Financial Analyst vs. Data Analyst: an Overview
If you are a student or young professional who is great with numbers, analytical, and an expert problem-solver, consider a career as either a financial analyst or data analyst. Financial analysts use financial data to spot trends and extrapolate into the future, helping their employers and clients make the best investing decisions. Businesses rely on financial analysts to determine when it is an auspicious time to buy or sell specific securities and, in some cases, companies use reports put together by financial analysts to determine if the entire business should be sold.
Data analysts perform a similar role, the primary distinction being that these professionals analyze data that may or may not relate to investing decisions. For example, a data analyst might study figures related to sales numbers, advertising efficacy, transportation costs, or wages versus productivity.
Ultimately, any piece of numerical data that could be used to make a business decision is potentially within the purview of a data analyst's job. While they are not as laser-focused on the financial markets as their counterparts in the financial analyst world, data analysts are still expected to maintain up-to-date knowledge on investing practices. Often, accessing and organizing necessary data in this role requires high-level computer skills, making an information technology background, or at least a working knowledge of the field, a definite plus for an aspiring data analyst.
Because the required education and skills, income potential, work/life balance, and competitiveness of the job market is similar between the two fields, subtle differences in personality type and skill set determine whether someone is better suited for a career as a financial analyst or data analyst.
Financial analysts tend to take a general perspective when undertaking their work. They review financial decisions based on current market trends, stated business objectives, and possible investment options of companies while also reviewing economic data and financial forecasts.
A degree in finance is probably most beneficial for aspiring financial analysts, although mathematics or economics could also suffice. A Master of Business Administration (MBA) may help for a financial analyst, but it is not always required. Financial analysts may also opt to pursue the highly selective Chartered Financial Analyst (CFA) title. Unlike the CPA, which is focused on a professional understanding of public accounting standards in the United States, the CFA is focused on those who actively make investment decisions on behalf of clients or an employer. This test is in 3 parts and administered and overseen by the CFA Institute.
Many financial analysts are also CPAs, and many accountants have a CFA designation. Having both titles is considered a major advantage for nearly any career in the business world and requires a significant mastery of business accounting and investment knowledge.
Financial analysts earned a median annual salary of $84,300 in 2017, the most recent figures as of February 2019. Top earners brought home nearly $115,000 and the lower rung made approximately $64,000, according to the Bureau of Labor Statistics. Financial analysts tend to earn the most in large financial hubs, such as New York City or San Francisco. Bridgeport, Connecticut is also a lucrative destination for analysts. Increased regulations and market complexity are driving the growth for financial analysts, particularly among larger firms with a lot of assets to manage.
Data analysts have a more narrow focus. They collect data and examine it to spot trends and glean information that can be used to make business decisions. In the information age, companies rely on big data more than ever to make decisions such as which customers to target, which products and services to focus on, which advertising methods to use, how many people to hire and for which positions, and new markets for expansion. For virtually any business decision, data is available to steer the company in the right direction. The role of the data analyst is to procure this data and draw conclusions the company can use to make decisions.
Data analysts are in demand everywhere. This is not an industry-specific role. Any company savvy enough to understand the importance of parsing data needs skilled data analysts. While data analysts command above-average salaries, the returns on investment (ROI) for companies who employ them are even more impressive. The trends spotted and information gleaned by data analysts often make their employers millions of dollars per year.
Students and young professionals who are quantitatively inclined, logic-driven, computer-savvy, good communicators, and who want to make an above-average income while working reasonable hours, should look into data analysis as a career choice. Industry analysts have named it one of the hottest career choices for the 2010s, with projections indicating the demand for data analysts should increase rapidly as more businesses get on board with the importance of harnessing big data.
The median yearly salary for a data analyst is $54,070, as of 2013. The median range, meaning the 25th to 75th percentile, is roughly $45,000 to $66,000. The fact that such a variety of companies in a variety of industries employ data analysts contributes to the wide salary range. The size of the company, the industry, the geographic location, the candidate's education, experience, and other factors combine to determine a data analyst's first-year salary.
Neither career imposes across-the-board, hard-and-fast educational requirements. This means there is no exam you have to pass, such as the bar exam or medical boards, before you can even legally practice the profession. Individual employers set their own requirements for new hires. Generally, the more competitive the job market for financial analysts and data analysts in your local area, the more rigid the standards.
In either profession, most new hires have obtained at least a bachelor's degree, with a master's degree becoming more standard with each passing year. The best college majors for a financial analyst are economics, finance, and statistics. Most large firms that hire financial analysts look for one of these three, and as an added bonus, these majors look great when applying for an MBA program, especially when combined with a competitive GPA and work experience.
For aspiring data analysts, a degree in statistics is a great place to start; even better, double up on your major and add information technology, computer information systems, or another up-to-date technology major offered by your school. When hiring a data analyst, employers want to see a healthy mix of quantitative acumen and computer literacy that goes beyond knowing how to input numbers into Excel. A bachelor's degree is not an official, but a de facto requirement, for data analysts, and a master's degree makes you much more competitive in the job market.
Financial analysts and data analysts should be great problem-solvers, excel at the use of logic, and possess strong skills in quantitative analysis. In addition, successful financial analysts have an in-depth understanding of various financial markets and investment products. For data analysts, it is helpful to maintain up-to-date computer skills and have at least a cursory understanding of some of the more common programming languages.
Strong people skills, leadership ability, and teamwork are beneficial for either career. A lot of financial and data analysis is done in teams, and analysts are expected to report their findings to various departments within the company in a clear, concise, and persuasive manner.
The U.S. Bureau of Labor Statistics (BLS) reports an optimistic outlook for financial analyst jobs between 2016 and 2026, with job growth projected at 11%. However, the BLS cautions: "Despite employment growth, competition is expected for financial analyst positions. Growth in financial services is projected to create new positions, but there are still far more people who would like to enter the occupation than there are jobs in the occupation. Having certifications and a graduate degree can significantly improve an applicant’s prospects."
The BLS did not break out the data analyst position in its latest forecasts, but the broader "financial specialist" job market is expected to experience 10% growth between 2016 and 2026, which is faster than the 7% growth expected across all occupations in the United States. In the near future at least, strong demand should exist for quantitatively inclined professionals who can cull pertinent information from large pools of data and use it to draw inferences and make forecasts.
Which One to Choose
These are both fine careers: Income potential is strong, the work hours, at an average of 40 to 45 per week, are not oppressive, and the job market is primed for growth. Distinctions between the two jobs are mostly nebulous, but the biggest difference is a financial analyst's daily duties are much more involved with the investment markets.
If you have a keen interest in investing and keeping up with Wall Street but want to steer clear of the powder keg environment of investment banking and trading, financial analysis is a career to consider. If, on the other hand, you like working with numbers but also enjoy computers and technology, you likely possess the skill set and interests needed to become a good data analyst.