A financial analyst who understands the current trends of the financial scenario can help your business grow. When you hire an analyst, look for qualities, such as analytical ability, decision-making power, communication skills, technological proficiency and attention to detail.
Differences Between a Financial Analyst and an Investment Banker
The first thing that comes to mind when you hear the terms financial analyst and investment banker are images of high-performing corporate personnel. Furthermore, the job holders of both these designations are professionals in the field of finance.
Even if you think these two designations are the same, it couldn't be far from the truth. The thing is that although there are certain superficial similarities between them, the job roles and expectations vastly differ.
Who Is a Financial Analyst?
Financial analysts are people in the financial services industry who conduct various research to make business recommendations for an individual or an organisation. For this purpose, they study recent events and changes related to market development, evaluate financial data etc. Moreover, they examine an organisation's financial documents and statements and chalk out economic models that explain how the performance will be in the future.
Furthermore, financial analysts monitor macroeconomic trends or focus only on specific sectors and industries which depend on their position. The role of a financial analyst requires mathematical prowess and good analytical power. Many large corporations, such as venture capital firms, investment firms, insurance companies, government agencies, private equity groups, etc., employ financial analysts due to the high value of their role.
There are 2 types of financial analysts, buy-side and sell-side.
Who Is an Investment Banker?
Investment banking is the division of banking that helps clients raise capital through securities and conducts complex monetary transactions. The word ‘investment banker’ is an umbrella term that includes entry-level bankers and experienced people of higher designations. They are professionals who support their clients in activities like raising capital, acquisitions, mergers, etc. They possess skills, such as expertise in the service industry, persuasion skills and analytical powers.
Organisations that opt for the corporate services of investment bankers range from established institutions to start-ups. In some cases, they even work for the government. Investment bankers are critical factors in the financial development of a business.
Investment Banker Vs Financial Analyst – What Are the Differences?
There are some key differences between a financial analyst and an investment banker in terms of the duties they perform and the skills they possess.
Here is a tabular comparison of their skills and job roles.
Parameters of Differences
Financial analysts usually research companies and industries to gain insight which influences investment decisions.
Investment bankers can analyse financial statements and identify potential acquisition targets.
Financial analysts provide organisations with the best financial course of action by researching demographic information about the client and market. They offer future projections regarding revenue and expenses to the client.
Investment bankers advise corporations about mergers and acquisitions. This helps them decide whether or not to buy a company or not. They assist people with high net worth with private equity transactions.
Financial analysts work in insurance companies, banks, pension funds etc.
Investment bankers offer their services to established organisations and even government agencies.
The salary of a financial analyst in India ranges from ₹2.1 lakh to ₹12 lakh per annum. Their average salary is ₹4.5 lakh per annum.
Investment bankers get between ₹2 lakh to ₹27 lakh per annum. ₹4 lakh is their average annual salary.
What Is the Role of a Financial Analyst?
Financial analysts play an essential part in providing information to the decision-makers at a company that will help them to manage assets successfully and increase revenue. An analyst's duties can be organisation specific and may vary depending on the role's requirements.
The job responsibilities of an analyst primarily include the following-
- Researching financial development of specific industries which includes business and economic trends.
- Understanding the needs of a company by collaborating with its management team.
- Evaluating opportunities for possible investments by analysing the financial statements of the client.
- Preparing financial reports that are easy to understand by translating financial data into detailed presentations.
- Staying up to date with the latest market trends, technologies and market conditions to deliver optimum results.
The tasks of an investment banker differ from that of an investment banker in several ways.
What Are the Roles of an Investment Banker?
Investment bankers often start their careers as analysts, eventually working in higher positions. In the advanced roles, they collect data, create financial models and advise an organisation's managing heads. An investment banker typically works in a fast-paced and demanding environment.
The work of an investment banker involves tasks, such as-
- IPO process- When a company conducts its Initial Public Offering (IPO), a banker acts as an intermediary, buys most of its stocks, and sells them in the public market.
- Book building- This is the process of determining an IPO's price from the bids the investors submit.
- Equity research- Bankers analyse market information to help investors make better decisions.
- Drafting prospectus- Making a document that contains details of an investment offering, including its risks and objectives.
- Issuing and selling securities- Investment bankers create and market tradable assets such as stocks, bonds, etc.
- Corporate restructuring- Providing clients consultations about how to rebuild their financial plan to generate more capital.
- Asset management- Controlling the assets of an individual or an organisation and helping them to make better financial decisions.
Now that the roles of an investment banker vs financial analyst have been discussed, here are the things that set them apart.
Financial Analyst Vs Investment Banker- Whom to Choose?
According to the National Centre of Financial Education (NCFE), only 27% of the total population in India is financially literate. Hence, opting for the services of professionals in the field of finance can be helpful if you want to manage your money efficiently.
The services of financial analysts are not just for the rich. If you are looking for promising investment opportunities for yourself or your business, consider hiring an analyst.
On the other hand, people avail of the services of an investment banker for a different reason. If you wish to sell your business, it can be a complex process that requires a lot of time. For this reason, you can hire an investment banker to reduce the hassles of that process and increase the chances of success.
Apart from the differences between a financial analyst and an investment banker, there are also certain similarities. Both roles require excellent analytical, mathematical and communication skills. However, investment bankers have additional knowledge of complex financial instruments.
Now that you know about the services they offer, you can opt for either of their services according to the needs of you and your business.
Frequently Asked Questions:-
Several small businesses, investment banking firms etc., hire the services of an investment banker. Some companies hire them permanently, while others do so on a freelance basis. Some of the leading organisations that hire investment bankers are Goldman Sachs, JP Morgan, Accenture, etc.
The money that an investment banker and a financial analyst may charge will depend on location, experience and market conditions. It will also change based on whether you want to avail of the services on a temporary or permanent basis.
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