1) Finance is not accounting or economics.

Accounting: This is the most closely connected, and confused, career option to finance. Accounting can be summarized as the process of recording financial transactions, whether it be by oversight agencies, regulators, auditors, tax professionals, or controllers. They’re the financial scorekeepers, arranging balance sheets and cash flow statements to deliver good news and bad news to the decision makers and shareholders of an organization. The most recognized designation in this field is the CPA (Certified Public Accountant).

Economics: This is the other line of business sometimes mistaken for finance. It’s the branch of knowledge that studies the production, consumption, and transfer of wealth. While true economists often work in government, academia, or think tanks that study and guide economic policy, graduates with a degree in economics can possess logical reasoning and analytical skills that suit an array of career paths.

2) Finance involves two major career paths.

People with a finance background don’t just work on Wall Street. As a matter of fact, the old image of stockbrokers running and screaming across the floor of NYSE (New York Stock Exchange) building no longer exists. Technology has replaced many of those roles. Some common junior- and senior-level positions finance majors end up in today include:

• Financial analyst: Assesses accounting and financial decisions for banks, pensions funds, insurance companies, and corporations.
• Financial planner: Designs financial plans for personal clients which can include investment, insurance, debt, estate, and budget recommendations.
• Investment analyst: Assesses and recommends investment decisions, often for a fund or investment company.
• Comptroller: A management position responsible for supervising the accounting and financial reporting of an organization.
• Chief financial officer: A senior executive position responsible for all financial actions of a company.
• Chief executive officer: Usually the highest-ranking position within a company, responsible for all management decisions of the organization.

Most careers in finance fall into one of two settings: retail or institutional. You’ll need to choose one of these paths:

Retail Finance: Retail finance usually involves dealing with the general public. These professionals service customers that include individual investors and small businesses.

The most notable designation for finance professionals working in this space is the CFP, certified financial planner. In order to become a CFP, you must have at least a bachelor’s degree from an accredited college or university, complete a 12 to 18-month CFP board-registered education program, complete 6,000 hours of professional financial planning experience, and then pass the 170-question CFP exam which is taken over two three-hour sessions in one day. The pass rate for first-time test takers is approximately 67%. There is an accelerated path for professionals who already possess certain qualifying credentials.

Institutional Finance: Institutional finance generally refers to working with large institutions such as banks, hedge funds, and other business entities. The premier designation in this space is the CFA, chartered financial analyst. This requires completing a three-part exam that tests the fundamentals of investing, valuing assets, portfolio management, and wealth planning.

Which is better for you: retail finance or institutional finance?

An effective way to gauge which of these paths is right for you is by assessing your personality. A “people person” who enjoys working with the public, customer service, business development, or sales would likely be more successful in retail finance. A financial professional who prefers working behind a computer, analyzing portfolios and investment options, and dealing with other financial professionals as opposed to the public, would probably prefer a career in institutional finance.

Furthermore, someone with an entrepreneurial spirit may appreciate the upward mobility available in a career in retail finance or as a financial advisor. Someone more comfortable in a salaried position with the goal of becoming an executive someday would favor institutional finance.

Here a few more questions to ask yourself before committing to a path.

1) Where do you want to work?

Retail finance offers the flexibility of working in almost any locale. There are financial advisors everywhere, from major cities to suburbia and rural areas. Remember, retail finance means working with the public, so wherever people reside there is a customer base. Since the coronavirus pandemic and explosion of remote working, there has been more flexibility around where people in finance are able to work from. I, for instance, usually work one day a week in my office, 30 minutes from my home, and four days a week from my home office, even though my clientele span the country.

Institutional finance often implies that you’re an employee of a large institution. These jobs are commonly located in major cities for Fortune 500 companies. Even with the advent of remote working, workers starting out in institutional finance can expect to have to be in the office more often than not.

2) Do you like working by yourself or on a team?

Retail finance, such as being an independent financial advisor, can mean working with new customers every day, but often doing so alone. Even wealth management firms that have small teams or groups of partners tend to be entrepreneurial environments, where advisors are expected to attain and retain clients independently.

Institutional finance usually means working on a team within a department that’s part of a larger department, meaning there is more of a hierarchy. Junior associates may report to senior associates who have more interaction with executives and a set list of regular customers. A change of scenery may only come about from a job change or promotion within the company.

3) How long do you want to stay in school?

Professionals in finance can range from having a bachelor’s degree, up to a master’s, or even doctorate degree. People in retail finance are more likely to obtain a bachelor’s and then pursue necessary insurance and investment licenses or designations specific to their career and clientele.

People in institutional finance may have to obtain a master’s to move up the ladder, and those working in academia or think tanks may require a PhD.

4) Do you want a steady income with a lower ceiling, or volatile income with no ceiling?

A career in finance can be very lucrative. The average salary for a finance major is $101,038. Pursuing a career as a financial advisor or another form of financial sales can go well beyond this number, whereas a career in corporate America or the government typically stays close to it.

When I interviewed for a financial advisor internship in college, I was told, “You can expect to be way overworked and way underpaid for the first three years of your career, but if you do it right, you can be overpaid and underworked for the next 30 years.” This explanation is not all that different from what many entrepreneurs and small business owners may experience. Whereas institutional finance — working in a bank or large corporation — might offer a comfortable and reliable salary, but make your position feel sticky, with less opportunity to climb the ladder.

. . .

As a final gut check, I often tell young professionals and career changers to reflect on what I call “the three I’s”: impact, independence, and income. Everyone can define them differently and prioritize one over another, but all three are necessary to a fulfilled career.

A financial professional, for instance, can find impact through a personal note from a client thanking them for helping their family pay for college or retire, or from an executive thanking them for planning a budget on a new product line. Independence might come from working from home, writing an article on finance, or traveling the world to visit corporate customers. Finally, a career in finance can obviously be financially rewarding, with a wide spectrum of potential based on job.

As you consider this field and these two paths, think about what’s important to you. And remember: A career in finance is more than just math.