An Online Master of Business Administration degree program, such as the one offered by the University of Maryland Robert H. Smith School of Business, introduces students to a range of important concepts that can help prepare them for in-demand career opportunities.
For instance, students can choose to concentrate their studies in areas including accounting, finance or even a general track that offers the widest and most varied MBA experience. For students specializing in finance, one of the career paths they might consider after graduation is financial analyst.
Currently, the job outlook for financial analysts is very positive, with the U.S. Bureau of Labor Statistics predicting that more than 20,000 positions will be created from 2018 to 2028.
Today, we’re going to take an in-depth look at this role, and answer questions including what does a financial analyst do, what is it like to achieve this career position, and how much do these professionals earn annually. This potential career path can prove to be a challenging yet rewarding way for students to leverage their Master of Business Administration degree and financial expertise.
What does a financial analyst do? Role overview
Most financial analysts typically work in industries including securities, commodities contracts, investing and other financial services. Other positions are available internally in enterprises, or within credit mediation, technical services and the insurance industry.
In these working environments, it is the responsibility of financial analysts to review, analyze and assess an organization’s stock market standing, bonds, investments and overarching stock portfolio. As the BLS notes, financial analysts use their findings to provide guidance to their clients or employers, and help decision-makers make the best choices about their investment strategies.
Before making their recommendations, financial analysts generally examine a considerable amount of data, including current and historical financial statements, financial reports and other market conditions or business trends that might impact the company’s investments. Financial analysts are not only experts in assessing and analyzing existing financial reports, but also economic and investing trends.
These professionals use their expertise to suggest potential investment opportunities to management teams, including individual investments or collections called investment portfolios. Analysts must be able to assess and describe these recommendations, as well as their data-backed findings and reasoning for their decisions, within financial reports for decision-makers and other internal business stakeholders.
How does this differ from financial reporting?
The key distinction between financial analysis and financial reporting is the stakeholders financial service professionals deal with.
Where financial analysts work internally with company stakeholders and make recommendations to guide investment decisions, financial reporting is an external activity. As financial software provider Planful explained, financial reporting requires that a company’s financial standing and investment conditions are shared with external stakeholders. Financial reporting details and results are provided to external industry regulators, investors and even the company’s customers, in certain instances.
What does a financial analyst do? Types of roles
As the BLS notes, there are certain specializations that financial analysts can choose within their professional capacities. These include:
- Portfolio management: Financial analysts involved in portfolio management help businesses choose the right balance of products, services, industries and global regions in which to invest. As the name suggests, these analysts specifically deal with the business’s investment portfolio, and support its positive performance based on their recommended investment strategies.
- Fund management: These analysts only work with hedge funds or mutual funds and assist management teams in investment decisions according to current market conditions.
- Ratings analysis: Financial analysts in this role focus on guiding businesses or government agencies through the best strategies to help pay down debts like bonds. This includes providing an overall rating of the risk involved of an organization not being able to repay these debts.
- Risk analysis: Like ratings analysts, financial analysts dealing with risk analysis assess the overall risk involved with certain financial strategies. As opposed to dealing with debt repayment, however, these analysts seek to reduce the risk with financial investments and maximize profits.
Compensation: How much do financial analysts make?
PayScale reports that the current average salary for financial analysts is $60,781. However, compensation for this role can vary, according to candidates’ education, professional experience, seniority and the region in which they work.
For instance, PayScale found that the top 10% of financial analysts typically make $81,000 annually, and the lowest 10% earn closer to $46,000. Those with more experience usually earn closer to the average salary – according to current data, analysts with one year of experience or less earn $54,000 annually. Those with five to nine years of experience usually earn $68,000 a year, and analysts with 20 years of experience or more see compensation of $75,000 annually or higher.
Financial analysts working in New York make about 12% higher than the national average. Similarly, professionals working in areas including Houston, Boston and Chicago all typically earn higher than the national average.
As Indeed points out, though, salary and compensation can vary widely. Some analysts earn $23,000 annually, where others in higher compensation regions with more experience might make $137,000 per year, given commissions, bonuses and potential profit-sharing opportunities.
How to become a financial analyst
To embark on a path toward a career in financial analysis, professionals must have at least a bachelor’s degree, according to the BLS. However, many employers now prefer or require that employment candidates hold a master’s-level degree in accounting, finance or a similar field. This means a Master of Business Administration program is an ideal way to build the necessary skills to become a financial analyst.
Many employers also advise financial analysts and candidates to earn their certification. This can be achieved through the Chartered Financial Analyst certification from the CFA institute. To earn the CFA certification, professionals need at least a bachelor’s degree, four or more years of experience and passing results on three separate CFA exams.
The best way to prepare for certification and a career in the field is with an advanced degree like the Master of Business Administration. Specializing in either accounting or finance is ideal for students interested in financial services roles, including the financial analyst position.
To find out more, check out our website and connect with one of our expert enrollment advisors today.