Financial analysts and personal financial advisors provide analysis and guidance to businesses and individuals in making investment decisions. Both types of specialists gather financial information, analyze it, and make recommendations. However, their job duties differ because of the type of investment information they provide and their relationships with investors.
Financial analysts assess the economic performance of companies and industries for firms and institutions with money to invest. Also called securities analysts and investment analysts, they work for investment banks, insurance companies, mutual and pension funds, securities firms, the business media, and other businesses, helping them make investment decisions or recommendations. Financial analysts read company financial statements and analyze commodity prices, sales, costs, expenses, and tax rates in order to determine a company's value and to project its future earnings. They often meet with company officials to gain a better insight into the firm's prospects and to determine its managerial effectiveness.
Financial analysts can usually be divided into two basic types: those who work on the buy side and those who work on the sell side. Analysts on the buy side work for companies that have a great deal of money to invest. These companies, called institutional investors, include mutual funds, hedge funds, insurance companies , independent money managers, and charitable organizations, such as universities and hospitals, with large endowments. Buy side financial analysts work to devise investment strategies for a company's portfolio. Conversely, analysts on the sell side help securities dealers to sell their products. These companies include investment banks and securities firms. The business media also hire financial advisors that are supposed to be impartial, and as such occupy a role somewhere in the middle.
Financial analysts generally focus on a specific industry, region, or type of product. For example, an analyst may focus on the utilities industry, Latin America, or the options market. Firms with larger research departments may divide the work even further so their analysts can maintain sharp focus. Within their areas of specialty, analysts assess current trends in business practices, products, and competition. They must keep abreast of new regulations or policies that may affect the investments they are watching and monitor the economy to determine its effect on earnings. Some experienced analysts called portfolio managers supervise a team of analysts and help guide a company in selecting the right mix of products, industries, and regions for their investment portfolio. Others who manage mutual funds or hedge funds perform a similar role and are generally called fund managers. Other analysts, called risk managers, analyze portfolio decisions and determine how to maximize profits through diversification and hedging.
Some financial analysts, called ratings analysts, evaluate the ability of companies or governments that issue bonds to repay their debts. On the basis of their evaluation, a management team assigns a rating to a company's or government's bonds, which helps them to decide whether to include them in a portfolio. Other financial analysts perform budget, cost, and credit analysis as part of their responsibilities.
Financial analysts use spreadsheet and statistical software packages to analyze financial data, spot trends, and develop forecasts. Analysts also use the data they find to measure the financial risks associated with making a particular investment decision. On the basis of their results, they write reports and make presentations, usually with recommendations to buy or sell particular investments.
Personal financial advisors assess the financial needs of individuals. Advisors use their knowledge of investments, tax laws, and insurance to recommend financial options to individuals. They help them to identify and plan to meet short- and long-term goals. Planners help clients with retirement and estate planning, funding the college education of children, and general investment choices. Many also provide tax advice or sell life insurance. Although most planners offer advice on a wide range of topics, some specialize in areas such as retirement and estate planning or risk management.
Personal financial advisors usually work with many clients, and they often must find their own customers. Many personal financial advisors spend a great deal of their time making sales calls and marketing their services. Many advisors also meet potential clients by giving seminars or lectures or through business and social contacts. Finding clients and building a customer base is one of the most important aspects of becoming successful as a financial advisor.
Financial advisors begin work with a client by setting up a consultation. This is usually an in-person meeting where the advisor obtains as much information as possible about the client's finances and goals. The advisor then develops a comprehensive financial plan that identifies problem areas, makes recommendations for improvement, and selects appropriate investments compatible with the client's goals, attitude toward risk, and expectation or need for a return on the investment. Sometimes this plan is written, but more often it is in the form of verbal advice. Advisors sometimes meet with accountants or legal professionals for help.
Financial advisors usually meet with established clients at least once a year to update them on potential investments and adjust their financial plan to any life changes—such as marriage, disability, or retirement. Financial advisors also answer clients' questions regarding changes in benefit plans or the consequences of a change in their jobs or careers. Financial planners must educate their clients about risks and various possible scenarios so that the clients don't harbor unrealistic expectations.
Most personal financial advisors buy and sell financial products, such as securities and life insurance. Fees and commissions from the purchase and sale of securities and life insurance plans are one of the major sources of income for most personal financial advisors.
Private bankers or wealth managers are personal financial advisors who work for people who have a lot of money to invest. While most investors are simply saving for retirement or their children's college education, these individuals have large amounts of capital and often use the returns on their investments as a major source of income. Because they have so much capital, these clients resemble institutional investors and approach investing differently from the general public. Private bankers manage portfolios for these individuals using the resources of the bank, including teams of financial analysts, accountants, lawyers, and other professionals. Private bankers sell these services to wealthy individuals, generally spending most of their time working with a small number of clients. Unlike most personal financial advisors, private bankers meet with their clients regularly to keep them abreast of financial matters; they often have the responsibility of directly managing customers' finances.
Work environment. Financial analysts and personal financial advisors usually work in offices or their own homes. Financial analysts may work long hours, travel frequently to visit companies or potential investors, and face the pressure of deadlines. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.
Personal financial advisors usually work standard business hours, but they also schedule meetings with clients in the evenings or on weekends. Many also teach evening classes or hold seminars in order to bring in more clients. Some personal financial advisors spend a fair amount of their time traveling, usually to attend conferences and training sessions, but also occasionally to visit clients.
Private bankers also generally work during standard business hours, but because they work so closely with their clients, they may have to be available outside normal hours upon request.
| 1. | Sell financial products such as stocks, bonds, mutual funds, and insurance if licensed to do so. |
| 2. | Build and maintain client bases, keeping current client plans up-to-date and recruiting new clients on an ongoing basis. |
| 3. | Analyze financial information obtained from clients to determine strategies for meeting clients' financial objectives. |
| 4. | Answer clients' questions about the purposes and details of financial plans and strategies. |
| 5. | Review clients' accounts and plans regularly to determine whether life changes, economic changes, or financial performance indicate a need for plan reassessment. |
| 6. | Interview clients to determine their current income, expenses, insurance coverage, tax status, financial objectives, risk tolerance, and other information needed to develop a financial plan. |
| 7. | Recommend strategies clients can use to achieve their financial goals and objectives, including specific recommendations in such areas as cash management, insurance coverage, and investment planning. |
| 8. | Implement financial planning recommendations, or refer clients to someone who can assist them with plan implementation. |
| 9. | Research and investigate available investment opportunities to determine whether they fit into financial plans. |
| 10. | Explain and document for clients the types of services that are to be provided, and the responsibilities to be taken by the personal financial advisor. |
| 11. | Monitor financial market trends to ensure that plans are effective, and to identify any necessary updates. |
| 12. | Prepare and interpret for clients information such as investment performance reports, financial document summaries, and income projections. |
| 13. | Guide clients in the gathering of information such as bank account records, income tax returns, life and disability insurance records, pension plan information, and wills. |
| 14. | Contact clients periodically to determine if there have been changes in their financial status. |
| 15. | Meet with clients' other advisors, including attorneys, accountants, trust officers, and investment bankers, to fully understand clients' financial goals and circumstances. |
| 16. | Devise debt liquidation plans that include payoff priorities and timelines. |
| 17. | Open accounts for clients, and disburse funds from account to creditors as agents for clients. |
| 18. | Conduct seminars and workshops on financial planning topics such as retirement planning, estate planning, and the evaluation of severance packages. |
| 19. | Determine amounts of aid to be granted to students, considering such factors as funds available, extent of demand, and financial needs. |
| 20. | Explain to individuals and groups the details of financial assistance available to college and university students, such as loans, grants, and scholarships. |
| 21. | Collect information from students to determine their eligibility for specific financial aid programs. |
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