What Is the Role of a Financial Planning Analyst?
Do you often worry about your financial position? Are you daunted by the thought of predicting the market or how future events will impact your investments? Anxiety surrounding money is common, even for individuals who feel like they are financially secure.
If financial strategy planning seems too overwhelming, you should think about working with a financial planning analyst. What is a financial planning analyst, and how can they help you?
In this article, we will explain the role of a financial planning analyst, the details of their jobs, and how a competent FPA can help you transform your financial dreams into a reality.
What Is a Financial Planning Analyst?
A financial planning analyst, sometimes referred to as an FP&A Analyst, is someone who assists companies or private clients with making sound financial decisions. A financial planning analyst uses methods such as the following to formulate an accurate plan:
Financial analysis
Budgeting
Forecasting
Financial planning analysts possess a widely applicable skillset that can translate to virtually any field. From individual investors to large corporations, their clientele can take advantage of their expertise and feel confident in their financial decision-making.
Core Responsibilities of a Financial Planning Analyst
The duties and responsibilities of a financial planning analyst are vast and can vary depending on the type of company they work with, as well as the goals of their clients. Here are some of the key responsibilities that are typical for financial planning analysts.
Data Gathering and Collation
Gathering data can be a challenging task in itself, especially if an FP&A analyst works with large clients. Complex transactions often require hundreds of pages of data that detail every element of the money changing hands.
Some corporations have sub-companies, with financial data that may require consolidation. A consolidated financial picture is often required by investors and shareholders to get an accurate forecast of the company's financial future.
Collating the data into a digestible format is also an essential job function of a financial planning analyst. It often involves working with a plethora of file types and reports to blend the data together into a format that is easy to read and understand for the target audience. Individual clients may also have a wide variety of financial statements and documents, including:
Bank statements
Investment statements
Amortization schedules for financed purchases, such as vehicles and mortgages
Private loan agreements
Other liquid assets
Budgeting and Forecasting
Corporate financial analysis is often heavy in budgeting and forecasting. Companies may operate under tight profit margins. They may also need to produce a certain amount of growth to satisfy key shareholders.
For individual and private investors, budgeting and forecasting may involve projecting retirement scenarios or calculating future net worth for large purchases. A financial planning analyst can predict your financial picture at future points, so you can allocate your money effectively.
Preparing Financial Statements
Financial statements are documents that show the financial health of a company or private client in various ways. Some of the most common types of financial statements include:
Balance Sheet: A big-picture snapshot that defines assets, liabilities, and equity at a certain point in time, usually the end of a monthly, quarterly, or annual reporting period.
Income Statement: Also known as the profit and loss statement, this statement focuses on accounts such as revenue, net income, operating expenses, and gross profit.
Statement of Cash Flows: This statement shows shareholders how money flows through a business's accounts, with categories such as investing activities, financing activities, and operating activities.
Although standard financial statements present a streamlined view of your assets, you can also request your financial planning analyst to create supplementary or customized statements and schedules depicting whatever you wish, such as realized gain from the sale of investments or breaking down your monthly spending.
Suggesting Actionable Financial Performance Improvements
Once your financial planning analyst is able to look at the data and familiarize themselves with the big financial picture, they can curate actionable suggestions that improve your financial performance.
For instance, they may evaluate stock market trends and suggest where to move your assets, based on factors such as volatility and investment goals. If you plan on retiring soon, it may be wiser to place your assets into less risky holdings like treasury bills and government bonds.
In the corporate world, a financial planning analyst can look at a company's data and determine metrics for shareholders, such as target revenue for the following quarter. They may also be able to analyze past data and recommend solutions to avoid errors that were made in previous reporting periods.
Key Skills and Qualifications
Since a financial planning analyst has such a broad job description, it can be difficult to understand just how many skills they need to successfully navigate the world of corporate and private wealth management. Here are just some of the key attributes of a reputable financial planning analyst:
Industry Knowledge: An FP&A analyst has extensive knowledge of the industry or companies they work with, so they can provide informed opinions.
Detail Orientation: Analysts pay attention to small details and transactions, and how these can contribute to the bigger financial picture.
Communication: Financial planning analysts must know how to communicate with different audiences, depending on knowledge level and position within the company.
Financial Modeling: An FP&A analyst should be able to effectively build financial models based on various outcomes and key decisions within the company.
Data Analytics: Analysts may work with all types of data, so it is vital that they know how to analyze and interpret the data when creating forecasts and budgets.
Financial Software Proficiency: Financial planning analysts need to have knowledge of financial planning software, as well as staple applications, such as Microsoft Excel, for data modeling.
Educational Background and Certifications: Although there isn't a dedicated degree program for financial planning analysts, most entry-level professionals hold a bachelor's degree in a field such as business or finance.
FPA vs. Accounting
You may be wondering about the difference between a financial planning analyst and an accountant. After all, both career fields work extensively with money and financial analysis. If you already have a dedicated certified public accountant, do you really need a financial planning analyst?
The answer is undoubtedly, yes. Here are some key differences between the two professions, and how they can each provide unique benefits to your financial position and outlook.
Looking Forward vs. Looking Back
Although financial planning analysts rely on historical data to form opinions, the objective of their job is primarily to look forward.Accountants, on the other hand, primarily examine records and transactions, focusing on reconciling accounts and creating a picture of your financial position at a certain point in time.
Analytical vs. Technical Skills
Financial planning analysts rely far more on analytical skills in their day-to-day jobs. They use various forms of analysis to effectively interpret data for financial forecasting. Accountants have a more technical skillset, focusing on regulatory guidelines and accounting principles for more accurate record-keeping.
Big Picture vs. Attention to Detail
While attention to detail can be beneficial for financial planning analysts, it is not a primary function of the role. Financial analysts take consolidated data and use it for financial strategy planning. Accountants are more focused on accurately recording transactions and journal entries so that the data matches and bank statements are reconciled appropriately.
How Financial Planning Analysis Can Impact Your Wealth Strategy
Now that we have covered the basics of a financial planning analyst, it is time to ask the essential question: How can working with a financial planning analyst help you?
Less Anxiety Surrounding Money
Knowing that your finances are in safe hands can help you feel more at ease. You will not have to worry about whether you are making the right decisions for your financial health.
Establishing Attainable Financial Goals
An experienced financial planning analyst can help you make financial goals. These goals can be short-term or long-term.
Trust and Estate Planning
If you have many assets or generational wealth, estate planning can be tricky. A financial planning analyst can help you update your estate planning and ensure the right beneficiaries receive the proper amounts.
Budgeting and Expense Tracking
Wondering how much you spend each month, and on what? Work with your financial planning analyst to break down expense categories and set a realistic budget.
Planning for Retirement
Your golden years should not be filled with stress and anxiety. Retirement planning ensures you have enough cash to fund your lifestyle without worrying if the well will run dry.
Consider Working With a Financial Planning Analyst
Are you ready to begin the next phase of your financial journey? If you want a hands-off approach to your investment strategy, or you simply want more knowledge regarding your finances, think about partnering with a financial planning analyst.
At Phillip James Financial, our motto, "Investing With Purpose," applies to all of our clients. Our financial planning strategies include solid, objective investments, cost-effective implementation, and maximizing tax benefits. Whether you are new to investing or you are a seasoned brokerage expert, we are here to help.
Do you want to learn more about all of the services we offer? Explore our site today, or contact us to get in touch with a financial advisor. We can't wait to meet you!