Data Analyst vs. Financial Analyst: What’s the Difference?

Data analytics and financial analytics are two growing careers with more and more people looking to break into the field. Although they share many common skills and tasks, their core purpose is different. Understanding the difference between these two roles will help you find out which one is best for you.

The chief difference between a financial analyst and a data analyst is that financial analysts deal primarily with the investment markets—it’s more of a business-oriented job. On the contrary, data analysts may handle various tasks, which may or may not include finance—it’s more technical.

There are many similarities and differences between these positions. In this article, we’ll discuss what these roles are, their qualifications, skills, responsibilities, and considerations to help you figure out what suits you best.

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Who Is a Financial Analyst?

A financial analyst collects and organizes the financial information of an organization. They analyze this data to make future predictions and recommendations to the company. This is the usual job of a financial analyst, though they perform a wide variety of other tasks. They work for banks, investment firms, investment banks, KPOs, and individual companies. 

Simply put, a financial analyst analyzes financial data and helps organizations make better business decisions. Their primary task is to prepare financial models that can predict the results of certain business decisions. They need to collect large amounts of financial information and prepare a report that considers the current marketing trends and extrapolates into the future.

Financial analysts don’t always analyze bond or stock markets or help their company make investments. Businesses also hire them to analyze numerical data and determine the cost-effectiveness of different marketing techniques. They must keep themselves updated with current developments in their field of specialization.

You can work as a junior or senior financial analyst within an organization. A junior analyst will mostly spend their time gathering data and maintaining spreadsheets. On the contrary, more senior analysts develop investment theses, recommend ideas and investment opportunities to management teams and investors. 

Buy-side analysts work for institutional investors like pension funds or mutual funds. They research and make recommendations to the fund managers. On the other hand, sell-side analysts work for a firm or brokerage that manages individual accounts. They make recommendations to the firm’s clients.

Who Is a Data Analyst?

We’ve seen that a financial analyst’s job revolves around using financial data to help their clients and employers make the best investment decisions. Data analysts perform a similar role. They gather, process, and analyze large amounts of data to draw meaningful conclusions from it. However, the chief distinction is that their work may or may not be related to finance or investment decisions.

In today’s age, organizations rely on data to make business decisions like which customers to target, which new market is suitable for expansion, and which social media platforms to focus on. Data is always available, and it can be used to help companies move in the right direction. A data analyst’s job is to collect this information, spot trends, and draw conclusions that the business may use to make big decisions.

Data analysts decipher the data language and report their findings in non-technical English. Their job is to explain what differences in numbers mean when viewed from month to month, year to year, or across different departments. They may also advise department heads and project managers using insights from the data they analyzed.

Data analytics is not limited to any specific industry. Any company that realizes the importance of parsing data can hire a data analyst to work for them. Regardless of the industry, they work in; data analysts spend their time collecting information and compiling their findings into a report that the stakeholders can use to make business decisions. 

It’s one of the hottest careers as of now, and projections indicate that the demand for skilled data analysts will only increase rapidly in the coming years.

Education Qualifications

Many high-level careers have strict education requirements. However, neither of these two positions have any hard-and-fast qualifications. You don’t have to pass any exam, like the medical boards or bar exam, to legally practice these professions. No official minimum education requirement exists for these jobs.

Usually, the rigidity of education standards depends on the competitiveness of the job market for these positions. A bachelor’s degree is a de facto requirement for landing a job as a data or financial analyst. However, a master’s degree is becoming more standard day by day. Let’s look at some academic paths for becoming a financial analyst or data analyst.

Financial Analyst

If you want to get into financial analytics, a degree in finance, economics, or statistics is preferred. Most large companies hiring financial analysts look for one of these college majors. You can even major in math and accounting, or engineering, and biology. These degrees are especially attractive if you want to specialize as an analyst in any of these fields.

Usually, big banks and firms recruit people from renowned universities, like Princeton and Harvard. If you have a degree from a less prestigious institute, you can increase your employment chances by getting an MBA from a reputable business institute. MBA graduates are recruited directly from college as senior financial analysts.

Another thing you can do to increase your chances of advancement is to get a certification. For example, suppose you have a bachelor’s degree and four years of qualified work experience. In that case, you can acquire the highly selective Chartered Financial Analyst (CFA) certification from the CFA Institute by passing three exams. You’ll then have the CFA title, which is considered a significant advantage in the financial analytics industry.

Data Analyst

If your dream is to become a data analyst, getting a degree in statistics is a step in the right direction. You may also major in computer science, mathematics, information technology, or economics. Of course, you can also get the best of both worlds by doubling up your major and studying one of these subjects along with statistics.

Data analyst position requires a healthy mix of computer knowledge and quantitative skills. As we’ve said, a bachelor’s degree is a de facto requirement. So if you want to land an entry-level job, a simple bachelor’s degree from a reputable university will do. However, getting a master’s in data science or business analytics will make you much more competitive in the job market.

Skills Required

As their names suggest, analytical skills are essential, whether you are a data analyst or a financial analyst. Filtering lots of information, spotting trends, and finding profitable opportunities is the fundamental responsibility of these roles. Another common attribute is communication skills. It would help if you conveyed your findings in non-technical English so that the company may use it to make decisions.

Financial analysts and data analysts share many common abilities, which is why it isn’t difficult to switch from one career to another (more on that later). Let’s discuss the skills required for both these professions to better understand how similar and different these positions are.

Financial Analyst

As a financial analyst, your findings help the company make crucial financial decisions. You spend most of your time looking at economic data and drawing conclusions that help your organization progress financially. Employers typically look for the following skills when hiring a financial analyst:

• Analytical skills to process large amounts of data and find profitable investments.
• General accounting skills to work effectively in the finance industry
• Problem-solving skills to solve financial equations or find solutions to a company’s debt issues
• Knowledge of the current investment market, interest rates, and other current financial events, commonly referred to as financial literacy.
• Knowledge of software programs like SQL, SAP, and QuickBooks
• Organizational skills to keep track of financial records and current processes of a business

Data Analyst

Data analytics is more of a technical job than financial analytics. Cleaning and preparing large piles of data takes up around 80% of data analysts’ time. Here are the skills required for becoming a data analyst:

• Data cleaning and preparation skills to make information usable for analysis.
• A strong foundation in statistics and probability to understand the data you’re working with
• Data visualization skills to make patterns and trends easier to understand
• Presentation skills to prepare easy-to-understand reports and convey findings to relevant team members.
• Knowledge of statistical programming—R and Python—to perform complex mathematical operations
• Understanding of machine learning concepts

Responsibilities

Now that you know the two positions’ skills and qualifications, it is time to talk about what their day-to-day activities look like. As we’ve discussed, the work of a financial analyst is mostly about finances and investments. While a data analyst analyzes data for solving a variety of problems.

The exact duties of these positions vary depending on the type of organization. But let’s discuss what data analysts and financial analysts typically do as part of their job.

Financial Analyst

A financial analyst’s core task is to use information, like budgets and income statement forecasts, to recommend creative ways to reduce costs and enhance a company’s financial position. Here are some other duties of this job:

• Collecting and analyzing financial data while considering the company’s goals and financial situation
• Preparing reports on financial status, investment opportunities, and risks
• Supervising the quarterly and annual budgeting process
• Developing financial models by analyzing large amounts of data and conducting process analysis and benchmarking
• Recommending actions to relevant team members by making comparative analysis
• Guiding cost analysis procedure by enforcing policies and providing forecasts and trends
• Spotting opportunities for performance enhancement across the company

Data Analyst

Data analyst’s core responsibility is to analyze information and turn it into valuable insights that solve their company’s problems. Here’s what a data analyst position involves:

• Gathering data from various sources, then organizing and cleaning it to be useful for machines and humans
• Spotting trends and patterns in data sets using statistical tools and techniques
• Working with engineers, programmers, and company leaders to spot opportunities for performance improvement across the organization
• Creating appropriate reports of their findings for stakeholders to understand and implement the insights.
• Using visualization techniques to translate raw data into meaningful information effectively
• Storing and maintaining databases and data systems

Salary and Job Outlook

When switching a career or getting into one, it’s critical to consider the current salary in the market and the job outlook. Both of these roles are trending and expected to grow rapidly in the future. Even the entry-level positions offer around $50,000, with senior analysts making well over $100,000 and even $150,000. Here’s what to expect from these roles:

Financial Analyst

The U.S. Bureau of Labor Statistics states that the median pay for a financial analyst position in 2019 was $81,590. The top earners made more than $150,000, while the lowest 10 percent brought home nearly $50,000. Most financial analysts work full time, and some work for over 40 hours a week.

The employment is projected to grow 5 percent from 2019 to 2029. This is faster than the average growth for all occupations, which is 4 percent. As new businesses are established or existing businesses expand, they will require financial analysts to analyze and recommend investment opportunities. 

Financial products are growing, and new markets are emerging throughout the world. These require in-depth knowledge of geographic regions, leading to steady employment growth.

However, competition is still expected for financial analyst roles, despite the more-than-average employment growth. There are far more people wanting to break into the field than there are jobs. As we’ve discussed, certification and degrees from reputable institutions increase your chances of landing a job as a financial analyst.

Data Analyst

The Bureau of Labor Statistics did not provide information about the data analyst position in its latest forecasts. This is because data analytics is a broad sector with plenty of job opportunities. So it can be difficult to pinpoint growth and salary expectations. 

The BLS offers several classifications in data analytics. We’ve already looked at the first classification, financial analytics, including management analytics, business analytics, and various other investment analytics.

Another BLS classification is the market research analyst category. In 2019, the median annual wage for this position was $63,790. Top earners made over $122,000, while the lowest 10 percent earned around $34,000. This category’s employment growth is 18 percent from 2019 to 2029, much faster than the average of 4 percent.

Looking at these classifications, we can get a sense of the salary and job outlook of the data analyst position. Data analytics is a broad term, and your specialization will determine the kind of work you do and the amount of money you take home.

Can a Data Analyst Become a Financial Analyst?

Yes, the great thing about data analytics is that if you’re experienced, you can easily switch from one subject to another. If you have a degree in finance, economics, or statistics, you can start looking for open financial analyst positions. You’ll also be more likely to land a job since you’ve already been handling the technical part as a data analyst.

Both of these are excellent careers with strong income potential. You’ll be working full time, 40 to 45 hours a week, in both positions. The difference between these two roles is vague, but the primary distinction is that financial analysts deal with investment and financial markets a lot. On the other hand, data analysts are more involved in computing and technical work.

It’s essential to be able to enjoy your work and find passion in it. So you’ll need to pick your position based on your personal preferences. If you have an interest in investing and Wall Street, financial analytics may be for you. However, you may find that the accounting involved is too much for you. 

If that’s the case, you can jump from finance to any other field, such as business, sales, and production. On the other hand, If you like working with numbering and enjoy technology and computers, a data analyst position will best suit you.

Also, as we’ve discussed, the exact job responsibilities of analysts vary greatly from company to company, especially in startups. So you may join an organization as a data analyst but have to advise on financial matters a lot, or you can be a financial analyst but have to analyze metrics of marketing strategies and campaigns. All the positions in the analytics field are closely related to each other.

Conclusion

As we’ve said, data analytics is a broad term that includes financial analysts, market research analysts, business analysts, and many more positions. These people collect and analyze data to solve business problems and help their organizations grow. It’s hard to pinpoint the differences between these roles as their duties vary significantly from company to company.

It’s relatively easy to switch from one subject matter to another in the analytics field. So if you have experience in finance, you can start looking for job postings for financial analyst positions. Chances are, you’ll fulfill the requirements and quickly land a job, thanks to your experience as a data analyst.

BEFORE YOU GO: Don’t forget to check out my latest article – 6 Proven Steps To Becoming a Data Scientist [Complete Guide]. We interviewed numerous data science professionals (data scientists, hiring managers, recruiters – you name it) and created this comprehensive guide to help you land that perfect data science job.

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