The financial industry is teeming with openings for budding analytical minds and data miners – nearly 400,000 such jobs, according to the latest (July 2018) Bureau of Labor Statistics (BLS) figures. Among those are two of the more generic and misused titles in the industry: financial analyst and research analyst.
Financial firms in the United States don't really present a unified definition of either job. Some financial analysts are really just researchers who collect and organize market data, while others put together specific proposals for securities investments with large institutional clients. Similarly, some research analysts are glorified marketing specialists, while others apply socioeconomic or political insights and are probably better classified as management consultants.
It's possible to narrow the differences between research analysts and financial analysts. Generally speaking, financial analysts focus on analyzing investments and their market performance. They rely on a fundamental understanding of business valuation and economic principles to create reports and make recommendations; they are the behind-the-scenes experts. Research analysts occupy a less prescriptive role than financial analysts. Instead of looking through the lens of broad economic principles, they focus more on mathematical models to produce objective answers about historical data.
Financial analysts collect and analyze data but always within the context of a prior deductive understanding of how markets should function. Their thinking is systemic and, particularly at more senior levels, subjective. Research analysts tend to be operations-focused. Give a research analyst a series of inputs, and he can calculate the most efficient way to maximize output. If the research analyst works in the securities business, it's likely that recommendations may be made based on some predetermined criteria.
Education and Skills
Research analysts can be found everywhere and in any industry, not just the financial sector. Nearly any academic background could viably serve a prospective researcher, as long as the researcher has the requisite technical, mathematical and analytical skills.
One specific subset of research analysts, the market research analyst, used to be more unique to the investment industry. All that has changed, and today, investors, banks and manufacturers employ market research analysts to break down what consumer data says about markets. This requires a great deal of statistical knowledge, computer skills and at least a general understanding of economics.
Financial analysts are much more specialized, but that doesn't mean there isn't a huge variety of them as well. Almost all financial analysts start out with at least a bachelor's degree in finance, economics, mathematics or accounting. Many employers prefer a candidate have some form of professional certification, such as a Chartered Financial Analyst (CFA) designation or a Master of Business Administration (MBA).
If a financial analyst performs investment advisory services, such as recommending stocks, bonds or insurance products, then he is likely required to carry the appropriate professional licenses. This can include taking the Series 7 or Series 65 exams or state exams for life insurance and health insurance licenses.
Data from the U.S Department of Labor found the 2017 median salary for a market research analyst to be $63,230 per year. For financial analysts, the annual median salary was $84,300.
There are many different kinds of analysts in each field, so any single average salary is more of a statistical accident than a predictive indicator. Top financial analysts for major investment firms can easily earn two or three times the $84,300 average, while entry-level analysts for smaller operations can expect $45,000 to $50,000 in compensation.
Investment research analysts can earn more than $100,000 at major banks, but more representative salaries for other research analysts tend to fall between $50,000 and $70,000 per year.
Work / Life Balance
Few white-collar industries receive as bad a rap for work/life balance as the financial industry. The standard image of Wall Street conjures busy suits who are missing dinner with their families while they pore over reports in their lofty offices.
This image is more or less accurate for a select few research and financial analysts, but not for most. Recent research suggests that approximately one-third of financial analysts report working more than 70 hours per week, but 50 hours per week is far more likely. Market research analysts work similar hours, if not fewer.
These jobs aren't as demanding (and don't pay as much) as private equity jobs or investment banking jobs. It's standard for an analyst to receive 20 or more days a year in paid time off, at least one day off on weekends and time out of the office on holidays.
Work hours tend to increase as an analyst's work draws closer and closer to New York, London or Tokyo. Investment bankers and other high-level financial professionals rely on analysts for support. For analysts eyeing an eventual transition to buy-side banking, working in a major money hub helps a great deal with networking.
The BLS is bullish on future job prospects for financial analysts. It predicts an 11% growth in financial analyst jobs in the 10 years from 2016 and 2026 – on par with the financial industry as a whole and a little faster than expectations for the broader economy.
BLS statistics are even rosier for research analysts; projected growth over the same period is an astounding 23%. According to the Bureau's findings, "Employment growth will be driven by an increasing use of data and market research across all industries. [Analysts] will be needed to help understand the needs and wants of customers, measure the effectiveness of marketing and business strategies, and identify the factors affecting product demand."
The Bottom Line
Financial analysts are less mathematically focused and more subjective than research analysts. They spend more time looking at broader economic trends and a little less time manipulating mounds of data. In contrast, research analysis work is better for true data scientists who don't like to make abstract recommendations based on incomplete information.
While the growth rate for research analyst positions is bigger, financial analysts start out making a higher median salary and probably have more room to advance within the finance world, which should be two positive signals for the ambitious types. Even so, each career is a strong choice for aspiring analysts, especially for those who enjoy a supporting role.