A financial analyst is a person who performs financial analysis at a micro and macro level to understand the financial health of a company and offer suitable recommendations. The financial analysis covers fundamental analysis, ratio analysis, financial modeling, and valuation. The financial analyst is also known as an investment analyst, an equity analyst, a research analyst or a securities analyst.
In this post, we will see how to become a financial analyst.
According to the Bureau of Labor Statistics (BLS), the financial analyst job sector is predicted to grow by 15.5 percent between 2012 and 2022. According to liberal estimates, this will create about 39,000+ jobs in the US alone. A financial analyst can perform many roles and execute various responsibilities. Credit analysts, money market analysts, investment analysts, budget analysts, ratings analysts, security analysts, tax analysts, Wall Street analysts and mergers and acquisitions analysts are some specializations. You can read our detailed articles on becoming a hedge fund analyst and private equity analyst.
Financial Analyst Jobs
There are three areas where the role of a financial analyst is necessary.
1. Buy-Side Firms
Buy-Side Firms are corporate or individual investors who invest for future returns. The risk factor is high, and investment decisions are solely made by the investors.
2. Sell Side Firms
Again, as mentioned in the earlier section, the Sell Side also comprises of corporate and individuals who are involved as a facilitator for Buy Side entities. They help in decision-making and the risk potential is quite less.
Read more about Buy Side and Sell Side firms in detail here.
3. Investment Banks
The job profile of an investment banking analyst is rewarding. The objective of investment banks is to assist governments, corporations and individuals to raise capital by issuing securities or underwriting. Here is a detailed article on the roles and responsibilities of an investment banking analyst.
Watch this Video to understand it clearly:
Financial Analyst Job Description
Buy-Side Firms are basically different funds, inclusive of mutual funds, where the financial analyst studies different companies, performs research and analysis and gives recommendations whether an investment will be profitable or otherwise. The report also recommends whether it will be wise to sell an investment or hold it. This is in-house research. The job entails analyzing and writing in-depth reports using principles of fundamental analysis, tactical evaluation and technical chart analysis.
Sell Side Firms are research houses or brokerage firms. They cover certain companies and write detailed equity research reports and sell this research to the clients. The main idea here is to sell research and generate brokerage from client’s transactions.
In Investment banks, the financial analyst’s role is different. Here, he mainly covers Initial Public Offering (IPO) process and Mergers and Acquisitions (M&A) deals. The financial analyst plays an active role in all these deals.
The roles and responsibilities are earmarked for all the above areas. As an analyst, the primary role is to research and analyze financial information and assist the corporate or individual with investment decisions.
The financial analyst compares and analyzes financial reports and forecasts. The analyst identifies trends and offers investment recommendations accordingly.
The job of a financial analyst also entails managing financial data and summarizing them through presentations, reports and statistical analysis. Furthermore, the financial analyst needs to remain abreast of current economic trends and market happenings, and he/she can do this by developing a personal networking group, reading financial publications and participating in professional events like conferences and seminars.
How to Become a Financial Analyst?
For entry-level financial analyst jobs, an undergraduate degree in finance, economics, administration, management and statistics is necessary.
To have a successful career as a financial analyst, one needs to begin early. Get an internship while still being a student. This experience helps in the long run. Whether the employers are looking towards campus placements or other conventional hiring mediums, they tend to pick up the ‘creamy layer’. In short, never compromise with grades. Chances of getting picked by the best financial institutions increase with better grades.
Furthermore, accounting or financial degrees such as Chartered Investment Manager (CIM), Chartered Financial Analyst (CFA), Certified Management Accountant (CMA), Certified General Accountant (CGA) and MBA degree helps in intermediate and senior financial analyst positions.
In the US, registration with the Financial Industry Regulatory Authority (FINRA) is essential to work as a Wall Street research analyst or on the sell-side. Further, the person needs to clear Series 86 and Series 87 of the Research Analyst Examination and also clear the General Securities Representative Exam.
Apart from qualifications, the analyst needs to have certain skills such as:
1. Solid analytical skills
2. In-depth understanding of companies
3. Interest and curiosity in analyzing
4. Solid fundamental valuation skills acquired in business school
5. Interest in understanding and analyzing a company’s business
6. Ability to build financial models
7. Clear understanding of financial and quantitative concepts
8. Strong analytical and MS Excel skills (Macros, V-lookups and Pivot tables) with strong communication skills
9. Sectoral expertise in telecom, technology, media, insurance, food and beverage and banking
How Much Salary a Financial Analyst Draws?
In London, an equity research analyst profile will give you a salary in the range of GBP 20,000 – 50,000 annually. In the US, for the same profile, you can earn $ 35,000- 80,000 annually. In India, the pay scale is an average of Rs. 353,991 annually. A career as a financial analyst will bring financial benefits but don’t choose this career for this sole reason.
Financial Analyst Interview Questions
There are many financial KPOs where fresher and entry level openings are available. However, check the skills they want for these roles.
The selection process for the companies involves case-based test and two rounds of interviews.
My experience says that if you are excellent in fundamental and analytical skills, you can grab such roles. Therefore, brush up your financial knowledge and be ready to become a financial analyst.
If you wish to work in an investment bank, read the detailed guide to crack investment banking interview.
What are your career plans? Write to me.
Want help in how to prepare for a financial analyst interview? Leave a comment below.