One of the most competitive sectors in the world is the financial sector, namely because of the organizational structure of the firms and organizations that make it up, and the nature of their business. It is an industry which runs almost exclusively on insight, expertise and experience. The educational foundations required to make it in this industry are time-consuming and require a significant investment of time and effort. In the last decade, many young professionals are caught up in deciding what is right for them in the financial sector, namely the positions of investment banker and financial analyst respectively. Each has been hugely popular due to the intersectional skills utilized in both these roles. However, the functions and roles they serve are vastly different from one another and require professional experience to be tailored to either one or the other. Switching from one to another is considered one of the hardest transitions to make in the industry due to the huge amounts of practical experience required to survive in the high risk environment of banking.
Most investment bankers require a highly analytical mindset and most importantly, the ability to thrive in a fast-paced environment. Financial analysts are usually a part of investment banks, accompanied by two or three year contracts, and hence it is easier for a professional with a career in investment banking to make a transition within their own institution, if they so choose to. They may of course, stay on their current trajectory and be promoted to Manager or Associate Director, leave for an equity position, or even transition from investment to managerial finance. That being said, financial analysts play a very inclusive role in the long term development of the establishments they work for, and they work directly under the executive management and board of directors for the sake of development strategy. Investment banking, by its natures, does not provide this kind of opportunity, although many consider investment banking experience to take priority due to the smoother nature of the transition.
The reason for this is because investment banking carries with it a wealth of knowledge and experiences that carry over well into several other roles, with its core functionalities. The competitiveness of the position is almost a “trial by fire” and it mentally prepares for the investment banker for work outside the industry as well, due to the inherent need to be adaptive and dynamic. Although the financial returns are not as high as they would be in the banking sector, there is great room for consolidation, expansion and development in other industries and many investment bankers transition into financial positions that help guide these decisions.
Financial analysts are geared towards understanding a particular kind of establishment rather than working within one for their profession. It is usually a good idea to think from medium to long term in terms of developing your skills, and garnering experience, especially if professionals desire mobility and diversity in their professional endeavors. If making a transition in your financial career in the future is on the cards, it is usually a better idea to assume an investment banking position first to help build expertise for other positions within the industry.