How to Become a Financial Analyst – Forbes Advisor

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For anyone with an entrepreneurial spirit, big picture vision and strong communication skills, becoming a financial analyst can be a promising career path. Financial analysts can work in a variety of industries to study economic trends, make forecasts, and offer recommendations for investments and other money movements.

Most financial analyst jobs require at least a bachelor’s degree. After gaining some professional experience, financial analysts can increase their prospects through licenses and certifications. Our guide explores more details on how to become a financial analyst.

What do financial analysts do?

Generally speaking, financial analysts do exactly what their title implies: they advise companies and individuals on the most profitable investments. These professionals must be able to distil large amounts of information into concise recommendations.

Financial analysts assess whether a company is worth investing in by looking at the company’s financial history. These professionals can also help companies decide how to invest in growing industries. Financial analysts are responsible for studying economic, political and global trends to make recommendations.

Although financial analysts need a broad understanding of the market, they are not expected to know everything. Analysts tend to focus on one industry, region, or product, and they gain expertise in their area of ​​specialty.

Working environment

Financial analysts don’t just work with securities. They can be employed by companies to analyze other types of investments, such as real estate or marketing. Analysts may even work for media or research companies. Rather than advising clients on profitable investments, these workers analyze trends and publish their findings or predictions.

Types of financial analysts

Several job titles fall under the umbrella of financial analysts, as noted by the US Bureau of Labor Statistics (BLS). Below we list some examples.

  • Financial risk analysts make investment decisions that limit potential losses.
  • Rating analysts assess whether companies (or governments) can pay their debts.
  • Portfolio managers determine the composition of investments in their clients’ portfolios and respond to stakeholders.
  • Fund managers – who work with hedge funds or mutual funds – and portfolio managers both make buy and sell decisions to maximize returns.

What skills do financial analysts need?

Financial analysts must, of course, be analytically minded and thorough in their research. They need both strong math skills and computer literacy, as analysts use software to examine trends and make forecasts.

After all their research, financial analysts have to make decisions. Their recommendations can affect the longevity of a business, so they should be thorough but decisive. Analysts need to communicate their choices clearly and effectively, often through reports or presentations.

How much does a financial analyst earn?

Becoming a financial analyst is a solid option for anyone looking for an above-average salary. In May 2021, the median annual salary for financial analysts was $91,580, according to the BLS. In contrast, the median salary for all workers was $45,760.

Working as an analyst in the financial sector offers the most lucrative salary. These workers earn an average annual salary of $124,020.

Employment prospects

The field is also growing at a steady pace. The BLS projects that employment of financial and investment analysts will grow 9% from 2021 to 2031, which is faster than the average growth expected for all jobs. This represents approximately 32,000 new financial analyst jobs by 2031.

As you can guess, the increase in economic activity affects the demand for financial analysts. Expanding and emerging industries need the help of financial analysts to guide their growth.

Globalization is also a factor. As more and more markets develop around the world, companies need analysts to advise them on where to expand or invest. The BLS anticipates that these investors will hire financial analysts who have a thorough understanding of political, economic and cultural trends in the geographic areas concerned.

Buy Side Analysts vs Sell Side Analysts

Financial analysts, excluding those working for research and media companies, fall into two main categories: buy-side analysts and sell-side analysts.

buy side

Buy-side analysts help companies choose where to invest. These companies, called institutional investors, include pension funds, hedge funds, fund managers and insurance companies. This category also includes nonprofit groups with endowments, which are large donations that have been invested to increase the initial cash value.

Most financial analysts are on the buying side. Although they do not carry out any stock market transactions themselves, they advise companies on the most profitable investments. This can involve actual titles, real estate, or even franchise opportunities. Employers can also have analysts review their business practices, marketing spend, or other returns on investment.

sell side

Sell-side analysts, on the other hand, advise agents who are selling securities or other investments. This is a much more restricted area than the buy-side. Research analysts, for example, analyze companies’ financial data and create reports that recommend buying, selling, or holding those stocks. They also signal trends in individual stocks within fund portfolios.

As the CFA Institute notes, one of the pressures put on sell-side analysts is that they are responsible for the accuracy of stock ratings. Their findings are used by buy-side analysts to make decisions, and these ratings carry a lot of weight within the industry.

Note that financial analysts are not responsible for buying or selling investments. Instead, these professionals must rely on strong data analysis and communication skills to persuade stakeholders to implement their recommendations.

How to become a financial analyst

Education requirements for financial analysts

Most companies require applicants to have at least a bachelor’s degree. The CFA Institute recommends a finance-related major, such as a bachelor’s degree in accounting, finance, statistics, economics, or general business.

Although most employers don’t require a master’s degree, this advanced degree can help analysts take the next step in their career. With a proven track record, a financial analyst can move into a portfolio manager or fund manager role for high net worth individual investors. An MBA can demonstrate an analyst’s communication and business knowledge.

Financial Analyst Certification

Entry-level licenses for financial analysts are available from the Financial Industry Regulatory Authority (FINRA). FINRA regulates the securities industry and offers dozens of exams for different types of jobs. Most of these exams require employer sponsorship.

In most cases, financial analysts must pass the Securities Industry Essentials® exam, which covers basic industry information. General Securities Representatives must pass the Series 7 exam.

After gaining some professional experience, analysts can pursue the Chartered Financial Analyst (CFA) charter, administered by the CFA Institute.

CFA applicants must have a bachelor’s degree or be within 11 months of graduation. If this is not the case, they must have significant professional and/or higher education experience of at least three years. They also need an international passport, some professional references and 4,000 hours of qualifying work experience.

Take note that the CFA charter is not an easy course – it requires over 900 hours of individual study, in addition to hours of professional work. Prospective CFAs must also pass three levels of exams before they can apply to become charter holders.

Frequently Asked Questions (FAQ) About Financial Analysts

What are the three main skills of a financial analyst?

Financial analysts must be thorough and analytical because each recommendation can have a significant impact on their employer or the market as a whole. They also need math and computer skills to help them synthesize data and come to a conclusion. Communication skills are just as important.

What qualifications do I need to be a financial analyst?

To become a financial analyst, you must earn a bachelor’s degree in a finance-related field, such as business, economics, or statistics. Once hired, you will likely need to pass qualifying exams through FINRA to start practicing.

Is a financial analyst an accountant?

No. Both roles deal with finances, but in very different ways. Accountants work with their company’s finances on a day-to-day basis, while analysts examine overall economic trends and make recommendations for the most profitable investments.

How long does it take to become a financial analyst?

You can become a financial analyst in four years or the time it takes you to earn a bachelor’s degree. Depending on the type of work you plan to do, obtaining a license from FINRA may also take longer.


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