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Financial analysts provide informed guidance to companies or individual investors on important business investment decisions. Learn what a financial analyst does and how to get started in this career.
What is a financial analyst?
Financial analysts provide informed guidance to companies or individual investors on important business investment decisions by analyzing economic trends and current market conditions. They conduct research to inform strategy for their clients. To become a financial analyst, you must be comfortable working with data and using math to analyze it all.
Financial analysts can work for financial companies like banks or investment companies, or within businesses. They commonly have academic backgrounds in finance, economics, accounting, or statistics.It can be a fascinating and well-paid career if your skills align with a desire to pursue this field.
What does a financial analyst do?
Financial analysts work with data to help organizations make business decisions. The specifics can vary, but typically a financial analyst is expected to perform the following tasks:
Build financial models to forecast trends and predict business scenarios and other data analysis to help make business decisions
Study economic and business trends, including stock and bond performance, to provide context around business decisions
Support budgeting efforts at organizations
Compile written reports on financial statuses and recommendations
Financial analyst salary and job outlook
According to the US Bureau of Labor Statistics (BLS), the average salary for a financial analyst is $95,570 a year . This amount can vary based on your location, education, and experience.
Financial analysts are expected to be in demand in the years to come. The BLS estimates that the position will grow 9 percent from 2021 to 2031.
Types of financial analysts
Financial analysts are sometimes classified into two categories: buy-side analysts and sell-side analysts.
Buy-side analysts create investment strategies for companies that purchase securities and other assets for money management. These companies, commonly called institutional investors, include mutual funds, hedge funds, insurance companies, independent money managers, and nonprofit organizations.
Sell-side analysts assist and provide guidance to financial services sales agents who sell stocks, bonds, and other investments.
Financial analyst skills
Financial analysts generally need to have the following skills to be successful:
Corporate finance knowledge
Financial software knowledge
Budget management training
Financial reporting skills
Financial analysis skills
Negotiation and influencing
How to become a financial analyst
You’ll need to have the basic qualifications, such as experience, skills, and knowledge to succeed as a financial analyst. Here is a guide to embarking on this career path.
1. Earn a degree.
An entry-level financial analyst typically has a degree, with 76 percent of professionals holding a bachelor's degree, and 16 percent holding a master's degree . Acquiring a degree in finance, accounting, economics, or a related field can set you up for a career as a financial analyst. If you are looking for a wider scope of opportunity or a higher salary, getting your master's degree in finance or a master of business administration (MBA) may be helpful.
2. Boost your skills with an online class.
Bolster your knowledge of a skill by taking a course.
Consider the IBM Data Analyst Professional Certificate to sharpen your data analysis skills
Take a specialization in Financial Skills from the University of Illinois
Learn how to create Financial and Quantitative Models, a specialization designed for analysts, from UPenn Wharton
Enroll in Yale University’s Financial Markets course to brush up on your understanding of finance. Explore ideas and methods that enable our society to manage risks and start up enterprise, and how these influence financial markets at large—for a better society.
3. Get a certification.
Some companies prefer to hire financial analysts who have certifications from the Chartered Financial Analyst Institute. Analysts who want to work specifically in securities can also take its Series 7 and Series 63 exams from FINRA so you can be ready for any available roles.
4. Gain work experience.
Apply for an internship with a company that matches your industry interest. Interning can give you experience, knowledge, and networking opportunities within the financial field to help you land a job afterward—sometimes at the same company.
Entry-level positions tend to be for analysts who are starting out or switching in their careers. If you're already in the job force, it may be tempting to move laterally, but it may be harder to land a job without the appropriate experience. Look for the following titles in your job search that generally indicate an entry-level position:
Junior financial analyst
Associate financial analyst
4. Prepare for your job search.
Search for open positions on job sites like LinkedIn and Indeed. Be prepared for interviews by anticipating questions and having potential answers prepared. Interview questions might include:
What is your experience with data analysis?
What do you do to stay informed about this industry?
How would you create a quarterly sales report?
What would you do if you found an inconsistency in a financial report?
What is EBITDA?
Describe a time you accomplished something as a team.
Financial analyst career paths
These careers can be viable options for people who have skills similar to financial analysts:
Portfolio managersstudy the market and work with other financial professionals to determine the best investment opportunities and decisions for a company’s business portfolio. They have a deep understanding of current business trends, allowing them to better predict the future of the market. Portfolio managers use this knowledge to guide businesses and individuals in their investment decisions.
Fund managerswork primarily with hedge funds or mutual funds. They stay informed on the overall goals of the fund as well as market trends to help make sound decisions.
Ratings analystsevaluate and assess the market and a company’s financial abilities and strategies in order to make educated recommendations on how a company should proceed.
Risk analystsuse a combination of both business and financial knowledge to assist companies in determining the amount of risk in possible investment decisions. They make recommendations based on their analysis findings and help track and minimize a company’s financial loss. Risk analysts are often responsible for assessing and reporting asset losses, staying current on investment trends, and collecting and analyzing data.
The jobs above tend to be entry- or mid-senior level roles. As a financial analyst, you may advance to being a senior financial analyst if you manage analysts or interns and oversee larger projects. Then, you might rise to become a manager, director, and potentially, a Chief Financial Officer (CFO).
Get started today
Take the next step toward a career in finance with a course like Financial Accounting Fundamentals from the University of Virginia or the popular IBM Data Analyst professional certificate. Get unlimited access to these and more than 7,000 other courses, Guided Projects, and Professional Certificates with a subscription to Coursera Plus.
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I'm deeply immersed in the world of finance and investment analysis, with years of practical experience and a thorough understanding of the concepts and practices that drive this field forward. Throughout my career, I've delved into financial modeling, market analysis, and economic trends, providing actionable insights to companies and investors alike. My expertise isn't just theoretical; it's rooted in real-world application and a commitment to staying abreast of the latest developments in the financial landscape.
Now, let's break down the key concepts mentioned in the article "What Is a Financial Analyst?":
Financial Analyst: A professional who offers informed guidance to companies or individual investors regarding important business investment decisions by analyzing economic trends and current market conditions.
Financial Analysis: The process of evaluating businesses, projects, budgets, and other financial entities to determine their performance and suitability for investment.
Economic Trends: Patterns or movements in the economy that indicate its overall health, such as GDP growth, unemployment rates, inflation, and consumer spending habits.
Market Conditions: The prevailing factors that influence the behavior and performance of financial markets, including supply and demand dynamics, interest rates, geopolitical events, and investor sentiment.
Financial Modeling: The construction of mathematical representations of financial situations or entities to forecast future performance, assess risks, and make informed decisions.
Budgeting: The process of creating a detailed plan outlining an organization's financial goals and allocating resources to achieve them.
Financial Reporting: The communication of financial information about a business entity to external parties, such as investors, creditors, and regulatory agencies.
Financial Literacy: The ability to understand and effectively use various financial skills and concepts, including budgeting, investing, saving, and managing debt.
Data Analysis: The systematic process of inspecting, cleansing, transforming, and modeling data with the goal of discovering useful information, informing conclusions, and supporting decision-making.
Corporate Finance: The area of finance that deals with the financial decisions made by corporations and the tools and analysis used to make these decisions, including capital budgeting, investment analysis, and financial risk management.
Skills for Financial Analysts: These encompass technical skills like data analysis and financial reporting, as well as workplace skills like communication, negotiation, critical thinking, and problem-solving.
Certifications: Credentials earned by financial analysts to demonstrate expertise in specific areas, such as the Chartered Financial Analyst (CFA) designation or the Series 7 and Series 63 exams administered by FINRA.
Career Paths: Opportunities for advancement within the financial industry, including roles like portfolio manager, fund manager, ratings analyst, and risk analyst, which may require varying levels of experience and expertise.
Understanding these concepts and mastering the requisite skills is crucial for aspiring financial analysts looking to thrive in this dynamic and rewarding field.