|Bachelor's in Finance||Generally, financial analysts hold a bachelor's in finance or a related field.|
|Relevant Coursework||Most finance degrees offer preparation through coursework in accounting, economics, and statistics.|
|MBA with a Concentration in Finance||Some MBA programs offer concentrations in finance. Many employers prefer candidates with a graduate degree.|
Financial Analyst Career Overview
What Is Financial Analysis?
The phrase financial analysis has become commonly used in everyday business-related language, just like stock brokerage or investment banking; however, not everyone understands what it actually means. Professional financial analysis is the practice of evaluating businesses and organizations for performance, stability, and future profitability. Professionals employ financial analysis to forecast long-term business success.
Financial analysis also encompasses other practical goals. In investment finance, the end goal of financial analysis is to determine whether or not a business warrants monetary investment. Financial analysis plays an important role in setting policy for individual businesses and entire industries. The field allows businesses to receive guidance to become more profitable, and to create valuable connections with other businesses and organizations. For more information on the job profile for someone who conducts financial analysis as a career, read on.
What Is a Financial Analyst?
A financial analyst evaluates businesses in corporate or investment finance for profitability and suitability for investment. These analysts present their findings in written reports, making recommendations on how to invest profitably to executive management. They also construct financial models to forecast business performance over the short- and long-term future. In order to fulfill these job duties, they must carefully weigh factors such as market trends, a company's financial standing, and the outcomes of specific business decisions.
Read on for a detailed profile of the financial analyst profession, including specializations for financial analysts, where they work, and other important information.
What Does a Financial Analyst Do?
Financial analysts offer guidance to businesses based on evaluations of their overall profitability and stability. They make investment recommendations to both businesses and individuals. In order to make useful recommendations, financial analysts study market trends as they relate to specific industries, products, and geographic regions. This research requires analysts to account for outside influences on the market, such as political climate, regulations, and economic trends.
In general, financial analysts fall within one of two categories: buy-side and sell-side analysts.
In general, financial analysts fall within one of two categories: buy-side and sell-side analysts. Buy-side analysts work for companies with a substantial amount of investment capital, helping them to allocate this money profitably. Sell-side analysts work with financial services firms and sales agents who sell investments such as stocks or bonds, helping to market investments to clients.
A range of industries employ financial analysts on both the buy and sell side. Most commonly, they work in banks, securities firms, mutual funds, and other financial services businesses. Occasionally, they may work in business media or research firms in a role not exclusively devoted to the buy or sell-side of the field. Buy-side analysts tend to work in a larger variety of industries than those from the sell-side.
A variety of skills contribute to a successful career as a financial analyst. Financial analysts need strong math skills, as they use arithmetic, statistics, and algebra on a daily basis. They also need strong business communication skills, including active listening. A successful financial analyst needs the ability to get a clear sense of what their employer wants from their investments or how they hope to market their stock to potential clients.
Most employers also expect financial analysts to demonstrate strong critical thinking skills. Financial analysts need the ability to effectively weigh the potential consequences of multiple courses of action against one another in order to fulfill their job duties. They must also possess strong reading comprehension skills, enabling them to quickly read, understand, and synthesize work-related written documents.
Financial analysts' work draws upon a large amount of data extracted from balance sheets, income statements, financial reports, and stock price information. Computer technology allows them to construct tables and models from this information, synthesizing it into a clearly digestible format. Many employers expect financial analysts to know how to use financial analysis and business intelligence software such as Delphi Technology or IBM Cognos Impromptu.
People sometimes use the titles securities analyst and investment analyst interchangeably with financial analyst.
There are many specializations in the financial analysis field. Portfolio managers curate the mixture of industries, products, and regions that create a company's investment portfolio. Fund managers specialize in hedge funds or mutual funds. Ratings analysts evaluate companies on their ability to pay debts, including obligations for bonds and other securities. Finally, risk analysts look into investments to evaluate the level of financial risk they present to clients, offering recommendations on the most stable and risk-free options.
People sometimes use the titles securities analyst and investment analyst interchangeably with financial analyst. Read on to learn more about some of the responsibilities financial analysts handle on a typical day.
What Are the Responsibilities of a Financial Analyst?
What Qualifications Do You Need to Become a Financial Analyst?
|Active Listening||Financial analysts need strong active listening skills in order to communicate effectively with management, clients and shareholders. Their active listening skills enable them to understand the expectations of those who depend on their guidance.|
|Mathematics||Financial analysts need a firm foundation of basic math skills in subjects such as arithmetic, algebra, and statistics in order to fulfill job functions requiring them to calculate figures on the spot quickly.|
|Critical Thinking||Critical thinking skills enable financial analysts to weigh outcomes against one another and make the best recommendation possible to their employers.|
|Deductive Reasoning||Financial analysis work requires deductive reasoning abilities, such as noticing that an unstable investment may prove a riskier choice than a stable one.|
|Communication||Financial analysts need good communication skills to convey information to those overseeing their work.|
|Written Comprehension||In order to understand feedback or create reports of their own, financial analysts need written comprehension ability.|
|Economics and Accounting||Since financial analysts must follow market activity and identify trends, they need basic knowledge of economics. They also need to understand financial accounting principles in order to gather data for analysis effectively.|
|Computers and Technology||Financial analysts work with computer applications such as spreadsheets, data query tools, and business intelligence software every day, and they need strong computer literacy to use them successfully.|
How Are Financial Analysts Employed?
Many financial analysts work for hedge funds. In this context, their work may take on a high-pressure, high-stakes tone, requiring them to produce accurate results quickly and consistently with minimal financial toll.
Many financial analysts create smart investment portfolios for insurance companies, since these companies typically possess large amounts of investment capital. These analysts typically work on the buy-side.
Large Public University
Many colleges and universities employ financial analysts to create smart investment portfolios. Nonprofits also employ a surprising number of financial analysts. These analysts typically work on the buy-side.
Financial Services Firm
Many financial services firms employ financial analysts to generate interest from potential investors, and to minimize financial risk. These analysts typically work on the sell-side.
Some financial analysts find work in research firms. These entities help businesses build strong investment portfolios by gathering information about target markets and demographics through customer surveys, focus groups, and other studies.
Learn More About Financial Analysts and Take the First Step Today
Salary Information and Career Outlook for Financial Analysts
Learn How to Become a Financial Analyst
Explore Accounting Degree Programs
Professional Organizations for Financial Analysts
- Association for Financial Professionals The AFP advocates for financial professionals through an annual conference, continuing education, and certifications such as the Certified Financial Planning and Analysis Professional (FP&A) and Certified Treasury Professional (CTP) credentials.
- CFA Institute The CFA institute promotes the financial analysis profession through initiatives such as a research foundation and a range of publications. It also offers several certificates and other designations for professionals.
- Corporate Finance Institute Founded in 2016, CFI represents financial analysts working for corporate employers. Membership benefits include the Certified Financial Modeling & Valuation Analyst (FMVA) credential, which candidates may earn completely online.
- American Association of Finance and Accounting Established in 1978, the AAFA helps connect financial analysts and other financial services professionals with high-level jobs. Its online job postings board features opportunities from a range of affiliate companies.
- Professional Risk Managers International Association PRMIA represents risk enterprise professionals nationwide through continuing education and local events. The organization offers a range of professional certifications related to risk enterprise, including the Credit and Counterparty Risk Manager (CCRM) Certificate.