What is a Financial Analyst?
Table of Contents
- What is a Financial Analyst?
- What does a Financial Analyst do?
- How to become a Financial Analyst
- What is the workplace of a Financial Analyst like?
- What are the different areas of finance that a Financial Analyst can work in?
- Where do Financial Analysts typically live?
- What is a Chartered Financial Analyst?
- Is becoming a Financial Analyst a good career choice?
- Further Reading
- Similar Careers
A financial analyst is someone who manages various aspects of other people’s money. Some analysts work as investment advisors, either on their own or with a brokerage firm. Depending on the wealth and size of their clients, they may manage portfolios worth millions of dollars. Other financial analysts work for banks or insurance companies, ensuring that even when a loan defaults or a claim is paid, the company maintains a positive cash flow. Still others specialize in mergers and acquisitions, determining the profitability of two companies combining their forces in a merger or one company buying another company in an acquisition.
How to Become a Financial Analyst
What does a Financial Analyst do?
Financial analysts evaluate the financial situation in their area of expertise and generate appropriate reports, both written and oral, regarding their recommendations. They monitor and interpret available data such as industry and economic trends, forecast the current trends into probable future profitability, determine a fair market value for the sale of company stock, and recommend action to their company or investors.
Some financial analysts support the growing “green" industries. These analysts may evaluate a vacant building for the feasibility of retrofitting it, or he or she may analyze the costs and benefits of including green technologies in new construction. The financial analyst may also be involved in generating venture capital for green startup companies. They may monitor and interpret climate change data or clean water data in order to calculate supply and demand, or whether or not to invest in water rights, energy futures, and other tradable commodities within the green industry.
Successful financial analysts are excellent critical thinkers; they can logically determine the best course of action regarding any potential investment. They should be lifelong and active learners in order to remain current regarding market conditions and new technologies, and to be able to predict the long-term results of their investment decisions.
An analyst identifies potential problems within his or her investment options and either seeks a solution to the problem or opts out of the opportunity. Excellent communication skills, combined with the ability to distill large quantities of complex data into clear, concise presentations, allow an analyst to convey his or her investment opportunities in a manner that encourages clients to sign on.
An analyst is willing to take risks in order to generate profit, but he or she is also an expert in risk management and is sensitive to the acceptable risk level for his or her clients. Integrity, dependability, attention to detail, and initiative are hallmarks of a successful analyst.
Financial analysis is a fast-paced, cutting-edge, and highly competitive career choice. A thorough knowledge of ones chosen field on both the macroeconomic and microeconomic level enhances an analyst's opportunities for advancement within his or her area of specialty. Virtually all analysts rely on publications such as The Wall Street Journal, The Financial Times, and The Economist as well as various electronic media in order to remain at the top of their field.
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How to become a Financial Analyst
Individuals choosing a career in financial analysis will need to successfully complete a bachelor’s degree to qualify for an entry-level position. Students with a strong background in higher mathematics and business will excel in achieving a bachelor of science in finance. Coursework will include statistics, managerial finance, business laws, investment analysis, ethics, accounting, international business, and marketing.
Many positions require a masters degree in business administration. At this level of education, students typically study advanced theories in business and management and concentrate on one specific financial area, such as international investment or project management.
In addition to a bachelor’s degree or a master’s degree, most individuals pursuing a career in financial analysis need to maintain appropriate industry certification. The CFA Institute offers certification to those analysts who have a bachelor’s degree and four years of field experience. The CFA certification involves two to five years of study and the successful completion of three examinations.
Professional licensure is a requirement for those analysts choosing a career in stocks, bonds, or other legal issues. The Financial Industry Regulatory Authority offers securities licensure for current employees, should their company sponsor them.
What is the workplace of a Financial Analyst like?
Most financial analysts work in an office environment. Some analysts travel to visit potential investors, potential investments, and perform hands-on evaluations that enable them to accurately decide the value and potential risk of each investment. Financial institutions and insurance industries employ the majority of analysts, usually in financial centres in North America and worldwide.
Aside from the actual location of where financial analysts work, which is typically in an office environment, one should also note the different areas of finance in which they can work. These can be diverse and multi-faceted.
Investment banking is the area with which most people associate financial analysts, but some financial analysts secure jobs in corporations and businesses that are not wholly centred on investment. These companies can be involved in any area of business. Financial analysts working for such businesses are there primarily to manage financial portfolios and act as advisors. For instance, they may manage budgets and advise upon the condition of the company’s finances. However, if they gauge a potential area where the corporation or business can expand or invest, they may advise the relevant personnel to carry out the appropriate expansion or investment. This is why financial analysts are an invaluable asset to businesses and corporations, and why the role of a financial analyst is an esteemed and significant one within a company.
In terms of the geographical location of where financial analysts live and work, it depends on the area in which they have specialized. Corporations and businesses are located in any major city in the world, and often corporations have sites in different countries, which could offer the opportunity to travel. Investment firms, major banks and brokerages are almost always located in the main financial districts of major metropolitan cities. New York, London, Hong Kong and Singapore are some of the chief cities in which an investment financial analyst can ply their trade.
A chartered financial analyst, or CFA, is someone who has passed a series of intense exams and has obtained the relevant credential from the CFA Institute, which is based in the US. If one possesses the title of being a chartered financial analyst, their prospect of attaining employment with a top investment firm will increase dramatically.
To acquire the necessary credential, or to become a charterholder, a financial analyst is required to have worked for four years in the field of financial analysis. They must pass three six-hour exams, which are notoriously difficult, even for someone with plenty of experience and relevant knowledge.
If a prospective candidate is successful however, the rewards can definitely be worthwhile. The CFA Institute’s benchmark for success means that any financial analyst who has passed the exams will be held in high regard. According to their website, the CFA Institute ‘sets the standard for excellence in the industry,’ and this view is held as a truism within the realm of financial analysis.
Depending on which lens through which you look, becoming a financial analyst could be an exhilarating, rewarding career choice, or it could be an arduous, gruelling career choice. Certainly, this is a good career for anyone excited by risk management, numbers and algorithms, and a fast- paced work environment. Notwithstanding, and even if you are excited by all these aspects of a career in financial analysis, you must also possess huge reserves of grit and determination to succeed.
While some people may think that a financial analyst can exist somewhat in the background of an institution, deciphering numbers and producing resultant figures and charts, one should note that having excellent interpersonal skills is a huge asset. This is an especially suitable and good career if you are able to think in an elevated capacity and have acute visionary skills regarding finances and budgets, but also feel comfortable communicating these in a simple and effective manner.
The financial rewards of being a financial analyst are certainly appealing, but it should not be the primary motivation for entering this career. Satisfaction, for a financial analyst who seeks a career with longevity, will come from engaging in critical thinking every work day and undertaking constant detailed analysis.
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