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

Financial Analyst vs. Actuary: An Overview

The financial sector is full of careers for analytical individuals; perhaps no two jobs exemplify this more than the financial analyst and the actuary. These are good careers for those who love math, statistics, charts, and models, and those who can dive into a subject and pick apart its complexities.

Actuaries are the unsung heroes of the insurance industry, which makes them unsung heroes of the medical industry, mortgage industry, car industry, and every other industry where insurance coverage plays a prominent role. They are responsible for compiling and analyzing statistics about risks and the individuals who are exposed to risk.

There are actuaries who work in other industries. Some large financial institutions, particularly lenders, employ actuaries to assess risks on loan products. Actuaries can be used to measure the potential for loss in an investment portfolio, which directly crosses over into the realm of financial analysis.

Financial analysts serve as experts for businesses and investors on a wide variety of subjects, such as economics, markets, investments, regulations, taxes, or corporate governance. The fundamental role of a financial analyst is to provide accurate information to others and to make recommendations based on that information. Corporations, private companies, public agencies, defense contractors, and nonprofits all employ financial analysts.

Key Takeaways

• Being a financial analyst or actuary is a good career for those who love math, statistics, charts, and models, and those who can dive into a subject and pick apart its complexities.
• Most actuaries work about 45 hours a week after receiving their certifications.
• The average financial analyst works between 40 and 50 hours per week, may receive 20 days of paid vacation every year, and is not forced to work holidays.

Both careers are here to stay. Financial analysts are expected to thrive in a business environment because regulations are becoming more onerous and financial markets are growing more complex. There is almost always a shortage of actuaries in the U.S., and both careers are projected to grow much faster than average between 2023 and 2033.

Financial Analyst

Since there are many different kinds of financial analysts (buy-side, sell-side, institutional, industry-specific, corporate, private, and so on), there is no defined career path or set of necessary skills to become one. Every financial analyst should be gifted at analytical problem-solving and have the ability to communicate effectively to non-experts, but there are relatively few additional hard-and-fast requirements.

Common areas of study for financial analysts include finance, economics, statistics, accounting, mathematics, or other business-related fields. Many financial analysts eventually pursue other professional designations such as the Chartered Financial Analyst (CFA) designation. Some financial analysts have advanced degrees, such as an MBA.

Actuary

There are comparatively few actuaries in the United States. Actuarial work—which involves long hours of dedicated analysis and statistical modeling—appeals to a relatively small subset of the population. Another key reason, however, is that actuaries are forced to spend several years passing a series of rigorous certification exams before most companies will consider them.

Aspiring actuaries are encouraged to pursue an undergraduate degree in a field such as mathematics, statistics, or actuarial science. Some corporate finance and business coursework is typically also done.

After receiving a degree, actuaries work toward credentials through one of two professional associations: the Society of Actuaries (SOA) or the smaller Casualty Actuarial Society (CAS). There is no federal law requiring an actuary to be licensed, but very few employers consider hiring applicants who are not working toward these credentials. There is both associate and fellow level. In order to attain each, a series of exams must be passed. Students often taken the first exam or two before graduation. It can often take up to seven years just to pass all the exams for associate level. However, one can work after passing the first couple exams.

Important

Without actuaries, insurance providers would have no idea how to price their products, how many individuals or businesses to insure, or what kinds of liabilities should be covered.

Key Differences

According to the U.S. Bureau of Labor Statistics (BLS), the median salary for an actuary in the U.S. is $120,000 as of 2023, though aspirants are unlikely to earn near the median salary without starting to pass exams from the CAS or SOA. The BLS expects an additional 22% percent increase in actuarial positions between 2023 and 2033, much faster than the average for all occupations.

There are just over 30,000 actuaries in the U.S. There aren’t many licensed actuaries to go around, so businesses really have to compete to hire good people.

As of 2023, the median salary for financial analysts is $99,890. The BLS has estimated that financial analyst positions will increase by 9% between 2023 and 2033, which is much faster than average growth.

Special Considerations

The average financial analyst works between 40 and 50 hours per week, and is not forced to work holidays. The likely get a decent amount of vacation days, possibly as much as 20, depending on the company. Unlike many of their compatriots on Wall Street, financial analysts are not generally expected to dedicate their entire lives to their work.

Actuaries spend even less time at the office than financial analysts do. Most actuaries work about 45 hours a week at most. Actuaries who are still pursuing their credentials can expect to study for the exams outside of work. Some employers offer study time during work, but it is usually not enough on its own to pass an exam.

Some actuaries in the investment banking world may work more than 50 hours a week and may also be expected to travel often to meet with clients. Financial analysts who work for investment banks often do so as well.

Financial analysts don’t receive the same kinds of accolades about job desirability, but this career is a better fit for people who like the Wall Street environment, who like working in support of multiple teams, and who may eventually want to move into another financial career, such as investment banking or private equity.

Read the original article on Investopedia.