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What is an Advisor?
The Difference between Financial Advisors and Financial Analysts
by Chris Parry (Write for us!)
(Click on the links within the article to get definition of that word)
In the field of market analysis, investing, and financial
planning, financial advisors and financial analysts
play key, but somewhat different roles. It is important for every field to have its experts, to have a trusted
group which 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-marketcapitalism -
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 investmentfirm, or an insurancecompany.
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 issuereports 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.
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