The investment success can influence the earnings of a company, the quality of economic conditions, and management.
Financial analysts evaluate this information to buy, sell, or recommend the investment.
In this guide, you will find details about duties, skills, training a financial analyst needs to provide informed advice and decisions on investments.
You will also find out how licensing and certification can impact career prospects.
Article Table of Contents
What Does a Financial Analyst Do
Financial analysts consider various data.
They work with such information as profits, management practices, and cash flow to evaluate companies.
In specific regions, economic conditions, politics, and events can also affect firms.
- Find and recommend a single or group of investments to obtain or sell.
- Assess past and present financial performance of a company, such as values, losses, and profits.
- Analyze economic and business trends in different categories, such as regions, countries, and industries.
- Determine the value of a company based on its financial statements like income and cash flow statements, or balance sheets.
- Research the background, organization, management, activities, and performance of the company by reading reports and articles as well as interviewing directors.
- Prepare details analysis and performance reports together with the effects of events and economic conditions on industry, firm, or economy.
Financial analysts have to analyze financial statements, new accounts, reports, and other data to determine the suitability of bonds, stocks, and investments.
A financial analyst should recommend efficiently which investments to buy, hold, or sell and when, as well as how to create investment portfolios.
Financial analysts should acquire information, even from obscure sources, form the advice and make decisions.
They have to examine the company’s management to understand their practices and strategies.
Research also relates to finding new accounts, social media posts, reports, and other information in public domains.
Mathematical skills are mandatory for any financial analyst.
They should know how to calculate cash flows, financial ratios, and profits to form reliable estimates of the company’s value.
Financial analysts use computer software and apps to forecast earnings, economic indices like the gross national product, and cash flow.
How to Become a Financial Analyst
Typically, financial analysts need at least a bachelor of science degree in finance or business administration.
For better job prospects, they may hold a master’s degree in finance or business administration.
Many financial analysts work in securities brokerage that requires them to obtain a license from the Financial Industry Regulatory Authority.
Training and Qualifications
As mentioned, the minimal education includes a bachelor of science in finance or business administration.
However, employers prefer candidates who hold an MBA or a master’s degree in finance.
This is needed for landing more advanced or supervisory positions.
The undergraduate and master’s programs cover such courses as math, statistics, accounting, economics, finance, risk management, pricing and valuation of securities.
To participate in securities transactions for clients, financial analysts should be registered with the Financial Industry Regulatory Authority.
They have to take tests on securities regulation, industry, and its structure, types of financial operations and securities.
Analysts should be able to distinguish between stocks, bonds, options, and other securities.
Some of these tests are needed if you aim at supervisory positions in the securities industry.
Analysts can take the examination and obtain a Chartered Financial Analyst (CFA) certification having four years of professional experience and a bachelor’s degree.
The experience doesn’t have to involve investment work.
The CFA includes such courses as financial statements, securities, ethics, corporations, and tools to analyze the market.
Typically, financial analysts start working in a certain field of security.
With experience, they can switch to portfolio or fund management.
A portfolio manager financial analyst chooses the right mix of securities for the portfolio of a company.
Fund managers work with individual investors, considering their goals for return and tolerance for risk.
Experience is usually mandatory to take an exam and obtain a license from FINRA to be able to work in these positions.
It’s also needed for the positions that deal with the sale or purchase of securities or supervision of this process.
The US BLS reports that about one-third of all financial analysts work more than 40 hours a week.
The data is for 2014.
According to the O*NET survey, 89% of professionals work over 40 hours.
Analysts may conduct research or analysis of reports after business hours.
Within the office hours, they usually make and return calls and messages.
Since corporations work globally, financial analysts should track events or carry out trades in different time zones.
Even in the US, financial analysts working in the West Coast may have to start their day at 5 or 6 am to prepare for the markets opening in New York at about 9:30 am ET.
According to the BLS, the average salary of financial analysts in May 2015 was $95,320.
The median salary was $80,310.
The top 10% of analysts can earn as much as $160,760 per year or more.
The BLS reports that the employment rate of financial analysts should grow by 12% through 2024, which opens 32,300 more jobs.
The demand for financial analysts grows because of the complexity and diversity of securities and other financial products.
Investors and financial firms need analysts with knowledge and expertise in foreign regions or emerging markets.
Financial analysts need proper education, training, and licensing to be able to evaluate investments and companies.
With a career as a financial analyst, one can earn more than $100,000 per year, depending on the certifications, experience, and ability to hold supervisory positions.
By understanding foreign and emerging markets, financial analysts can enhance their employment opportunities.