How To Become a Financial Analyst: Complete Guide

Starting a career as a financial analyst can be overwhelming—many technical terms, checklists of tens of tasks to do, learning resources contradicting each other, and the list goes on.

However, sometimes all you need are ideas to get your dream alive and kicking and to give you a leg up when making an entry into a new field.

That’s why in this article I’ve put together a comprehensive guide to becoming a financial analyst that is easy to follow and actionable.

Here are some of the key areas covered in this article:

Key qualifications and skills needed in the field
Effective networking strategies for a financial analyst
How to gain practical experience in the field
Some of the high-end firms that can hire you
The financial analyst application process and how to win your interviews
Typical job description for a financial analyst
Challenges of being a financial analyst
Salaries and compensations
Financial analyst career prospects and much more

In every section above, I’ve put together insights, examples, and actionable strategies that can give your career wings in no time—in fact, this is a mentorship opportunity.

Ready to learn? Let’s get started…

Who Is a Financial Analyst?

A financial analyst is a professional working in banks, pension funds, insurance companies, and other businesses whose responsibilities are to study the performance of investments such as stocks, bonds, commodities, and more in order to help their companies make informed financial decisions.

A financial analyst working in a bank may be responsible for analyzing the bank’s financial statements, assessing risks and opportunities, and making recommendations on investments and lending decisions.

This is a very lucrative career in finance—you can work in almost every industry with tons of responsibilities in each. So, what are the different types of financial analysts?

Different Types of Financial Analysts

In this section, we’ll take a look at the most common types of financial analysts. Additionally, we’ll also look at some of the responsibilities that set them aside.

#1. Investment banking analyst

Their work is to assist companies and firms develop or maintain effective investments that meet their financial goals
Search for potential investment opportunities
Evaluate investments to identify which ones are performing well and which ones the company should consider replacing
Perform client transactions

#2. Equity research analyst

Overseeing client investment portfolios
Making decisions about what securities to hold

#3.Treasury analyst

Oversee and manage the use of an organization’s finances, including investment income, liabilities, asset levels, credit, and cash flow
Recommend how a company can maintain or improve its financial health

#4. Financial planning and analysis (FP&A) analyst

Undertake qualitative and quantitative analysis of a firm’s operations to assess its progress toward meeting its plans and goals
Analyze previous company performance and try to anticipate potential risks and challenges

#5. Corporate development analyst

Optimize business processes and improve revenue
Assess finances and operations, research sales leads, and improve business strategies

#6. Risk analyst

Help companies invest or expand in new markets or locations
Review plans and provide financial advice to increase or sustain profits, limit risks, and create growth

#7.Ratings analyst

Assess the ability of companies to pay their debts, including bonds

#8. Financial qualitative analyst

Evaluate investment opportunities, and make investment decisions.
Assess the performance of bonds, stocks, and other kinds of investments

#9. Budget analyst

Help companies monitor their finances by maintaining a balanced budget
Run regular financial reports

#10. Portfolio manager

Create and manage investment plans for their clients
Analyze market developments and trends

#11. Hedge fund manager

Advise companies on how to manage their long- and short-term hedge fund investments

The list of the various types of financial analysts is quite extensive; there are far more roles within the industry. So, which one do you think fits you well?

In the next section, we discuss some of the qualifications and skills needed to break into the finance analyst career. It should also help you make an informed decision on what type of financial analyst you want to be. Let’s take a look.

What Qualifications Do You Need to Become a Financial Analyst?

There is a high degree of consensus that the academic qualifications needed to become a financial analyst are well-defined. Let’s take a look at what you need.

Step 1: Earn a relevant bachelor’s degree

Earn a bachelor’s degree in a subject related to finance, such as business, economics, statistics, accounting, or finance, from an elite university or college, such as Harvard. This will take you three years of full-time study.

Step 2: Attain licensing and certifications

To improve your chances of being employed by top firms, consider pursuing a Chartered Accountant (CA) or Certified Practicing Accountant (CPA) qualification or a Financial Industry Regulatory Authority (FINRA) license.

Why are all these important? For a good reason, financial-related firms must comply with specific regulations to protect consumers from unfair practices.

It’s important to note that these certifications require hard work and lots of sacrifices to get them. Some of the key requirements include:

A bachelor’s degree in finance or accounting or be within 11 months of completing one
A minimum of four years of qualified work experience
Passing scores on the three CFA Institute exams

You can read more to shed some light on every type of financial analyst certification there is.

Step 3: Practical job experience

It’s one thing to be a graduate or licensed professional in the finance field, and it’s another to be able to execute your responsibilities as a financial analyst.

In addition to that, the competition among job seekers is high, which is why having practical experience will give you a competitive advantage over the rest.

To build your wealth of experience, you can start by seeking an internship or volunteer opportunity while studying to apply your skills under the guidance of experienced financial analysts.

Step 4: Earn a master’s degree in finance-related field (optional)

Without mincing my words, the competition for financial analyst positions is very high.

My secret is, after successfully completing all or either of the above steps, to go for a relevant MBA. It should take two years of study to get it, but it will prove helpful.

You’ll get to learn advanced skills in advanced auditing, advanced financial accounting and reporting, managerial methods, and strategic analysis, as well as other related topics.

It will improve your knowledge, business knowledge, and communication skills and spark interest from employers.

Additionally, with a proven track record, you can advance to a role as a portfolio manager or a fund manager for top investors.

Now that we’ve fully settled on the academic qualifications needed for one to become a financial analyst, let’s proceed to the skills that are necessary for this field.

What Skills Are Required to Become a Successful Financial Analyst?

As important as the academic qualifications are the skill sets. In fact, many hiring managers and firms take their time during interviews and the first few days of your entry into a career to assess the skills you have.

To put this into perspective, let’s take a look at some of the technical and soft skills you need to become successful.

Technical skills required of a financial analyst

Financial analysis of financial models
Financial planning
Accounting
Data analysis of past financial data
Budgeting
Strategic reporting
Risk analysis

Soft skills required of a financial analyst

Project management
Communication
Problem-solving
Teamwork
Time management
Research
Leadership
Business administration

What Are The Job Requirements For Entry-Level Financial Analyst Positions?

Overall, firms are looking for the right people to help them achieve their goals and objectives without missing a beat—be that person.

If you want to learn more about the job description, see my article, “Entry Level Financial Analyst Job Description: A Short Guide.”

So what do financial analysts do? More on this in the next section.

What Do Financial Analysts Do?

I have a confession to make.

Sometimes, being a financial analyst can feel like a complicated task. There are so many tasks to think about—and almost every time, your cup will be full to the brim.

This is because of the nature of the business environment. The responsibilities include:

#1. Gather financial data and information

Financial analysts start off their journey with research on the critical financial conditions of the economy that inform investment. In the process, they identify and gather relevant financial data from financial and accounting reports, which they further break down to inform decisions.

Some of the reliable sources of financial data, statistics, and information used include:

Financial statements
Economic indicators
Market trends
News articles
Financial news websites
Government reports
Company-specific information such as management interviews and industry research

#2. Organize information

All the data, statistics, and information collected above need to be organized so that they make sense. Financial analysts use tools like Excel and other software that store the information before it’s analyzed or for future reference.

The most commonly used tools include:

Tableau
Microsoft Excel
Google Sheets
QuickBooks
Bloomberg Terminal
Statistical Analysis System

These tools help analysts manage and organize large amounts of financial data, perform complex calculations and modeling, create visualizations and charts, and generate reports.

#3. Analyze financial results

This is the next process after data collection and organization. Financial analysts break down financial data, creating financial models that can predict the outcome of certain business decisions.

A financial analyst at an insurance company, for example, may analyze trends in the company’s claims data to identify potential areas for cost savings or to develop new insurance products that better meet customer needs.

#4. Develop recommendations

Firms and companies rely on recommendations made by financial analysts to inform their investment strategies and decisions.

Some of the typical recommendations made include:

Financial forecasting such as sales growth
Budget planning and allocation
Mergers and acquisitions
Performance improvement
Investment recommendations to increase market share
Risk management strategies such as hedging against potential losses or diversifying investments

#5. Make presentations and generate reports

Pitchbooks, internal reports, and management presentations form this last part of the work done by a financial analyst. They convert the data into accurate, easy-to-understand, and insightful presentations and reports in order to help their clients and company executives plan future investment plans.

Remember, as a financial analyst, you can’t afford to make a mistake; it will translate to a big economic loss—that is not desired. That’s why it’s important to stay up to date with new technologies and market conditions for sustained efforts.

If you want to learn more about Financial Reporting Analyst, I’ve created a resource that you can benefit from.

Now that we’ve figured out some of the key things a financial analyst does, it’s time to add some weight to some of the challenges of being a financial analyst.

What Are the Challenges of Being a Financial Analyst?

Want to become a financial analyst? Just like in any industry, there are tons of challenges—foreseen or unforeseen. And I don’t intend to intimidate you.

That’s why I have included this section to give you a heads-up so that you can take extra caution as you venture into this lucrative industry.

Some of the common industry challenges for financial analysts include:

Being able to correctly analyze, interpret, and offer actionable financial recommendations that can inform financial decisions
The dynamic and ever-evolving nature of the finance industry
Communication and presentation skills
Time pressure especially during earnings seasons, budget planning cycles, or other critical financial events
The complexity of financial instruments such as derivatives, options, and structured products requires advanced knowledge and expertise to understand and analyze.
Workload and stress
Ethical considerations such as conflicts of interest, pressure to promote certain financial products or biased analysis

Although working as a financial analyst does present some challenges, you don’t have to partake in them. There are far more intriguing opportunities that should motivate you to stay on the right side of your job.

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It’s always important to create meaningful networks and collaborations across the industry so that you can have a better working relationship with everyone.

Ready to get started in your dream career? In the subsequent sections, I’ll delve into guiding you through some of the things you need to do to land your first job as a financial analyst.

So, who is going to be your employer? More in the next section.

What Kind of Industries Employ Financial Analysts?

There are many industries that absorb financial analysts. Those who become financial analysts are often employed in companies such as:

#1. Banks

Banks are the top employers of financial analysts. They employ analysts to help them evaluate the risk for lending, liquidation, and other key services banks provide to the general public.

#2. Investment advisory firms

Investment firms, mutual funds, hedge funds, and private equity firms often hire financial analysts to conduct research and analysis on investment opportunities.

#3. Insurance companies

Financial analysts help insurance companies with risk analysis and management. They evaluate financial data that helps in underwriting insurance policies, update cash flow models, and generate reports for decision-making.

#4. Government regulatory firms

Financial analysts are hired by government agencies to assist them in investing and using financial data to predict future trends in the overall economy.

#5. Business

Generally, businesses of all sorts will employ financial analysts to provide advice on operational changes, product launches, marketing techniques compared to cost, and other financial concerns a corporation might have.

Some of the other specific firms that hire financial analysts include:

Financial planning institutions
Portfolio management providers
Pension funds
Corporate finance
Non-Governmental Organizations
Real estate
Energy and utilities
Technology and IT

Which of the above is your favorite or dream employer? It’s important to be decisive when it comes to the job market by knowing what you want and going for it.

Some of the key factors that will inform your decision in this case will be the work environment, skills, salary, and so much more.

It is important to keep an eye on the various job boards and company websites, just in case they advertise an opportunity you’re qualified for.

If your application goes through, one thing that you can be sure of is a tough interview process—and I am going to give you a heads up of what to expect in the next section.

What Are Some Common Interview Questions for Financial Analyst Positions?

The hiring process for financial analysts is perhaps the most rigorous exercise.

But it doesn’t have to be the case for you—because what I’m about to share is a guide to acing your future interviews.

Some of the general interview questions for a financial analyst job include the following:

Why do you want to be a financial analyst?
Where do you see yourself in five years?
What is your greatest weakness?
Why do you want to work for us?
What have you learned from your mistakes in your previous finance job?
Describe a situation when you had to meet a tight deadline. How did you complete it?
What do you think was your most successful project?
Tell me about a time you had to handle large amounts of data. How did you ensure accuracy?
What steps do you take to maintain quality at work despite the pressure?
What are CAPM and WACC?
How do you calculate the cost of equity?
What is debit and credit in accounting?
What’s the difference between operating profit, gross profit, and net profit?
What are the three most essential ratios to check a company’s financial strength?
Why do you want to join our company?
What is the difference between FCFF and FCFE?
What is LIBOR?
What is shareholders’ equity? How do you calculate it?

As a good steward of knowledge, it’s important to note that your answers to the above questions should not be set in stone but rather customized depending on the prevailing situation.

A career as a financial analyst is quite rewarding, so what’s the kind of salary and compensation you can expect? More about this in the next section.

What Kind of Salaries Can Financial Analysts Expect?

According to Glassdoor, the average salary for a financial analyst in the United States is $76,457 per year.

Source: Glassdoor

According to the US Bureau of Labor Statistics, the mean hourly rate for a financial analyst stands at $49.53, which translates to about $103,200 in mean annual wages.

Source: US Bureau of Labor Statistics

According to the Salary Guide for Accounting and Finance Professionals, the salary for entry-level financial analysts in New York is somewhere between $69,000 and $91,080, while senior financial analysts can bag somewhere between $101,430 and $142,485.

Source: Roberthalf

As is evident, the salary you can expect will depend on three things:

Your level of experience
Your position
The firm that you’re working in.

What Are the Career Prospects for Financial Analysts?

The demand for financial analysts continues to grow in the US. There are more and more firms, businesses, and companies looking to hire financial analysts so that they can help them make informed investment decisions.

According to the U.S. Bureau of Labor Statistics, there are about 296100 financial analyst jobs, respectively, in the US, while projections indicate a projected growth of 11% over the next 10 years.

As you plan for your career, it’s important to position yourself strategically, as we’ve already discussed above, so that you can be absorbed when opportunities arise.

Additionally, it’s very important to work hard and smart once you land your first job and aim to rise up the ladder with time.

That’s the ultimate goal—so that you can enjoy the benefits and opportunities that come with titles and roles.

How To Become a Financial Analyst: Frequently Asked Questions

#1. How important is networking for becoming a financial analyst?

While technical skills and qualifications are crucial, networking can help aspiring financial analysts create valuable connections, gain insights into the industry, and access potential job opportunities.

#2. How can you gain practical experience as a financial analyst?

There are many avenues you can use to gain practical and relevant experience as a financial analyst. You can start by looking for internships or volunteer opportunities in relevant firms, such as banks, and working under an experienced financial analyst. Additionally, you can go for a relevant MBA to gain managerial experience, among other skills.

#3. How long does it take to become a financial analyst?

The minimum qualification to become a financial analyst is a relevant bachelor’s degree. This means you immediately become one after completing your undergraduate studies. In some cases, if you need a license from FINRA, it may take a bit of time for you to complete the exams before you’re fully certified.

#4. What kind of degree do you need to become a financial analyst?

You need a bachelor’s degree in a subject related to finance, such as business, economics, statistics, accounting, or finance, from an elite university or college, such as Harvard.

#5. Is it necessary to have a CFA designation to become a financial analyst?

While having a Chartered Financial Analyst (CFA) designation can be beneficial and may enhance one’s qualifications as a financial analyst, it is not always necessary to have a CFA designation to become a financial analyst.

The specific requirements for becoming a financial analyst can vary depending on the employer, the industry, and the level of the role.

Conclusion: Is a Financial Analyst Career Right for Me?

In conclusion, while a career as a financial analyst can offer numerous opportunities for growth and advancement, it’s essential to thoroughly assess your interests, skills, and goals to determine if they align with your career aspirations.

Is Finance a Good Career path for you? Seeking guidance from professionals in the field and conducting thorough research can aid in making an informed decision about pursuing a career as a financial analyst.