Financial Analyst versus Investment Banker

Financial analysts (sometimes called “equity research analysts”) work for a variety of businesses, including investment banks. They are normally experts in markets, economics, accounting and compliance. These are the ultimate support members on a financial team, spending their days poring over data and preparing reports for other, less analytical departments. Before a business makes a major financial or investment decision, management often consults its financial analysts to identify trends or run projections. Think of financial analysts as future-focused accountants with sophisticated modeling techniques.

Investment bankers are the movers and shakers in the institutional world. They play a key role in underwriting new issues of stocks or developing mergers and acquisitions (M&As) strategies. It’s up to the investment bankers to evaluate companies and time the market to make the biggest profits for their firms or clients. Life as an investment banker is characterized by uneven bursts of activity followed by times of calm or even boredom. Unlike financial analysts, investment bankers are directly responsible for generating revenues and pulling the trigger on investment decisions.

Education and Skills

A minimum of a bachelor’s degree in a field such as economics, finance, mathematics or accounting is an absolute must for financial analysts or investment bankers. However, competition for these positions is notoriously steep; it may be a good idea to enter business school and earn a Master of Business Administration (MBA) to bolster your résumé.

Both careers are deeply analytical, and applicants are highly scrutinized for their ability to perform research, think critically and problem solve. Many seek out securities licenses such as the FINRA Series 7 or Series 63 to demonstrate an understanding of financial markets and investment products. (Note: Taking a FINRA exam requires sponsorship from a FINRA member firm or a self-regulatory organization (SRO).

Analysts and bankers must communicate with other departments every single day, so it’s also important to demonstrate the ability to handle interpersonal (and sometimes impersonal) communications in a dynamic work environment. There are going to be a lot of conference calls, meetings, emergency emails and quick-turnaround projects for either profession.

Financial analysts should probably consider pursuing a certified public accountant (CPA) or chartered financial analyst (CFA) designation to bolster their credentials, particularly if they want to advance up the ladder. An investment banker can begin as a low-level analyst with just a Bachelor’s degree, but investment banking associates should either have three to four years of experience or an MBA.

It takes a lot of stamina and the ability to handle stress to be a career investment banker. Firms expect their hires to hit the ground running and show a lot of initiative, but perhaps more than anything else, they expect them to put in a lot of hours.

Salary

These are both high-level and high-earning jobs, even at entry-level spots. According to 2016 Bureau of Labor Statistics data, the mean salary for a financial analyst was $81,760 per year. The top 10% of analysts earned more than $125,000 per year, and senior analysts at top firms can pull in more than $175,000.

Financial analysts who don’t work for major financial institutions, especially sell-side analysts, don’t earn quite as much but normally still start out in the $45,000 to $60,000 range.

Investment bankers are among the highest-earning professionals in the business community, especially at entry- and mid-level positions. Major banks in New York City often offer $75,000 or more to first-year bankers along with a signing bonus that can add another $25,000. Senior bankers and vice presidents commonly earn more than $250,000 per year.

Work/Life Balance

The financial industry is notorious for offering an inequitable work / life balance to employees. This can be problematic for some financial analysts, but it is perhaps most true for investment bankers.

A study in 2013 suggested that one in three financial analysts worked at least 70 hours per week during their first year on the job. Other estimates place the typical analyst week at 55 hours, but note that financial analysts still receive 20+ paid vacation days per year and rarely have to go into the office on weekends.

Put simply, work life can be very tough for investment bankers, especially associates and other junior-level staff. It is not uncommon for investment bankers to work 80+ hours a week (roughly six 13.5-hour work days) or to always be available via phone or email, even during early morning hours on weekends or vacations.

Except for those who truly do live for their work, the edge in this category goes to financial analysts.

Occupational Outlook

According to the Occupational Outlook Handbook released by the Bureau of Labor Statistics (BLS), the U.S. economy is expected to add an additional 32,100 financial analyst positions between 2016 and 2026. This represents an 11% increase over the decade, which is faster than average for all professions. The BLS credits increased complexity in financial markets and a growing industry for its projected growth.

The BLS does not offer comparable statistics for investment bankers, but the same dynamics that drive growth for analysts should drive growth for investment bankers.

Which One to Choose

Financial analysts and investment bankers often attract similar candidates, but they are really best suited for different individuals.

Financial analysts serve more like accountants than traders, and this job is best for those who like a consistent workflow and a life away from the office. Investment banking is a career for ambitious people who thrive under pressure and don’t mind the long hours. Eventually, investment bankers spend a great deal of time communicating with clients and making crucial decisions for the firm.

Analysts get to spend much more time digging through the actual data and creating models for other members of the team. This kind of work may sound perfect for some workers or very boring to others, so much depends on your individual temperament and work pace.