The Difference Between Financial Advisors And Financial Analysts

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The Difference Between Financial Advisors And Financial Analysts

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In the field of market analysis, investing, and financial planning, financial advisors and financial analysts play a key, but somewhat different roles. It is important for every field to have its experts, to have a trusted group that has been trained to understand the intricacies of complex systems, to have those to whom we can turn to when we need help with a situation or with anticipating the future. In the field of making money – perhaps the most important thing in our ever-globalizing world of free-market capitalism – financial analysts and financial advisors help both companies and individuals make choices with their money that will, in turn, lead them to greater profits and a more financially secure tomorrow.

A financial analyst will generally be employed by a bank, an investment firm, or an insurance company. Their main objective is to follow and analyze an assigned company’s financial workings – going over financial statements, expenses, tax rates, and the like – in order to develop an understanding of where the company makes and where the company loses money.

Then, from the data that a financial analyst collects, he can make projections and estimations of future growth and assess better ways of doing business in order to maximize profits while staying within the ever-important legal boundaries. Having knowledge of trends in the business is essential to weighing the causes and effects of a company’s current financial situation. With this data, analysts may make presentations to the clients of their employing firm who might be considering an investment in the company being followed by the analyst or issue reports and ratings on the company to be used by the general investing public. The training of a financial analyst – especially one who deals with exceedingly large corporations – is necessarily strict and time-consuming due to the impact that their research reports can have.

A financial advisor, on the other hand, is usually the term used for a personal consultant. Individuals seeking financial advice about what to do when they get married, or how to plan for when they retire, or what to do if they want to start up a college fund for their children, will go to a financial advisor in order to get his/her assessment of their current financial position and recommendations for the best possible way to plan for the future. Perhaps the most important thing a financial advisor can do – the thing that is hardest for an advisor to learn in any school – is condense and communicate their vast knowledge of finance and investment planning into layman’s terms for the everyday fellow with a wife and kids. Since they do not work as often with cutthroat business types, it is important for financial advisors to be charming and eloquent so that everyday individuals trust them with their money. After all, many financial advisors are self-employed and make their connections by good word of mouth, so being well-liked and well-spoken is a must.

The differences between financial advisors and financial analysts might not seem that big, but the next time you need some advice about how much money to put into your IRA, you’ll understand the distinction.