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How to Become a Financial Analyst? A Step-by-Step Guide

Avadhut |
July 6, 2020

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.

A financial analyst can perform many roles and execute various responsibilities.

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Credit analysts, money market analysts, investment analysts, budget analysts, rating 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.

Buy-Side Firms

Buy-Side Firms are corporate or individual investors who invest in future returns.

The risk factor is high, and investors solely make investment decisions.

Sell-Side Firms

Again, as mentioned in the earlier section, the Sell Side also comprises of corporates 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.

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 different funds, inclusive of mutual funds, where the financial analyst studies different companies, perform research and analysis and gives recommendations on 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 the 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.

A financial analyst advises their clients when to buy and sell investments.

These suggestions come from a strong background that involves the analysis of the current economic trends, business forecasts, and the strategy of the specific company.

In addition to making a recommendation, the financial analyst will make a report that explains the background.

Some may work for investment houses, banks, insurance agencies, stock brokerages, and similar institutions that base their work on investments.

They typically focus on becoming experts in stocks or bonds. Others work in large corporations in different industries.

They analyze internal financial data, create financial plans, and project revenues and expenses with the goal to help the executives make a proper budget and investment decisions.

No matter where the financial analyst works, their main responsibilities include providing senior management with all the information and analysis they need to make strategic decisions on buying and/or investing.

In short, these are some of the specific responsibilities you’ll have as a professional financial analyst:

  • Tracking and analyzing micro- and macroeconomic trends.
  • Determining a company’s value by studying its financial statements.
  • Staying informed regarding the current economic trends and forecasts. Reading important publications (such as The Wall Street Journal, Financial Planning, Journal of Financial Planning, and InvestmentNews) is a daily habit for a financial analyst.
  • Staying informed on the development of a specific sector or industry.
  • Recommending investments to clients and the managers of the organizations they work for. They advise them when to sell, strong sell, hold, buy, or strong buy.
  • Discussing investment strategies with executives.
  • Trading on behalf of the employer or client.
  • Creating detailed financial reports and models for comparison and analysis.

Based on the responsibilities, there are two major types of financial analysts:

  • Sell-side financial analysts, who advise agents that sell stocks, bonds, and other types of investments, and
  • Buy-side financial analysts, who advise institutional investors (corporations with a lot of money to invest).

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.

How to become a financial analyst

Furthermore, the financial analyst needs to remain abreast of current economic trends and market happenings, and he/she can do this by developing a private networking group, reading financial publications and participating in professional events like conferences and seminars.

Suggested: Read more about Finance Careers Path

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.

Financial Analyst qualifications

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 the Series 86 and Series 87 of the Research Analyst Examination and also clear the General Securities Representative Exam.

Financial Analyst Skills

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. A 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

Financial Analyst Skills US

How Much Salary a Financial Analyst Draws?

In London, the Financial Analyst profile will give you a salary in the range of GBP 28,000 – 64,000 annually, with an average base pay GBP 40,831.

Financial Analyst Salary in London

In the US, for the same profile, the median annual wage for financial analysts was $73,009 in March 2020.

Financial Analyst Salary in the US

In India, the pay scale is an average of Rs. 404,317 annually. A career as a financial analyst will bring financial benefits but don’t choose this career for this sole reason. 

Financial Analyst Salary in India

According to the Bureau of Labor Statistics (BLS), the financial analyst job sector is predicted to grow by 6 percent between 2018 and 2028.

Financial Analyst Salary and Outlook

The job outlook for a financial analyst is impressive.

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 a 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 an 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.

The Educational Path

If you intend to become a professional financial analyst, you will need at least a BA degree, preferably in a major related to finances.

That can be finance, economics, statistics, accounting, or even mathematics. An MA degree in finance or business administration will put you in an advantage over other job applicants. This is a profession where education is valued a lot.

According to the rankings made by US News, the best finance MBA programs are provided by the following institutions:

If you intend to work in this field after graduation, you’ll need to become a certified financial analyst.

If you want to become a sell-side financial analyst, you will be required to obtain a license. The main licensing organization is FINRA (Financial Industry Regulatory Authority).

The good news is that a license requires an employer’s sponsorship, so you don’t necessarily need it before starting a job.

In addition to a license, there are certain certifications that are beneficial and recommended for all types of financial analysts. These are the most important ones:

  • Chartered Financial Analyst Certification, which proves you’re a highly-qualified professional for investment banking and analysis, economics, and portfolio management. This credential will make you suitable for work in banks, insurance firms, mutual funds, and investment groups. Large corporations usually hire financial analysts who already have a CFA certification.
  • Financial Risk Manager Certification, which shows you can apply knowledge and risk-management skills in real-life situations. It’s a great certificate to have if you intend to work as an advisor, analyst, risk control manager, consultant, or credit manager for investments.
  • Financial Modeling Certificate, which makes you suitable to work as a fund manager or investment manager in banks; a property & fund manager in real estate; or a consultant, analyst, or finance manager in corporations.
  • Certified Financial Planner Certification, which shows your expertise in the planning of investment, employee benefits, insurance and retirement, tax and risk.

Did you notice how diverse these certifications are? That’s why it’s important to focus on a field of specialty and get the right type of experience and certificate. That’s what makes you a professional in financial analysis.

What Happens After Getting a Degree?

No one will hire you just because you have the right degree. Since most certification programs require some kind of experience, you’ll have to build a solid foundation that would make you eligible for such accreditation.

From there on, you can start becoming the professional you want to be.

Get an Internship

The university provides great theoretical knowledge and a foundation of skills you can build on.

For a financial analyst to get real-world experience, however, internships are crucial.

If possible, start accumulating this type of experience before you even graduate.

That will help you form relationships with financial firms and corporations that give you invaluable training opportunities.

Manisha Thakor, founder, and CEO of MoneyZen Wealth Management shared an insightful tip for the readers of U.S. News: “Something as basic as offering to work with an established financial professional for five to 10 hours a month can make all the difference. So remember to keep one hand in the books and one hand out shaking new ones.”

Take Networking Seriously

The key to getting a job in this field is networking.

Remember when we talked about the importance of communication skills? This is the stage of the journey when they have to shine.

  • Use your alumni network to its full potential.
  • Connect with the right people on LinkedIn.
  • Join an investment club and attend the events. There, you’ll meet professionals willing to offer tips and share experiences. You can learn more about the profession and get first-hand info about job openings.

Boost Your Interview Skills

  • Understand the questions recruiters usually ask the candidates for finance positions.
  • Learn as much as possible about the specific organization. They will want to see how informed you are.
  • Stay calm and relaxed, but professional enough.
  • Dress for the job you want to get. This is a golden rule for interview success. Since it’s a serious job in a corporate environment, it’s best to suit up.
  • Mind your body language. Uncontrolled movements will show you’re nervous. Show your confidence through your position and hand gestures.
  • When the hiring manager invites you to ask questions, do it. Think of an insightful question, which shows your interest in the organization’s work and the particular position.

Takeaway

I am sure you are now absolutely clear about how to become a financial analyst. If you have any queries, please comment below.

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