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. Dig a little deeper, though, and you'll see that analysts and consultants focus on different areas and enjoy very different work schedules.
- 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 manager. They examine financial and nonfinancial 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.
Analysts 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 acquisitions (M&As) 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 MBAs. Many began their careers in banking or working with financial advising firms.
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 have joined a consulting firm; this type tends to be older and is able to lean back on a network of prior professional connections.
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; however, some majors provide a head start, such as finance, economics, accounting, math, business management, and statistics.
Each career path lends itself nicely to a reputable financial certification. 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.
Similarly, investment analysts frequently pursue a 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 can have four years of applicable work experience or a combination of work experience and education. 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.
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; however, the most lucrative independent consultants are normally former high-ranking financial professionals who, late in their careers, decided to offer advice to other businesses in their field.
The U.S. Bureau of Labor Statistics (BLS) periodically releases a jobs 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 BLS handbook, there were 492,100 financial analysts in the U.S. in 2020 (the latest data available), and the industry was expected to add an additional 31,300 by 2030. This is a projected 6% growth rate. As of this BLS report, the average salary is $83,660 per year.
The BLS did not release specific figures for financial consultants, probably because of the vague and generic nature of the job title; however, the BLS 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.
Overall, 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 2020 median pay for a financial analyst was $83,600. 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.
1. 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.
2. 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.