What is the Difference Between a Financial Analyst and an Accountant?
Financial analysts and accountants play an important role in the world of business. Both professionals spend their working days looking at numbers and figures, examining budgetary matters such as revenue and expense reports, and making important calculations vital to a company’s survival.
On the surface, it may appear as though there are hardly any differences between a financial analyst and an accountant, but their daily responsibilities, roles, and overall objectives are surprisingly distinct. The following list is a great start to understanding those distinctions, but it should be noted that this list is not complete. There may be many more differences between the two that are not mentioned here.
The job duties of a financial analyst are largely directed towards achieving one goal; i.e., to ensure a company’s financial wellbeing, security, and overall success in both the near and distant future. Overseeing the big picture, financial analysts review spending and revenue projections, develop budgets, manage financial documents and records keeping, and meet with higher-ups and company executives to advise them as they make important financial decisions. They may also select and update the computer software that a company uses to keep track of its monetary movements.
Other financial analysts specialize in predicting whether current and/or pending investment opportunities will result in financial gain or loss. In order to do so, they analyze stock fluctuations, market trends, and other large quantities of data to determine how a company should utilize its resources. They may also design highly detailed simulations to forecast the outcomes of certain financial situations such as the acquisition of another company or a corporate merger.
In addition to performing their usual duties as a financial analyst, some might also serve as managers by supervising other employees. Various types of managerial duties would include assigning tasks, organizing employees into teams when faced with large projects, hiring and training new employees, recommending promotions and raises, mediating disputes amongst coworkers, and carrying out disciplinary responsibilities.
As opposed to a financial analyst whose primary concern is with the future, the job duties of an accountant are focused upon the past. Although some of their tasks may involve current and/or ongoing financial matters, an accountant spends most of his or her time evaluating financial transactions that have already occurred. Some of these duties might include organizing a company’s accounts, reviewing financial documents, and analyzing records both to identify errors and areas of unnecessary spending as a way to cut costs and increase profits.
Just as there are different types of financial analysts, there are also a variety of specialties from which accountants may choose. For example, forensic accountants coordinate with the IRS, FBI, attorneys at law, and other authorities to help identify and prosecute financial crimes such as money laundering, illegal loans and debt activities, and/or credit fraud.
Keeping track of transactions, financial accountants prepare reports containing large quantities of data which are then interpreted by financial analysts. Ultimately, these reports are used to develop and revise working budgets, assess a company’s present state of financial affairs, and determine what types of changes and decisions should be made for improvements in the future.
Most commonly performed by accountants are all the duties associated with tax law and taxation. Tax accountants comb through a company or individual’s history of transactions for expenses that can be written off and claimed during tax time.
Financial analysts usually work for large corporations as they have such a large number of expenses and investments that require concentrated oversight on a full-time basis. Within these organizations, financial analysts work 40 to 50 hours every week and perform their daily tasks within a typical office environment.
While some may work in a cubicle-like setting, most financial analysts enjoy the luxury and comfort of having his or her own office. Many are required to travel a substantial amount of time in order to meet with important clients or explore and finalize potentially lucrative investment opportunities.
From large corporations and small companies to law firms and private individuals, accountants can work for a wide variety of different types of employers. In fact, many accountants even work for themselves. Like financial analysts, accountants also work around 40 to 50 hours a week. However, those who specialize in tax accounting may work up to 70 hours per week during tax season, which typically runs from February through the end of April.
Usually an office environment, most accountants work amongst other accounting employees in cubicles. Attending professional accounting conferences and seminars and/or to conduct audits, some accountants do occasionally travel for work. However, accountants typically do not travel as frequently as financial analysts.
In order to become a financial analyst, candidates should first have their high school diploma or GED. Although there is technically no formal educational requirement, aspiring financial analysts should also have a four-year bachelor’s degree in some type of finance-related study such as economics, statistics, global finance, or accounting.
However, in addition to a bachelor’s, most employers will not even consider applicants who do not also hold a master’s degree. While candidates may earn a master’s in any finance related field, experts agree that earning a Master of Business Administration or MBA is the best way for a candidate to secure employment — especially if his or her ultimate goal is to work for an investment bank.
As it is true for most professions, an aspiring financial analyst will require further education and certification past earning a bachelor’s degree and even a MBA. Accredited through the Chartered Financial Analyst Institute, the most widely acknowledged certification is known as CFA, which qualifies applicants to advise clients throughout the difficult decision making processes of investing. This exam is only administered a few times a year, but studying for the CFA often becomes a full-time job in and of itself.
Aspiring accountants must first hold a high school diploma or GED and then earn their four-year bachelor’s degree. While some employers may hire accountants with a bachelor’s in finance, economics, or business, the majority favor applicants whose undergraduate education is strictly in accounting. Like a financial analyst, a master’s degree is not technically required to become an accountant. However, it is becoming more and more common that companies prefer accounting applicants to also hold either a MBA or a master’s in accounting or finance.
Also similar to financial analysts, aspiring accountants should earn additional certification past their bachelor’s and master’s degrees. Accredited through the American Institute of Certified Public Accountants, the CPA is currently the most popular and commonly accepted certification that candidates should seek to obtain. Resembling the CFA, which typically is pursued by financial analysts, the CPA is only administered a few times a year — and studying for the exam is likewise a full-time endeavor. However, once the CFA is earned, an accountant is then professionally recognized as an expert of United States accounting law and procedures.
There are other types of accreditations which accountants make choose to pursue such as becoming a certified management accountant; or, for those who aspire employment with the IRS, these individuals can become certified in internal auditing or information systems auditing.
While on average financial analysts earn a significant amount more than most accountants, there is still quite a bit of variability within the field. The Bureau of Labor Statistics reports that the median salary for financial analysts in 2014 was $78,620 per year, and that number grew to $84,760 in 2017. The highest paid financial analysts saw their income reach well over six figures, pulling in $165,580 in 2017. The BLS also predicts that those numbers will continue to increase by 11% along with financial analysts’ overall job outlook.
In 2017, the BLS reported that $69,350 was the median salary for accountants. While the highest earning accountants did manage to break six figures that same year, bringing in $120,910, this amount is nearly $45,000 less than those top earners in financial analysis. The lowest earning accountants worked in auditing, pulling in a median salary of $43,020 in 2016. However, identical to financial analysts, accountants should expect to see an 10% growth in their job outlook by 2026, which according to the BLS, is above average compared to most professions.