On the financial side, analysts are called upon to help the company, either the analyst's own employer or an external client, make investment decisions. The financial analyst studies financial data, attempting to spot trends and make forecasts. Typically, the analyst prepares periodic reports in which they recommend the company buy or sell certain securities. High-level financial analysts are even called upon to use financial models to determine if it is an auspicious time to sell the company.
Similarly, business analysts pore over company data and use their findings to help management make business decisions. This data, rather than being investment-related, involves the day-to-day operations of the business. Business analysts study strategy, business models, processes and workflows, and technical systems. They are called upon to spot inefficiencies and find opportunities for the company's operations to be streamlined and improved.
Like financial analysts, a business analyst can be internal, in which case they analyze data for their employer, or they may work for a firm hired by outside clients to conduct analyses.
Unlike attorneys or certified public accountants (CPAs), neither financial analysts nor business analysts are governed by a central regulatory authority that imposes hard-and-fast educational requirements. The individual firms doing the hiring determine how much education they require of potential analysts. In either career, most professionals carry at least a bachelor's degree, with a growing number having obtained master's degrees.
A business-related degree is helpful for either career, but rather than obtaining an overly broad bachelor's in business, certain specializations can put you on an easier path to a successful career as a financial analyst or business analyst. On the finance side, preferred college majors include finance, economics, and statistics. As an added bonus, a bachelor's degree in any of these fields, assuming a strong GPA and relevant work experience, should serve as a golden ticket into a competitive MBA program.
Students hoping to become business analysts can choose from many majors, including the aforementioned finance degrees, as well as management, accounting or, for those pursuing systems analysis, information technology. Again, a bachelor's degree is almost a given requirement, while a master's degree is becoming more of a necessity every year for aspiring business analysts.
It goes without saying that for an analyst position of any kind, strong analytical skills are a must. Whether a business analyst or financial analyst, a successful candidate must be capable of spotting trends and anomalies in piles of complex data and make proper inferences from those findings.
On the financial side, strong quantitative skills are equally important. Financial analysts do not need to be mathematicians since the advancement of computing technology has obviated the need for an analyst to solve complex math equations by hand. However, a successful financial analyst needs to be strong in areas such as statistics, and they must have a keen understanding of probability, trends, and distributions.
Business analysts should be good with numbers, but even more important, they need to be able to solve problems that arise from qualitative data. For example, an analyst might be assigned to examine a complicated flow chart and determine where a workflow process is convoluted or redundant. While this kind of task does not require mathematical proficiency, it necessitates strong reasoning skills and the use of logic.
Financial analysts and business analysts earn above-average incomes, even at the entry level, though neither career pays investment banking or corporate law salaries. That said, analysts typically do not work investment banking or corporate law hours. If you are willing to make less money than your contemporaries on Wall Street in exchange for a better work/life balance, a career as a financial or business analyst is worth considering.
According to the 2020 Robert Half Salary Guide for Accounting and Finance Professionals, the average salary for an entry-level financial analyst at a large firm is $53,250. However, bonuses and commissions could add as much as $50,000 to the analyst's base salary.
The average median salary for a business analyst is $69,784, plus bonuses. So, as you can see, income potential between the two careers is almost identical. Factors other than money, such as skill set and personality type, should be used to determine which career is a better fit.
The U.S. Bureau of Labor Statistics (BLS) expects 5% job growth for financial analysts from 2019 to 2029, as fast as expected job growth for all occupations. The BLS does not break out business analysts, but business analysis, by its nature, is a broader and larger field than the more focused financial analysis, meaning more jobs are available at any given time. However, the number of recent graduates seeking to become business analysts is also greater, making the level of competition between the two careers mostly a wash.
Which One to Choose
Between the two careers, income, average work hours and competition are all strikingly similar. You are likely to make between $50,000 and $60,000 per year starting out, work 40 to 50 hours per week, and face a favorable job market at least through 2029. These similarities can make choosing one over the other exceedingly difficult.
The biggest distinction between a financial analyst and a business analyst is that a financial analyst deals more with investments while a business analyst deals more with operations and management. It comes down to the field in which you feel more confident and knowledgeable.
For a student whose favorite class was statistics and loves working with numbers, becoming a financial analyst is a logical career move. On the other hand, a person naturally skilled at delegating tasks and making projects run as efficiently as possible should consider becoming a business analyst.