There are many routes to becoming a financial analyst, but all require mastering certain skills and technical knowledge. Here is a comprehensive guide with 5 steps to help you become a financial analyst—including key skills, job roles, and responsibilities.
Here’s what we’ll cover:
One of the most sought-after jobs in the finance industry is that of financial analyst. There's been a growing interest in this particular position in recent years, with many pursuing the role for the opportunities it brings.
According to Data USA statistics, there are approximately 284,000 actively employed financial analysts in the United States. Spurred by changes in the U.S. economy, demand for financial analysts is expected to rise by around 6.2% in the years ahead.
Contrary to popular belief, a financial analyst career is one of the more lucrative positions available to those interested in working in a multitude of industries. Many business professionals consider becoming a financial analyst because it gives them the opportunity to work across several industries.
The U.S. Bureau of Labor Statistics cites banks, insurance companies, government, investment, and business as being the key industries these professionals work in. Additionally, these professionals also receive substantial benefits and have attractive salaries.
Financial analysts continuously evaluate the economy, discovering and analyzing business trends they can use to give their clients recommendations. Often, financial analysts are needed to assess and advise on investment opportunities for new businesses and established businesses.
If analyzing money-related data trends, stocks, bonds, and other financial performance indicators to help companies and individuals make sound investment decisions sounds like something you'd be interested in doing professionally, a career as a financial analyst might be a good choice.
The financial analysis field is extensive as it encompasses a large variety of job titles and careers. Usually, financial analysts working in the financial or investment industry will find themselves as sell-side and buy-side analysts. They might also find themselves working as equity analysts or as rating analysts, which are branches of financial analysis.
Equity analysts advise on buy and sell decisions, while rating analysts evaluate and determine a government or institution's ability to pay debts. Sell-side analysts primarily advise financial service sales agents who sell stocks and bonds. Buy-side analysts typically work with insurance businesses and hedge funds to help with their various investment strategies.
If you're looking to become a financial analyst, you need to have the right education, experience, licensing, and certification to land your dream job. Whether you're just starting your finance career or looking to switch over to one, these five steps will help you learn how to become a financial analyst.
The first step toward becoming a qualified financial analyst is to earn a bachelor's degree, majoring in either mathematics, finance, statistics, economics, or accounting. While these subjects aren't necessarily prerequisites, qualified financial analysts usually major in them.
You should also consider taking courses in business communications and computer skills — both areas are beneficial to a financial analyst career.
Earning a master's degree is an optional step when considering a financial analyst career, as it is often not required for entry-level positions. Those with a master's degree are more likely to have increased interest from future employers, though.
To take your financial analyst career to the next level, aim to earn a master's degree in business administration (MBA) or a master's degree in finance. With a master's degree, you'll have the potential to earn more even if you're in an entry-level position.
To become a full-fledged financial analyst after you graduate from college, you'll need to gain work experience as either an entry-level financial analyst or junior-level financial analyst. You'll also need to determine if you want to work on the sell-side or buy-side of finance.
If you choose the sell-side, you'll need to get a job with a securities firm. If you choose the buy-side, you might want to launch your career with an investment bank, pension fund, mutual fund, or insurance company.
It's not uncommon for financial analysts to choose a particular field to specialize in. When you start in a financial analyst position, you'll be subject to in-house training programs to teach you your roles and responsibilities.
In an entry-level or junior-level financial analyst role, you'll have an array of tasks. If you don't have a master's degree or relevant licensing, it's difficult to progress past a junior level to a more senior role.
For many junior and entry-level financial analyst positions, you won't need additional certifications or licenses if you have a bachelor's degree. Yet, for advancement purposes, it's often best to consider obtaining relevant licensing and certification.
Many companies and firms hire financial analysts who have strict licensing protocols. For example, if you're working as a financial analyst for a firm that sells financial products, you'll need to obtain the appropriate licensing.
Companies and firms that sell financial products have to be registered with the Financial Industry Regulatory Authority (FINRA). Financial analysts working within these companies also need to be licensed by FINRA.
Don't despair just yet — potential hires don't need to have this licensing before they're offered a position. FINRA licensing requires employer sponsorship, so new hires will usually be offered this licensing.
In addition to licensing, many financial analysts seek certification. With the correct certification, many junior financial analysts can fast track their careers and gain additional benefits that include increased salaries.
One of the best certifications available to a financial analyst is the Chartered Financial Analyst credential, otherwise known as CFA. This credential is awarded by the CFA Institute. To earn this credential, you need to have at least four years of work experience and must pass three CFA Institute exams.
Financial analysts can also take the Series 7 exam. However, for you to be able to take this exam, you'll need to be sponsored by a regulatory organization or a FINRA member firm. Fortunately, as of 2018, FINRA established a new exam called the Securities Industry Essentials (SIE) exam. Financial analysts can take the SIE without sponsorship from a FINRA member firm.
As a financial analyst, you'll be responsible for several daily tasks, including preparing and processing a company's financial statements, analyzing plans and forecasts, maintaining various files, evaluating income statements, and communicating with company officials to evaluate and understand a company's prospects.
You'll need to suggest individual investments opportunities and be able to explain investment choices and decisions to stakeholders. You'll also need to understand market conditions to manage unpredictability so that potential losses are limited.
To accomplish all of that successfully, you'll need to be skilled in:
You should also aim to be detail-oriented. As a financial analyst, the smallest oversight can have large implications concerning an investment.
The length of time it takes to become a financial analyst varies by person and will largely depend on what skills, qualifications, and certifications you already possess. Fortunately, taking certain courses and boot camps can help expedite the learning and transitioning process.
To be eligible for an entry-level or junior financial analyst role, you need a bachelor's degree. After completing that degree, you're qualified to work as a junior financial analyst if you majored in mathematics, statistics, economics, or finance. Most companies won't hire you, though, if you lack professional work experience.
To make yourself more attractive to potential employers, you can pursue an MBA or work as an intern. Having either of these will help you to get a job in this field easier. Usually, a master's degree takes two to three years to complete, while an internship takes approximately one semester.
Once you're hired as a junior financial analyst, you'll need to gain a few years of work experience and attaining licensure and certifications to become a senior financial analyst. These certifications and licenses can take between four to six years to obtain.
How much you'll earn as a financial analyst will largely depend on the industry you're in, the amount of experience you have, and the size of the company you work for.
According to the career website Indeed, entry-level financial analysts typically earn around $40,142 annually in the U.S. The most common benefits associated with an entry-level position include a flexible spending account, family leave, health insurance, dental insurance, tuition reimbursement, and paid time off.
By contrast, a senior financial analyst earns around $85,890 per year. Commonly, senior financial analysts receive more benefits than junior financial analysts. Some of the more attractive benefits include parental leave, family leave, commuter assistance, health insurance, paid jury leave, gym membership, and a 401(k) matching.
In the United States, the highest paying cities for financial analysts include Washington D.C., Houston, and New York.
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