Financial Analyst vs. Accountant: What’s the Difference? was originally published on uConnect External Content.
Both accountants and financial analysts exist at the intersection of data, finance, and business. These finance professionals analyze financial data to help clients, companies, and institutions make informed decisions. However, the main difference between a financial analyst vs. accountant is that financial analysts try to predict the future — they create models to determine future financial performance. On the other hand, accountants record and report past data, like completed transactions, and use that information to create budgets and complete tax forms.
What Are Financial Analysts?
Financial analysts use data analysis to fuel company decisions, particularly with raising capital and boosting profits. The most common type of financial analyst is a Chartered Financial Analyst (CFA). CFAs are experts in economics, investment management, and analysis.
The work of financial analysts “contributes to the efficiency and well-functioning of capital markets and has served to reduce poverty around the world,” says John Cunnison, CFA, chief investment officer at Baker Boyer.
To fully understand the breadth of a financial analyst’s work, Cunnison encourages us to consider a company analysis of Coca-Cola:
“The thorough analyst would need to consider commodity prices, consumer tastes and preferences, public policy and taxes, international trade and conflict, demographics, corporate management and decision making, technology and advances in manufacturing, and global economic growth.”
Some typical job duties for financial analysts include:
- Building financial models
- Forecasting finances based on specific metrics and variables
- Advising clients on investing decisions
- Researching companies to find potential initial public offering (IPO) opportunities or M&A options
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What Are Accountants?
Accountants are finance professionals who review, record, and report financial information for companies, institutions, individuals, and governments. Some accountants work for an accounting firm (like Deloitte or EY) where their clients are large businesses and institutions. Others work in-house, handling their employer-company’s finances exclusively.
“The main role of an accountant is to manage and analyze the financial data of a company for the purpose of reporting or decision-making,” says Arianna Washington, CPA and senior associate at PwC.
Accountants manage data that informs decisions like budget planning, marketing efforts, corporate restructuring, and hiring abilities.
Some common day-to-day responsibilities of an accountant include:
- Preparing tax returns
- Tracking a company’s profits and losses
- Forecasting financial performance based on different metrics
- Advising leadership teams on ways to improve budgets
- Identifying fraud
>>MORE: Learn more about accounting.
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Financial Analyst vs. Accountant Salaries
According to the U.S. Bureau of Labor Statistics (BLS), financial analysts have an average annual salary of $108,790. Analysts working in securities and investing activities (like investment banking) tend to earn more than other types of financial analysts. In fact, first-year analysts at Goldman Sachs reportedly earn a $110,000 base salary — that doesn’t include other forms of compensation analysts may be eligible for, like commission, stock options, and performance bonuses.
On the other hand, accountants and auditors earn an average of $86,740 per year, according to the BLS. In general, accountants working for financial institutions and insurance companies see higher salaries than those working in the government. However, with both financial analysts and accountants, pay depends heavily on experience level.
Experience LevelFinancial AnalystsAccountantsEarly Career ($69,300$55,400Average for All Experience Levels$75,500$58,800Experienced (>15 Years Experience)$112,400$93,600Estimates sourced from Glassdoor and rounded to the nearest hundred.
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How to Become an Accountant vs. Financial Analyst
You typically need at least a bachelor’s degree to become either a financial analyst or an accountant. Ultimately, accountants can come from practically any background. However, finance, economics, and business coursework can help build a foundation for accountants who go for certified public accountant (CPA) licenses.
Financial analysts often study finance, economics, or business in college — this coursework helps set them up for specific certifications, like the CFA designation.
For both careers, having advanced education, like a master’s degree, can make you more marketable, improve your ability to be promoted within your job, and make it easier to pass the exams for certifications.
Licensing and Certifications
Financial analysts who work directly with investment instruments, like stocks, bonds, and options, typically need licensing and certification from the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA). Many financial analysts choose to get a chartered financial analyst (CFA) designation, but there are other certification options for financial analysts:
- Financial risk manager (FRM) certification for risk analysts
- Certified international investment analyst (CIIA) designation for analysts working in Europe and Asia
- Certified financial planner (CFP) certification for analysts who give financial advice, especially in personal finance
Accountants often get CPA licenses; many big accounting firms require accountants to gain this certification.
“A CPA is a professional that has taken and passed all parts of the CPA exam and has fulfilled their state requirements, which typically include a year of work experience and the passing of an ethics course,” says Washington.
However, accountants can also choose to go into management accounting by getting a certified management accountant (CMA) certification. This designation shows a higher degree of financial management skills, making it a great option for those who work in-house at a company and want to take on a managerial role in the finance department.
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Both accountants and financial analysts need a mix of hard and soft skills, including:
- Analytical thinking
- Attention to detail
- Problem-solving skills
- Strong mathematical abilities
- Experience using Excel
Financial analysts need specialized skills in areas like:
- Financial models, like the capital asset pricing model (CAPM)
- Equity and debt capital markets
- Business valuation approaches
- Calculations and formulas, like calculating compound annual growth rates (CAGR)
>>MORE: See the skills investment bankers need for their resumes.
Accountants must have an in-depth understanding of the generally accepted accounting principles (GAAP) in addition to:
- Familiarity with financial statements, like cash flow statements
- Knowledge of local, state, and federal tax laws and regulations
- Experience using accounting-specific equations and formulas, like the accounting equation
>>MORE: Check out the most in-demand accounting skills.
Bottom Line: What’s the Difference?
Both accountants and financial analysts analyze financial data to help clients make informed decisions. However, accountants typically deal with past data, recording and reporting transactions and tracking budgets. On the other hand, analysts often handle future data, making predictions about a company’s performance using financial models.
While top-earning financial analysts at investment banks often see six-figure salaries early in their careers, becoming either an accountant or a different type of financial analyst can still be a lucrative career in finance.
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