Occupational Outlook: Financial Managers
- About 3 out of 10 work in finance and insurance industries.
- A bachelor’s degree in finance, accounting, or a related field is the minimum academic preparation, but many employers increasingly seek graduates with a master’s degree in business administration, economics, finance, or risk management.
- Experience may be more important than formal education for some financial manager positions—most notably, branch managers in banks.
- Jobseekers are likely to face competition.
Nature of the Work
Almost every firm, government agency, and other type of organization has one or more financial managers who oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. Because computers are increasingly used to record and organize data, many financial managers are spending more time developing strategies and implementing the long-term goals of their organization.
The duties of financial managers vary with their specific titles, which include controller, treasurer or finance officer, credit manager, cash manager, and risk and insurance manager. Controllers direct the preparation of financial reports that summarize and forecast the organization’s financial position, such as income statements, balance sheets, and analyses of future earnings or expenses. Controllers also are in charge of preparing special reports required by regulatory authorities. Often, controllers oversee the accounting, audit, and budget departments. Treasurers and finance officers direct the organization’s financial goals, objectives, and budgets. They oversee the investment of funds, manage associated risks, supervise cash management activities, execute capital-raising strategies to support a firm’s expansion, and deal with mergers and acquisitions. Credit managers oversee the firm’s issuance of credit, establishing credit-rating criteria, determining credit ceilings, and monitoring the collections of past-due accounts. Managers specializing in international finance develop financial and accounting systems for the banking transactions of multinational organizations.
Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example, cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments. Risk and insurance managers oversee programs to minimize risks and losses that might arise from financial transactions and business operations undertaken by the institution. They also manage the organization’s insurance budget.
Financial institutions, such as commercial banks, savings and loan associations, credit unions, and mortgage and finance companies, employ additional financial managers who oversee various functions, such as lending, trusts, mortgages, and investments, or programs, including sales, operations, or electronic financial services. These managers may be required to solicit business, authorize loans, and direct the investment of funds, always adhering to Federal and State laws and regulations.
Branch managers of financial institutions administer and manage all of the functions of a branch office, which may include hiring personnel, approving loans and lines of credit, establishing a rapport with the community to attract business, and assisting customers with account problems. The trend is for branch mangers to become more oriented toward sales and marketing. It is important that they have substantial knowledge about all types of products that the bank sells. Financial managers who work for financial institutions must keep abreast of the rapidly growing array of financial services and products.
In addition to carrying out the preceding general duties, all financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes, whereas health care financial managers must be knowledgeable about issues surrounding health care financing. Moreover, financial managers must be aware of special tax laws and regulations that affect their industry.
Financial managers play an increasingly important role in mergers and consolidations and in global expansion and related financing. These areas require extensive, specialized knowledge on the part of the financial manager to reduce risks and maximize profit. Financial managers increasingly are hired on a temporary basis to advise senior managers on these and other matters. In fact, some small firms contract out all their accounting and financial functions to companies that provide such services.
The role of the financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency of their firm’s financial operations.
Working in comfortable offices, often close to top managers and to departments that develop the financial data those managers need, financial managers typically have direct access to state-of-the-art computer systems and information services. They commonly work long hours, often up to 50 or 60 per week. Financial managers generally are required to attend meetings of financial and economic associations and may travel to visit subsidiary firms or to meet customers.
Training, Other Qualifications, and Advancement
A bachelor’s degree in finance, accounting, economics, or business administration is the minimum academic preparation for financial managers. However, many employers now seek graduates with a master’s degree, preferably in business administration, economics, finance, or risk management. These academic programs develop analytical skills and provide knowledge of the latest financial analysis methods and technology.
Experience may be more important than formal education for some financial manager positions—most notably, branch managers in banks. Banks typically fill branch manager positions by promoting experienced loan officers and other professionals who excel at their jobs. Other financial managers may enter the profession through formal management training programs offered by the company. The American Institute of Banking, which is affiliated with the American Bankers Association, sponsors educational and training programs for bank officers through a wide range of banking schools and educational conferences.
Continuing education is vital to financial managers, who must cope with the growing complexity of global trade, changes in Federal and State laws and regulations, and the proliferation of new and complex financial instruments. Firms often provide opportunities for workers to broaden their knowledge and skills by encouraging them to take graduate courses at colleges and universities or attend conferences related to their specialty. Financial management, banking, and credit union associations, often in cooperation with colleges and universities, sponsor numerous national and local training programs. Persons enrolled prepare extensively at home and then attend sessions on subjects such as accounting management, budget management, corporate cash management, financial analysis, international banking, and information systems. Many firms pay all or part of the costs for employees who successfully complete courses. Although experience, ability, and leadership are emphasized for promotion, advancement may be accelerated by this type of special study.
In some cases, financial managers also may broaden their skills and exhibit their competency by attaining professional certification. Many different associations offer professional certification programs. For example, the CFA Institute confers the Chartered Financial Analyst designation on investment professionals who have a bachelor’s degree, pass three sequential examinations, and meet work experience requirements. The Association for Financial Professionals (AFP) confers the Certified Cash Manager credential to those who pass a computer-based exam and have a minimum of 2 years of relevant experience. The Institute of Management Accountants offers a Certified in Financial Management designation to members with a bachelor’s degree, with at least 2 years of work experience, and who pass the institute’s four-part examination and fulfill continuing education requirements. Also, financial managers who specialize in accounting may earn the Certified Public Accountant (CPA) or Certified Management Accountant (CMA) designation.
Candidates for financial management positions need a broad range of skills. Interpersonal skills are important because these jobs involve managing people and working as part of a team to solve problems. Financial managers must have excellent communication skills to explain complex financial data. Because financial managers work extensively with various departments in their firm, a broad overview of the business is essential.
Financial managers should be creative thinkers and problem-solvers, applying their analytical skills to business. They must be comfortable with the latest computer technology. Financial operations are increasingly being affected by the global economy, so financial managers must have knowledge of international finance. Proficiency in a foreign language also may be important.
Because financial management is critical to efficient business operations, well-trained, experienced financial managers who display a strong grasp of the operations of various departments within their organization are prime candidates for promotion to top management positions. Some financial managers transfer to closely related positions in other industries. Those with extensive experience and access to sufficient capital may start their own consulting firms.
Financial managers held about 528,000 jobs in 2004. Although they can be found in every industry, approximately 3 out of 10 are employed by finance and insurance establishments, such as banks, savings institutions, finance companies, credit unions, insurance carriers, and securities dealers. About 1 in 10 works for Federal, State, or local government.
Employment of financial managers is expected to grow about as fast as average for all occupations through 2014. The increasing need for financial expertise as a result of regulatory reforms and the expansion of the economy will drive job growth over the next decade. As the economy expands, both the growth of established companies and the creation of new businesses will spur demand for financial managers. However, mergers, acquisitions, and corporate downsizing are likely to restrict the employment growth to some extent.
As in other managerial occupations, jobseekers are likely to face competition, because the number of job openings is expected to be less than the number of applicants. Candidates with expertise in accounting and finance—particularly those with a master’s degree—should enjoy the best job prospects. Strong computer skills and knowledge of international finance are important; so are excellent communication skills, because financial management jobs involve working on strategic planning teams. In addition, a good knowledge of compliance procedures is essential because of the many regulatory changes instituted in recent years.
Over the short term, employment growth in this occupation may slow or even reverse due to economic downturns, during which companies are more likely to close departments or even go out of business—decreasing the need for financial managers.
The banking industry will continue to consolidate, although at a slower rate than in previous years. In spite of this trend, employment of bank branch managers is expected to increase, because banks are refocusing on the importance of their existing branches and are creating new branches to service a growing population. As banks expand the range of products and services they offer to include insurance and investment products, branch managers with knowledge in these areas will be needed. As a result, candidates who are licensed to sell insurance or securities will have the most favorable prospects.
The long-run prospects for financial managers in the securities and commodities industry should be favorable, because more people will be needed to handle increasingly complex financial transactions and manage a growing amount of investments. Financial managers also will be needed to handle mergers and acquisitions, raise capital, and assess global financial transactions. Risk managers, who assess risks for insurance and investment purposes, also will be in demand.
Some companies may hire financial managers on a temporary basis, to see the organization through a short-term crisis or to offer suggestions for boosting profits. Other companies may contract out all accounting and financial operations. Even in these cases, however, financial managers may be needed to oversee the contracts.
Computer technology has reduced the amount of time and the staff required to produce financial reports. As a result, forecasting earnings, profits, and costs and generating ideas and creative ways to increase profitability will become a major role of corporate financial managers over the next decade. Financial managers who are familiar with computer software that can assist them in this role will be needed.
Median annual earnings of financial managers were $81,880 in May 2004. The middle 50 percent earned between $59,490 and $112,320. Median annual earnings in the industries employing the largest numbers of financial managers in 2004 were as follows:
Securities and commodity contracts intermediation and brokerage
Management of companies and enterprises
Nondepository credit intermediation
Depository credit intermediation
According to a 2005 survey by Robert Half International, a staffing services firm specializing in accounting and finance professionals, directors of finance earned between $78,500 and $178,250, and corporate controllers earned between $61,250 and $147,250.
A 2004 survey of manufacturing firms conducted by Abbot, Langer, and Associates, Inc., a human resources management consulting firm, reported the following median annual incomes: chief corporate financial officers, $130,000; corporate controllers, $86,150; cost accounting managers, $67,161; and general accounting managers, $64,100.
Large organizations often pay more than small ones, and salary levels also can depend on the type of industry and location. Many financial managers in both public and private industry receive additional compensation in the form of bonuses, which, like salaries, vary substantially by size of firm. Deferred compensation in the form of stock options is becoming more common, especially for senior-level executives.
Financial managers combine formal education with experience in one or more areas of finance, such as asset management, lending, credit operations, securities investment, or insurance risk and loss control. Workers in other occupations requiring similar training and skills include accountants and auditors; budget analysts; financial analysts and personal financial advisors; insurance sales agents; insurance underwriters; loan officers; securities, commodities, and financial services sales agents; and real estate brokers and sales agents.
Source: U.S. Department of Labor, Bureau of Labor Statistics