Organizations, banks and many other financial institutions are constantly looking for ways to optimize their investment strategies for the future. This means they need the assistance of a financial analyst.
If your expertise is in finance, the role of finance analyst is an ideal position to utilize your skills and knowledge to help businesses and other clients succeed. Let’s take a closer look at what being a financial analyst entails, including daily responsibilities, salary expectations and how having a Master of Business Administration degree can help launch your career.
Financial Analyst: Role and Responsibilities
Financial analysts play a critical role in an organization’s daily operations. At a high level, they research and utilize financial data to understand the business and market to see how an organization stacks up. Based on general economic conditions and internal data, they recommend actions for the company to take, like selling stock or making other investments.
Of course, this is just skimming the surface of a financial analyst’s responsibilities. Here are some of the more specific tasks these professionals might perform for a company, according to the Corporate Finance Institute:
Gather and organize information: Whether it’s a company’s historical financial reports and accounting data or macroeconomic information and industry research, an analyst must know how to find, collect and organize vast amounts of information relevant to their business and industry. They use their research skills to review internal databases and reports from government agencies and enter them into a database, like an Excel spreadsheet.
Examine financial statements: A company’s financial statements hold a wealth of important information for a financial analyst. Using these documents (and those sorted into internal databases), they are able to determine the value of the organization. This is one of the most important responsibilities of financial analysts, as this information guides their recommendations and serves as a benchmark for the company’s performance.
Recommend investments: After analyzing all of this information, financial analysts develop a forecast about the market and how the company will perform in the future. This is where they must use their outside knowledge alongside the financial calculations to make recommendations to company officials or investment bankers. A financial analyst will create a portfolio filled with reports backing up their recommendations.
As you can see, a financial analyst must be prepared to take on many responsibilities. They must conduct research and financial analysis, connect with management teams and company officials and generate written reports and presentations. This is different from an accountant who would be concerned with a company’s financials from an operational perspective, rather than the big-picture, strategic angle of a financial analyst.
Financial analysts work in a number of different industries, including securities, commodities, contracts, investment banking and other financial services. And while the general responsibilities of this role are outlined above, the Bureau of Labor Statistics noted that a financial analyst can choose a specialization based on their professional capacities.
Here are some of the specific roles someone with this expertise can take on:
Fund management: These analysts exclusively work with hedge or mutual funds. They assist management teams and evaluate their strength to help make investment decisions in line with current market trends.
Portfolio management: Every organization wants a strong portfolio. This requires the right balance of products, services, industries and global regions in which to invest, helping the longevity and success of their company. Financial analysts use their expertise to analyze market and business data to recommend a positive investment strategy and measure results.
Ratings analysis: This niche analysis focuses on guiding businesses or government agencies through the best strategies to pay down debts, like bonds. These analysts are heavily involved in understanding a company’s debts and the risk involved if it was unable to repay them.
Risk analyses: As the title suggests, a financial analyst specializing in risk assesses the company’s financial strategy to locate potential sources of loss. However, unlike the previous role, these analysts aim to reduce the risk involved with financial investments and maximize profits.
Like with any position, the specific daily tasks a financial analyst carries out also depends on their experience level. For instance, an entry-level analyst is likely a new hire with at least a bachelor’s degree in finance or economics and some experience in the industry. A guide created by FinanceWalk explained that an entry-level analyst would work within a larger team and mostly handle administrative tasks. This nevertheless requires significant attention to detail, as they may be responsible for reviewing reports, entering data and performing deep market analysis.
A senior financial analyst, on the other hand, would take a more active role in building a financial model, forecasting trends and making business recommendations. That’s because they may have a master’s degree with a discipline in finance and more years of experience in the industry or with the company itself. They typically lead a team of analysts and manage workflows to ensure reports and recommendations are ready when business leaders need them.
Financial Analyst: Working Environment and Compensation
During your professional career, finding a working environment that fits your expectations is just as important as finding a job that suits your skills and interests. As previously mentioned, a benefit of being a financial analyst is that your expertise is sought by various industries and employers. For the most part, however, you can expect to work in an office environment.
Some of the most common industries financial analyst work in are as follows:
- Banks: Local banks and large financial institutions all know that risk exists in their industry. That’s why banks are the largest employers of financial analysts. They use their expertise in finance and research skills to help evaluate lending risk, among other services. Additionally, they help banks identify new investment opportunities.
- Insurance: Another industry that understands risk is insurance. Financial analysts in this sector can help companies screen applicants and evaluate claims. By putting together accurate cash flow models and generating reports on market trends, they help insurers manage their risk and provide customers with the right policies.
- Investment: As previously alluded to, investment is a particular popular niche for financial analysts. Investment banking requires the skills of an analyst to understand market trends to help institutions make strategic decisions. Their recommendations and advice drive investments for the future. This is a more flexible career path, as financial analysts can work as independent advisors or for a consulting firm.
- Business: Nearly every business, from manufacturing and technology to consumer goods, rely on the skills of financial advisors. An experienced analyst can evaluate the financial performance of an organization and give advice on everything from operational changes to product launches. In this role, analysts are typically expected to prepare reports and present their recommendations on financial subjects to management. The best part of working for a business as a corporate financial analyst is that you can find an industry or organization you are passionate about.
- Government: Government agencies are consistently in need of financial analysts as well, especially those who specialize in macroeconomics. Professionals in these positions assist government investments by analyzing data and economic trends. Something that makes this niche unique is that analysts can sometimes be called upon to help identify fraud and other criminal activity.
There is also opportunity to travel within this role, especially for analysts working for banks and insurance companies. Oftentimes, these positions require visiting potential investors or investment properties for an on-site evaluation. In-person observation helps the analyst better understand the potential risks involved, which is a key component of their job.
While the salary of a financial analyst can vary depending on their experience, education and role, the median salary for this position is $81,590, according to the BLS. This is a solid number to base your starting or current salary on, but Robert Half broke corporate financial analysts’ salaries into three distinct categories based on experience:
- Entry-level or junior financial analyst: $53,250
- Senior analyst: $85,500
- Financial analyst manager: $106,000
- Director: $134,500
Like with many other positions, there is a clear correlation between more experience and a higher salary. As a financial analyst, there is a defined career path you can take, and as your title and responsibilities change, so can your salary.
It’s also important to note that employment of financial analysts is projected to grow 5% from 2019 to 2019, per the BLS. This is a faster-than-average rate compared to all other occupations, mainly because industries are understanding the need for their expertise. Employers understand the value of forward-thinking financial decisions, and an analyst with this specialty can help them create a sustainable investment strategy. Furthermore, experienced financial analysts continue to retire in large numbers, leaving essential positions vacant. This is creating more demand for such professionals, especially those with knowledge of modern practices and experience with new technology solutions.
How to Become a Financial Analyst
Now that you know what a career as a financial analyst entails, you may be thinking what skills are needed for the role. This can be broken into two distinct categories, hard and soft, and both can be developed and refined when pursuing an advanced degree.
Soft Skills of a Financial Analyst
A financial analyst is expected to collaborate with many people in the company, so having these soft skills is important:
Communication: Financial analysts work with complex subject matter that many other managers and executives may not understand. They must be able to translate their work and recommendations to other teams in a way they can comprehend. Similarly, they must know how to send concise emails and conduct phone calls to discuss important financial information.
Interpersonal: These skills differ from communication because they focus more on working relationships. Since analysts will be expected to work within a team, they must know how to effectively collaborate and understand nonverbal cues that naturally occur during a meeting or conversation.
Presentation: After coming to conclusions about the future of a market, a financial analyst will need to present their insights to business leaders or their clients. This typically involves creating a presentation filled with their findings. It’s important for an analyst to know how to create engaging presentations with a balance of visuals, text and verbal cues that concisely gets their point across.
Organization: Another soft skill a financial analyst must possess is organization. They will be presented with large amounts of disjointed data they must comb through to pick out what’s important to their forecast. From there, an analyst will have to know how to organize the information so it can be used and shared with other stakeholders.
Problem-solving: Finally, financial analysts must use hard skills and their intuition to solve problems. It takes critical thinking to transform the insights they derive from data and analyses into action in the form of evidence-based decisions.
Hard Skills of a Financial Analyst
Alongside these social and communication skills, a financial analyst must have a concrete understanding of the following abilities:
Accounting: While financial analysts differ from accounting professionals, it’s still advisable for them to understand some of the basic principles. According to Indeed, it’s important for an analyst to know about standard accounting techniques and statements because they use these documents to assess a business’s financial health.
Financial literacy: Similarly, an analyst in this role must be able to properly decipher financial information. They should know how to read financial reports to gain insights into the investment market. Additionally, they should be well-versed in financial jargon and processes unique to this field.
Analytics: Analytical skills are a core competency of a financial analyst. They must be able to take the data they have and make an accurate forecast, as well as identify and resolve financial problems. Knowing how to use analytics tools is also important and can help improve their productivity.
Research: Conducting research is one of the main responsibilities for this position. An analyst should know how to conduct research efficiency and effectively to find the information they need. While it may be easier to obtain a company’s historical information, they will also have to search databases and other third-party reports for supplemental data.
Written reports: The last notable hard skill you need to be a financial analyst is strong writing capabilities. While numbers will guide an analyst’s recommendations, they must be able to craft reports and translate information into a written form for other members of the company.
If you want to become a financial analyst, you need to consider your education. The BLS highlights that you must have at least a bachelor’s degree for this position. Many companies will look for a degree in accounting, finance or another related field (like economics). Other opportunities, like an internship or experiential learning, can also be helpful for an entry-level financial analyst looking for their first professional position.
However, if you want to further your career as a financial analyst and have a leg up over other applicants, a master’s degree may be your best option. Many employers prefer or require their candidates to have an advanced degree, and that means a Master of Business Administration program should be your next step.
The best way to prepare for a career as a financial analyst is to get an advanced degree, like an MBA. With focuses in accounting or finance, an online Master of Business Administration program from the University of Maryland is ideal for students interested in financial services roles looking to advance their careers. In this program, you will be able to develop and hone the skills necessary to become a successful financial analyst while earning your degree.
And the training of a financial analyst doesn’t stop there. It’s also beneficial for candidates to become a Chartered Financial Analyst (CFA) from the CFA Institute. To earn a CFA certification, you need to have a bachelor’s degree, four or more years of experience and passing results on three separate CFA exams. This certification shows employers you have additional expertise and knowledge of legal practices.
To find out more about receiving your MBA in finance online from the University of Maryland, check out our website and connect with one of our expert enrollment advisors today.