Chief Investment Officer vs Chief Financial Officer [COMPARED]


Have you ever read an article talking about a major corporation’s CIO or CFO and wondered, “What the heck do those letters even stand for?” If so, you’re not alone.

Suppose further that someone explained to you that CIO stood for Chief Investment Officer, while CFO was the abbreviation for Chief Financial Officer. Would you at that point know the difference? If not, don’t feel bad – you’re in the majority of people who have no idea there even is a difference.

Simply put, a Chief Financial Officer (CFO) is responsible for all of the financial operations of the company. Of all the directors, the CFO is the ultimate decision maker on the company’s financial moves. On the other hand, a Chief Investment Officer oversees the investments made by the company.

Chief Investment Officer vs Chief Financial Officer

The section below provides a brief explanation of what roles each of these executives play in the life of a corporation. For basics on corporate structure, leadership, and positions within a corporation, you can read more here.

The Chief Financial Officer (CFO)

In a general sense, the CFO and their team will handle the company’s financial planning, assess financial risk, and keep up with reports and records. But obviously there is a lot more to it than that!

Consider that a CFO is a high level executive who could potentially be responsible for hundreds of millions or even billions of dollars. It follows that many of their responsibilities will be delegated to other employees. Most corporations have vast financial commitments and requirements that require daily management; the CFO handles it.  

The CFO does this by establishing and managing the financial department and the daily financial activities of the corporation. Additionally, a CFO has accountability to regulations and authorities according to federal law, including the Sarbanes-Oxley Act and the Securities and Exchange Commission (SEC). Not only does a CFO have a duty to the company, they have a duty to abide by the laws and rules imposed upon them.

CFOs answer directly to the chief executive officer and the company’s board of directors. In this sense, the CFO acts as an advisor for the corporation’s financial strategies. This not only includes maximizing revenue streams, but also meeting revenue goals and a steady cash flow. Part of this responsibility includes keeping company expenses and purchases low without damaging the company’s reputation or quality of the goods or services it produces.

If the CFO does all of this, what could there possibly be left for a Chief Investment Officer to do?            

The Chief Investment Officer (CIO)

The name says a lot: The Chief Investment Officer is responsible for all the investments the corporation holds. But like the CFO’s job duties, it’s not as simple as that. It’s important to note that in some corporations, the CIO’s duties may be absorbed into the CFO position, with that person acting in both roles.

Everyone knows that corporations are in business to make money. In addition to maximizing revenue and profits, another great way to increase a corporation’s wealth, holding, and security is to take the company profits and invest them. Here is where the CIO earns her salary.

A strong investment portfolio will allow a corporation to maintain stability and the capital needed to maintain their daily operations. The better investments made, the more opportunity for growth and stability the corporation has.

Every corporation that has pensions or retirement benefits for their employees needs a manager to invest those funds and grow them. Additionally, publicly traded companies owe a duty to their investors to make wise financial decisions. These are duties of the CIO.

Remember the Sarbanes-Oxley and SEC discussed above? Well these apply to the CIO as well, considering the goal of the CIO is to maximize profits while lowering risk. With so many people depending on the company’s success, these laws and regulations serve to make the CIO’s investment decisions legal, prudent, and ethical.

The CIO likely has a departmental team just as does the CFO. Additionally, the CIO may even be outsourced rather than an actual part of the corporation’s internal structure. Alternatively, the CIO may be a member of the board (as a CFO could be).

The job is high stress due to the enormous expectations that corporations have for their liquidity and investments. Consider: Markets fluctuate in cycles, but the demands of the company (salaries to benefits to paying for materials or services) stay the same and often increase, rarely going down. Thus, the CIO must strategize in order to meet the corporation’s rigorous financial demands regardless of the status of the market.

Where might you find a CIO?

  • Nonprofit Organizations
  • Investment Firms
  • Insurance Companies
  • Banks
  • Universities
  • Corporations with Pension or Retirement Funds

Who is a CIO or CFO?

To be a good candidate for either of these positions, a person must have the basic educational background, but also possess some key qualities, including, but not limited to:

  • Good Decision Making
  • Effective Communication Skills
  • Ability to Think on Their Feet
  • Motivated
  • Leadership Skills
  • Planning Skills

While every major company will have a CFO (or some other similar named financial officer), not every corporation or entity will have a CIO. For companies that do have a CIO, they will work with the CFO and the board of directors and other high-level executives to manage the entity’s financial operations. In this situation, the CIO will likely answer to the CFO.

Conclusion

As you can see, each of these positions require high qualifications and are demanding jobs with numerous responsibilities. The upper level executives who work as Chief Financial Officer and Chief Investment Officer are important people. Imagine being responsible for all the operations of a billion dollar corporation?

A team of dedicated financial professionals certainly helps. But either way, as similar as they may seem, one can see that a CFO and CIO are two very different things.

Geek, out.

Noel

Noel is the founder and main contributor for his blog - Noel's passion for personal finance has helped him amass over 600k readers to his Financial Geek blog.

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