Financial analysts provide guidance to businesses and individuals making investment decisions. They assess the performance of stocks, bonds, and other types of investments.

Duties

Financial analysts typically do the following:

  • Recommend individual investments and collections of investments, which are known as portfolios
  • Evaluate current and historical financial data
  • Study economic and business trends
  • Examine a company’s financial statements to determine its value
  • Meet with company officials to gain better insight into the company’s prospects
  • Assess the strength of the management team
  • Prepare written reports

Financial analysts evaluate investment opportunities. They work in banks, pension funds, mutual funds, securities firms, insurance companies, and other businesses. Financial analysts are also called securities analysts and investment analysts.

Financial analysts can be divided into two categories: buy-side analysts and sell-side analysts.

  • Buy-side analysts develop investment strategies for companies that have a lot of money to invest. These companies, called institutional investors, include hedge funds, insurance companies, independent money managers, and nonprofit organizations with large endowments, such as some universities.
  • Sell-side analysts advise financial services sales agents who sell stocks, bonds, and other investments.

Some analysts work for the business media or other research houses, which are independent from the buy and sell side.

Financial analysts generally focus on trends affecting a specific industry, geographical region, or type of product. For example, an analyst may focus on a subject area such as the energy industry, a world region such as Eastern Europe, or the foreign exchange market. They must understand how new regulations, policies, political situations, and economic trends may affect investments.

Investing is becoming more global, and some financial analysts specialize in a particular country or region. Companies want those financial analysts to understand the language, culture, business environment, and political conditions in the country or region that they cover.

The following are examples of types of financial analysts:

Portfolio managers select the mix of products, industries, and regions for their company’s investment portfolio. These managers are responsible for the overall performance of the portfolio. They are also expected to explain investment decisions and strategies in meetings with stakeholders.

Fund managers work exclusively with hedge funds or mutual funds. Both fund and portfolio managers frequently make buy or sell decisions in reaction to quickly changing market conditions.

Ratings analysts evaluate the ability of companies or governments to pay their debts, including bonds. On the basis of their evaluation, a management team rates the risk of a company or government not being able to repay its bonds.

Risk analysts evaluate the risk in investment decisions and determine how to manage unpredictability and limit potential losses. This job is carried out by making investment decisions such as selecting dissimilar stocks or having a combination of stocks, bonds, and mutual funds in a portfolio.

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Work Environment

Financial analysts held about 329,500 jobs in 2018. The largest employers of financial analysts were as follows:

Securities, commodity contracts, and other financial investments and related activities 23%
Professional, scientific, and technical services 13
Credit intermediation and related activities 12
Management of companies and enterprises 12
Insurance carriers and related activities 6

Financial analysts work primarily in offices but travel frequently to visit companies or clients.

Many financial analysts work at large financial institutions based in New York City or other major financial centers.

Work Schedules

Most financial analysts work full time and some work more than 40 hours per week. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.

Education and Training

Financial analysts typically must have a bachelor’s degree.

Education

Most positions require a bachelor’s degree. A number of fields of study provide appropriate preparation, including accounting, economics, finance, statistics, and mathematics.

Licenses, Certifications, and Registrations

The Financial Industry Regulatory Authority (FINRA) is the main licensing organization for the securities industry. A license is generally required to sell financial products, which may apply to some financial analyst positions. Because most of the licenses require sponsorship by an employer, companies do not expect individuals to have these licenses before starting a job.

Employers often recommend certification, which can improve the chances for advancement. An example is the Chartered Financial Analyst (CFA) certification from the CFA Institute. Financial analysts can become CFA certified if they have a bachelor’s degree, 4 years of qualified work experience, and pass three exams. Financial analysts can also become certified in their field of specialty.

Advancement

Financial analysts typically start by specializing in a specific investment field. As they gain experience, they can become portfolio managers and select the mix of investments for a company’s portfolio. They can also become fund managers and manage large investment portfolios for individual investors. A master’s degree in finance or business administration can improve an analyst’s chances of advancing to one of these positions.

Personality and Interests

Financial analysts typically have an interest in the Thinking, Persuading and Organizing interest areas, according to the Holland Code framework. The Thinking interest area indicates a focus on researching, investigating, and increasing the understanding of natural laws. The Persuading interest area indicates a focus on influencing, motivating, and selling to other people. The Organizing interest area indicates a focus on working with information and processes to keep things arranged in orderly systems.

If you are not sure whether you have a Thinking or Persuading or Organizing interest which might fit with a career as a financial analyst, you can take a career test to measure your interests.

Financial analysts should also possess the following specific qualities:

Analytical skills. Financial analysts must process a range of information in finding profitable investments.

Communication skills. Financial analysts must explain their recommendations to clients in clear language that clients can easily understand.

Computer skills. Financial analysts must be adept at using software packages to analyze financial data, see trends, create portfolios, and make forecasts.

Decision making skills. Financial analysts must provide a recommendation to buy, hold, or sell a security. Fund managers must make split-second trading decisions.

Detail oriented. Financial analysts must pay attention to details when reviewing possible investments, as small issues may have large implications for the health of an investment.

Math skills. Financial analysts use mathematical skills when estimating the value of financial securities. 

Pay

The median annual wage for financial analysts was $85,660 in May 2018. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $52,540, and the highest 10 percent earned more than $167,420.

In May 2018, the median annual wages for financial analysts in the top industries in which they worked were as follows:

Securities, commodity contracts, and other financial
investments and related activities
$101,410
Professional, scientific, and technical services 84,540
Management of companies and enterprises 83,640
Credit intermediation and related activities 81,420
Insurance carriers and related activities 78,870

Fund managers are typically compensated by fees, usually structured as a percentage of assets under management and a percentage of the fund’s annual return.

Most financial analysts work full time and some work more than 40 hours per week. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.

Job Outlook

Employment of financial analysts is projected to grow 6 percent from 2018 to 2028, about as fast as the average for all occupations. A growing range of financial products and the need for in-depth knowledge of geographic regions are expected to lead to strong employment growth.

Demand for financial analysts tends to grow with overall economic activity. Financial analysts will be needed to evaluate investment opportunities when new businesses are established or existing businesses expand. In addition, emerging markets throughout the world are providing new investment opportunities, which require expertise in geographic regions where those markets are located.

Demand is also projected to increase as the growth of “big data” and technological improvements allow financial analysts to access a wider range of data and conduct higher quality analysis. This analysis will help businesses manage their finances, identify investment trends, and deliver new products or services to clients.

Job Prospects

Despite employment growth, competition is expected for financial analyst positions. Growth in financial services is projected to create new positions, but there are still far more people who would like to enter the occupation than there are jobs in the occupation. Having certifications and a graduate degree can significantly improve an applicant’s prospects.

For More Information

For more information about licensure for financial analysts, visit

Financial Industry Regulatory Authority (FINRA)

For more information about training and certification, visit

CFA Institute

For more information about certifications in financial analysis, visit

Global Academy of Finance and Management

CareerOneStop

For a career video on financial analysts, visit

Financial Analysts

FAQ

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The career information above is taken from the Bureau of Labor Statistics Occupational Outlook Handbook. This excellent resource for occupational data is published by the U.S. Department of Labor every two years. Truity periodically updates our site with information from the BLS database.

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