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For anyone with a mind for business, a big-picture outlook and strong communication skills, becoming a financial analyst may be a promising career path. Financial analysts can work in a variety of industries studying economic trends, making predictions and offering recommendations for investments and other money moves.
Most financial analyst jobs require at least a bachelor’s degree. After gaining some work experience, financial analysts can increase their prospects through licenses and certifications. Our guide explores more details about how to become a financial analyst.
What Do Financial Analysts Do?
In general terms, financial analysts do exactly what their title implies: They advise companies and individuals on the most profitable investments. These professionals must be able to distill large amounts of information into concise recommendations.
Financial analysts assess whether a company is worth investing in by poring through the company’s financial history. These professionals may also help companies decide how to invest in growing industries. Financial analysts are responsible for studying economic, political and global trends to make recommendations.
While financial analysts need a broad understanding of the market, they aren’t expected to know everything. Analysts tend to focus on one industry, region or product, and they build expertise in their specialty area.
Financial analysts don’t just work with securities. They may be employed by companies to analyze other types of investment, such as real estate or marketing dollars. 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 financial analyst umbrella, as noted by the U.S. Bureau of Labor Statistics (BLS). Below we list a few examples.
- Financial risk analysts make investment decisions that limit potential losses.
- Ratings analysts assess whether companies (or governments) can pay their debts.
- Portfolio managers determine the mix of investments in their clients’ portfolios, and they answer 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 should, of course, have analytical minds and be detail-oriented in their research. They need both strong math skills and computer literacy, as analysts use software to look at trends and make forecasts.
After all of their research, financial analysts need to make decisions. Their recommendations can affect a company’s longevity, so they must be thorough but decisive. Analysts have to communicate their choices clearly and effectively, often through reports or presentations.
How Much Does a Financial Analyst Make?
Becoming a financial analyst is a strong option for anyone seeking a higher-than-average paycheck. As of May 2021, the median annual wage for financial analysts was $91,580, according to the BLS. In contrast, the median wage for all workers was $45,760.
Working as an analyst in the financial industry offers the most lucrative pay. These workers earn a mean annual salary of $124,020.
The field is also growing at a steady pace. The BLS projects employment for financial and investment analysts to grow by 9% from 2021 to 2031, which is faster than the average projected growth for all jobs. This amounts to about 32,000 new financial analyst jobs by 2031.
As you may guess, increases in economic activity affect the demand for financial analysts. Expanding and emerging industries require the help of financial analysts to guide their growth.
Globalization is a factor as well. As more markets develop around the world, companies need analysts to advise on where to expand or invest. The BLS predicts that these investors will hire financial analysts who have a deep understanding of political, economic and cultural trends in the geographical areas at play.
Buy-Side Analysts vs. Sell-Side Analysts
Financial analysts—not including those who work for research and media companies—fall into two main categories: buy-side analysts and sell-side analysts.
Buy-side analysts help companies choose where to invest. These companies, known as institutional investors, include pension funds, hedge funds, money managers and insurance companies. This category also encompasses nonprofit groups with endowments, which are large donations that have been invested to increase the original cash value.
Most financial analysts are on the buy side. While they don’t perform any stock transactions themselves, they advise companies on the most profitable investments. This may involve actual securities, real estate or even franchise opportunities. Employers may also have analysts look at their business practices, marketing spending or other returns on investment.
Sell-side analysts, on the other hand, advise agents who sell securities or other investments. This is a much narrower field than buy-side. Research analysts, for example, analyze companies’ financial data and create reports that recommend whether to buy, sell or hold those stocks. They also flag trends on individual stocks within fund portfolios.
As the CFA Institute notes, one of the pressures on sell-side analysts is that they are responsible for accurate stock ratings. Their findings are used by buy-side analysts to make decisions, and those ratings carry a lot of weight within the industry.
Note that financial analysts aren’t responsible for actually buying or selling any investments. Instead, these professionals must rely on strong data analysis and communication skills to persuade stakeholders to carry out their recommendations.
How to Become a Financial Analyst
Financial Analyst Education Requirements
Most firms require candidates 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.
While most employers don’t require a master’s degree, this advanced degree may help analysts move up to the next stage of their careers. With a proven track record, a financial analyst can advance to a role as a portfolio manager or a fund manager for wealthy 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 various job types. Most of these exams require employer sponsorship.
In most cases, financial analysts must pass the Securities Industry Essentials® exam, which covers basic information about the industry. General securities representatives must pass the Series 7 exam.
After gaining some work experience, analysts may pursue the Chartered Financial Analyst (CFA) charter, administered by the CFA Institute.
CFA candidates must have a bachelor’s degree or be within 11 months of completing one. If not, they should have a significant amount of work and/or higher education experience over at least three years. They also need an international passport, a few professional references and 4,000 hours of qualifying work experience.
Take note that the CFA charter isn’t an easy course—it requires more than 900 hours of individual study, on top of professional work hours. Prospective CFAs must also complete three levels of exams before they can apply to become charterholders.
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Frequently Asked Questions (FAQs) About Financial Analysts
What are the top three skills for a financial analyst?
Financial analysts must be detail-oriented 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 should earn a bachelor’s degree in a subject related to finance, such as business, economics or statistics. Once hired, you will probably need to pass qualification exams through FINRA to begin practicing.
Is a financial analyst the same as 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 level, while analysts look at 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 within four years, or the time it takes you to earn a bachelor’s degree. Depending on the type of work you plan to do, it may take additional time to earn licensure through FINRA as well.