In this post we talk about how to become a financial analyst.
The financial analyst profession is one of the most desired career paths in business. A successful financial analyst earns way above-average wages, is able to make profitable predictions, and is in a commanding position to determine the future of companies.
Due to global competition and constant innovations in the industry, enterprises are in need to reinforce their analytical abilities in order to improve their financial results. The continuous flow of up-to-date information is becoming a global standard. Every day more businesses are implementing financial analysis systems to their operations. As new investment opportunities are surging around the world, the demand for new analysts is rising.
If you wish to become a financial analyst, in this article, you will find what a financial analyst does, the skills required, and the ideal career path that you will need to follow to become a prosperous financial analyst.
How to Become a Financial Analyst
What is a Financial Analyst?
Financial analysts are professionals who gather, monitor, and evaluate information in order to provide forecasts, recommendations and asses potential risks in investment opportunities.
Financial analysts are employed by investment funds, banks, securities firms, insurance companies, and other businesses to develop statistical models that can spot trends and forecast future scenarios. A financial analyst’s mission is to help companies and individuals make better and more conscious business decisions.
The financial analyst judgment plays a crucial role in the decision-making process of enterprises and the general public.
What does a Financial Analyst do?
The job of a financial analyst can take multiple directions. But typically, their functions are closely related to the banking industry, for example:
- Analyzing securities, potential benefits, and losses, predicting the performance of the financial product in different market circumstances, and assessing the risks associated with them.
- Developing systems that calculate optimal insurance primes.
- Analyzing companies, their leadership, market position, cash-flow trends, and give them a credit rating.
- Risk management and portfolio diversification.
- Creating models that can spot market trends and business opportunities.
- Building profiles for potentially profitable clients.
Today, and analyst expertise can have other applications. Like, helping an e-commerce business choose a profitable product, finding appropriate beneficiaries for government programs or creating ideal work-flow models for enterprises.
The uses for a financial analyst work used to be limited to banking and government purposes, as they were of the few sectors that kept track of relevant information, make it transparent and accessible. Nowadays, it is possible to obtain access to a lot of useful data that can add value to a business, as long as there is a professional who knows how to take advantage of that information.
Financial Analyst Wages and Demand
According to the Bureau of Labor Statistics, in 2018, the median annual pay for financial analysts was $85,660, with a total of 329,500 professionals employed on the field. The average salary for an entry-level analyst was around $55,500 a year, and a senior analyst earned between $90,000 and $150,000. The wages of analysts vary among sectors, as insurance professionals are expected to make lower wages compared to their securities and trading counterparts.
Brokerage firms, banks, investment funds, etc. are required by regulation to submit securities for evaluation to the financial analysis team before making any suggestions, promoting products, or making decisions on behalf of their clients. This team must be composed of licensed financial analysts regulated by the FINRA. For that reason, as the industry grows, the demand for professional analysts will augment accordingly.
The BLS reports that the industry is expected to have an extra demand of 20,300 financial analyst professional from 2018 to 2028. That is a 6% employment creation in the sector, surpassing the total average growth for all occupations.
It is worth mentioning that the offer of analysts is expected to rise at a bigger scale than the demand, as more people are showing interest in the career; thus, wages are likely to reduce, and competence get tougher.
Necessary Skills to Become a Financial Analyst
Achieving a financial analyst status requires a particular set of skills and disciplines. Knowing what employers are looking for in financial analyst prospects can help you to aim your efforts in the correct direction and develop the abilities that you are lacking.
Research skills:
Having excellent research abilities is an essential part of analyst work. The information and opinions they provide can only be as dependable as their information sources. Most of the time, the employer will provide reliable references. Still, knowing where to find trustworthy information will bring added value to a financial analyst work and help them boost their career, as the more variables that are taken into account, the more precise their conclusions would be. An analyst that has access to multiple resources will be able to arrive with a solution to any request.
Critical thinking:
A good financial analyst is able to reason clearly and rationally, put the appearances aside, and perceive the underlying issues. A financial analyst always questions ideas, solves problems rigorously, and doesn’t make assumptions by intuition.
A critical thinker is aware of his biases and knows when his vision might be compromised, as he recognizes that no person can think all the time objectively.
Critical thinking cannot be studied or taught; it is something that you have to train your mind to do by always questioning yourself and others, being eager to find the truth, and listening to different perspectives.
Technological skills:
In our modern world, there isn’t a career path that can escape from this requirement. Being proficient with technology is increasingly becoming a necessity for a financial analyst as their work is starting to merge with a programmer’s tasks.
Having a total domain of Excel is a must. Knowing how to build dashboards, work with pivot tables, and program macros will help you to analyze large amounts of data, streamline repetitive tasks, and present information in an appealing way.
Having familiarity with SQL or Python would give you curricular value. Placing you in a favorable position compared to traditional analysts who are not used to query languages, which are essential for dealing which a large amount of information and data banks.
Interpersonal and writing skills:
Knowing how to communicate correctly with colleagues and partners is fundamental for any business application. Having the ability to exchange information efficiently and understanding other’s opinions will create a friendly and collaborative working atmosphere that will be reflected in the work and customer satisfaction.
Having excellent oral skills are as relevant as written skills. A financial analyst needs to back their approach; he needs to be able to explain complex topics in simple words that everyone can understand.
A financial analyst will represent his firm, often in front of clients, so knowing how to communicate confidently under pressure is essential for the job.
Mathematical skills:
The main focus of a financial analyst is number crunching. The mathematical complexity of the work will vary depending on the application and the profoundness of the analysis. Nevertheless, an analyst needs to have a strong mathematical basis, so he would be able to come up with formulas and models.
How can I become a Financial Analyst?
If you feel attracted to the idea of working with a large amount of data, developing predictions models, and helping businesses and individuals to make better business decisions, a financial analyst career may be what you are looking for.
Modern, sophisticated businesses and technology corporations are willing to give motivated persons the chance to work for them even if they are inexperienced or don’t have a degree. But if what you are seeking, is a position in a big enterprise, bank, or brokerage firm, there are rigorous steps that you will need to follow to achieve a successful career as a financial analyst.
Step 1: Obtain a Bachelor’s Degree
A Bachelor’s degree is the entry-level qualification for a financial analyst. Today there a lot of professional analysts employed in the sector who don´t have a degree related to finance, but as competence increases, a diploma in economy, accountability, finance, or a math-heavy field is becoming a requisite. It is also crucial for someone pursuing a financial analyst career to develop financial accounting knowledge as it is a big part of the job to understand and build financial statements.
Step 2: Earn Experience
A lot of fresh graduates find themselves in the position that they can’t get a job because they lack experience and they lack experience because they can’t get a job. Well, there is a way around this. One option is to complete an internship; this will help you get a realistic picture of the job, give you confidence performing in professional environments, earn contacts, and the most important, build experience. Even if the job is not related to the field, completing an internship will show compromise to future employers. Another option is to go online into free-lancing platforms; this is an excellent choice for fresh college graduates; there a lot of serious businesses looking from entry-level to expert analysts. Earning experience will help you to build a professional résumé and come with fresh ideas in job interviews. Even entry-level financial analyst positions are highly competitive, so having adequate experience in the field will differentiate you from other candidates.
Step 3: Attain a Licensure
As state above, to operate on the securities industry, you will need to attain the appropriate Financial Industry Regulatory Authority (FINRA) license first. The requirements, difficulty, and costs of the licenses depend on the specific activity that the professional wants to perform. The test for an analyst license can take up to six hours and is recommended for an applicant to study for at least 200 hours. It isn’t necessary to have this license before applying to a securities or banking position as employers often sponsor this examination, provide studying material, and have in-house training programs. Nevertheless, if you fail the exam, you are unlikely to get another chance, and the employer will go with another candidate.
Step 4: Obtain a job
Once you obtained the right education, relevant work experience, and the appropriate license, achieving a position as a financial analyst shouldn’t be a problem. It’s imperative to start working on the industry as early as possible and start to climb the corporate ladder.
You can work as either a buy-side analyst or a sell-side analyst. A sell-side analyst would usually work for a brokerage firm, and his job would be to evaluate securities, companies, and make predictions about market trends. A buy-side analyst, on the other hand, would work for an insurance company, pensions fund, or investment bank, and his tasks would be aimed towards risk hedging and portfolio diversification.
Step 5: Pursue a CFA Charter or an MBA.
As a professional analyst, your employer eventually will require you to pursue a CFA charter or an MBA to continue advancing with your career.
The Chartered Financial Analyst (CFA) is a professional credential administered by the CFA Institute. The CFA charter demonstrates proficiency in advanced financial analysis and real-world portfolio management. It is the most recognizable and respected finance-related designation in the world. For finance affairs, this designation can outweigh the benefits of obtaining an MBA degree.
Obtaining the designation can be challenging as only 20% of candidates who enroll in the program successfully earn the charter. To be a candidate for the exam, you will need to have at least 4,000 of experience on the field, a bachelor’s degree, and an international passport.
As hard as earning the charter might be, the challenge will be worth it. According to the CFA Institute, the average total compensation for a charter-holder in the US is around $300,000 a year.
Conclusion
The decisions that an analyst takes will lead to higher profits or losses; that is why it is one of the professions with the highest starting salary. Now that you know what it takes to become a successful financial analyst is up to you if you want to take the challenge. Nowadays, we can find all the information and instruction that we need online; there are no excuses. The secret for any successful career is to be persistent, being willing to perform outside our comfort zone, and having the initiative to start right away. Hope you enjoyed this post on how to become a financial analyst and let us know if you have any questions in the comments below!
