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Financial Analyst vs. Financial Adviser: Definitions and Differences

October 14, 2021

Financial analysts and financial advisers are both professionals in the field of finance who help others strive toward financial goals. Though there are some similarities between the two, they're distinct professions, each with its own focus and approaches. If you're interested in a career as either a financial analyst or a financial adviser, it's important to understand what each profession entails and how it differs from the other. In this article, we define the roles of a financial analyst and a financial adviser and examine some of the major differences between them.

Related: 12 High-Paying Jobs in Finance

What is a financial analyst?

A financial analyst is a finance professional who evaluates financial data in a field of specialty and uses their findings to guide the financial decisions of clients. Their analyses often relate to investments. They examine and evaluate investment opportunities, informing clients on what stocks, bonds and other investment vehicles may generate the most profit. Aside from an advisory role, financial analysts also study micro- and macroeconomic factors such as financial statements, historical financial data, economic trends and business trends.

There are two main categories of financial analysts: sell-side analysts and buy-side analysts. Sell-side analysts help their clients valuate and sell their investment products, whereas buy-side analysts devise investment strategies for institutional investors—organizations that look to invest their money, such as insurance companies, hedge funds, private equity firms and nonprofits. There are also various specializations in financial analysis, including but not limited to:

  • Financial risk analyst: A financial risk analyst works to manage and minimize risks to their client's investments. They're responsible for portfolio diversification and giving recommendations to mitigate financial loss.

  • Fund manager: A fund manager manages hedge funds or mutual funds—money pooled from various sources for the purpose of investment.

  • Portfolio manager: A portfolio manager selects the various investment products and vehicles in their client's portfolio. They aim to select a diverse range of investments to minimize risk and maximize profit.

  • Securities analyst: A securities analyst analyzes markets and trends relating to securities—financial instruments for raising capital. They may refer to publications and resources such as economic forecasts stock quotes to identify and recommend securities to their clients.

Read more: Learn About Being a Financial Analyst

What is a financial adviser?

A financial adviser is a financial expert who provides financial guidance to clients. They are often independent practitioners who work with individuals in a fiduciary capacity, meaning they have a duty to put the needs and interests of their clients ahead of their own. After consulting with a client about their goals and evaluating their financial health, they educate the client about options and create a plan. If, for example, the client wants to save for retirement, the adviser might recommend minimum yearly savings and various investments over a specific period to help realize this goal. Other activities may include:

  • Answering questions about financial concepts and terms
  • Educating the client about financial risks
  • Educating the client about issues relating to tax or insurance
  • Researching potential investment opportunities
  • Selecting investment products for the client, with their authorization
  • Creating investment reports or otherwise updating the client about developments relating to the financial plan
  • Overseeing the client's accounts
  • Recommending adjustments to financial activities adjust for circumstances that may hinder the realization of the client's financial goals

Some financial advisers work for institutions and primarily work with wealthy individuals. Private bankers are a type of financial adviser whose primary responsibility is managing the investments of high-net-worth individuals. Such advisers often work together with other financial professionals, including financial analysts and accountants, to yield optimal returns for their clients.

Read more: Learn About Being a Financial Advisor

Financial analyst vs. financial adviser

Both financial analysts and financial advisers help clients to realize financial goals, but there are some important differences between them, including how and with whom they apply their services. The following are some of the major and minor points of difference between these two financial professions:

Focus

Analysts and advisers help their clients realize their goals in slightly different ways. Financial analysis is more of a research-based profession. Analysts examine both the financial health of their clients and broader financial factors in the economy, and they base their recommendations on these findings. Financial advisers perform more of a client-centered relationship management function. They look first at the goals of their client and base their advice on the client's needs and capabilities.

Work environment

Financial analysts and financial advisers often work in different areas of the financial sector. In terms of institutions, financial firms are the primary employers for both, but the U.S. Bureau of Labor Statistics (BLS) shows that financial advisers are more likely than analysts to be self-employed, with 20% of the profession being independent. Therefore, they're also more likely to participate in activities such as seminars and networking events to attract additional clients.

The differences in work environments contribute to the work-life balance. Financial analysts are more likely to have a predictable 40-hour schedule and consistent workload. In contrast, financial advisers, particularly independent agents early in their careers, can expect varying work schedules. It's not uncommon for advisers to work longer than 40 hours per week, particularly if they travel to meet clients or attend events.

Related: 11 Benefits of Self-Employment

Salary

There's some difference in earning potential between these two professions, which may be significant to some. The average yearly salary for financial analysts is $67,624 per year. Earning potential may increase with experience, as analysts with over 10 years of experience report an average salary of $79,804. In contrast, the average base salary for financial advisers is $72,995 per year. Experience may substantially improve earnings, as financial advisers with greater than 10 years of experience report an average salary of $104.478.

Payment

In addition to how much they're paid, analysts and advisers are often paid in different ways. Financial analysts generally earn a salary from their employer. Advisers employed by financial firms also earn salaries, but those who are self-employed may earn based on fees or commissions. For example, they may enter an agreement with a client to be paid an hourly wage or a percentage of the total assets.

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