provides research and makes recommendations (often to buy-side firms) or works to help promote certain investments.
An investment banking analyst is a different kind of job entirely. These analysts use models and predictive forecasts in support of senior partners for venture capital deals, stock valuations, or other institutional decisions. Some even act like financial consultants and make recommendations for initial public offerings (IPOs) or M&A transactions.
Independent consultants tend to have variable incomes and the most lucrative independent consultants are normally former high-ranking financial professionals. These individuals often decide to advise other businesses later in their careers.
The Bureau of Labor Statistics (BLS) periodically releases a report called the Occupational Outlook Handbook. In this report, the BLS outlines the average salary, required experience, and projected future demand for any number of common jobs in the United States.
According to the latest figures from the BLS handbook, there were 373,800 financial analysts in the U.S. in 2021 and the industry was expected to add an additional 31,900 in the decade between 2021 and 2031. This is a projected 9% growth rate, which is faster than average. The median annual salary for professionals in this category was $95,570 as of 2021.
The BLS does not release specific figures for financial consultants, probably because of the vague and generic nature of the job title. But the agency notes that business and financial occupations are expected to increase more quickly than the average.
Comparing Work/Life Balance
Except at the most senior levels, financial analysts tend to work standard 40- to 50-hour weeks, with time off during the weekends and normal vacation packages. The hours on the job tend to be very busy and even intense, but there is still ample time left over during the week for family, friends, and recreation.
This is rarely the case with financial consultants, particularly those who work for major firms as associates. Many junior-level consultants report working 70 hours a week or longer, which means 11+ hour days and a six-day workweek. Consultants also tend to travel a lot and experience extended time away from home.
The COVID-19 pandemic did cause hiccups in business travel for the financial services sector. This was one of the first things to be reduced as many companies looked to cut costs following the pandemic. Changes were also made to the overall work environment. In fact, many financial services companies implemented work-from-home policies once lockdowns were lifted, with as many as 69% of them allowing employees to work from home at least once a week.
The financial industry is well-known (even infamous) for its long hours and rigorous job demands. There is some evidence that major financial institutions are trying to curb workloads and reduce burnout among their employees, but most aspiring financial professionals should be prepared for many extra hours at their workstations.
Is There More Money in Finance or Consulting?
Depending on the specific job one has in finance or consulting will determine whether their salary is higher or not than the other. In investment banking, one of the highest-paid jobs in finance, employees earn approximately 30% to 40% more than management consultants. That being said, investment bankers work approximately 50% more hours than consultants.
What Does a Financial Consultant Do?
Financial consultants help companies understand and improve their financial situations. They break down how a company operates, determine where its strengths and weaknesses lie, and how to improve upon areas, such as inventory management, cost control, cash flow management, and productivity.
Are Financial Analysts Rich?
Financial analysts are well-paid. According to the BLS, the 2021 median pay for a financial analyst was $95,570. This can be higher or lower depending on the job location, specific job requirements, and company. As a financial analyst's career grows, they can earn more, setting them up to live a comfortable life.
The Bottom Line
An aspiring financial professional who is torn between a career as a financial analyst and one as a financial consultant should focus on the two areas where these careers are most distinct.
The first is work/life balance and compensation. Broadly speaking, financial consultants have a greater earning potential, but they also tend to work longer hours and spend more time away on business travel. Financial analysts tend to have steadier jobs and less stressful careers.
The second consideration is the type of investment analysis that each job performs. Big-picture thinkers who want to perform research at a macro level find it more suitable to work as analysts. On the other hand, those who love company fundamentals and capital management probably feel more at home in consultancy roles.