Analyzing the Finance Field: A Career Profile
A Brief Synopsis of a Financial Analyst's Duties
Financial analysts work for big companies in need of financial guidance. The analysts gather information about the company, analyze it, and make financial recommendations to the company. For example, a financial analyst may be asked to draw up a plan for where a company should consider investing its money and resources. Analysts also project a company's future earnings by looking at its sales, costs, expenses and tax rates. Working with company officials also gives analysts insight into the managerial effectiveness of the company, helping it to predict its overall value and future success. Analysts will then turn this data into valuable information for the company by using spreadsheet and statistical software. This information, in turn, is used to measure financial risks, make presentations or write reports-including recommendations to buy or sell specific investments.
Companies that need to invest money will work with a financial analyst on the “buy side” who will guide the company through various investment opportunities in hedge funds, charitable organizations and mutual funds. Financial analysts on the “sell side” will support securities dealers in selling their products.
Typically, analysts will focus on a specific region, market or type of product. One analyst may work with the nationwide tobacco industry, while another turns his or her attention to the southwestern United States. In every case, analysts must be aware of economic trends as well as newly enacted policies or regulations that affect investments.
Working from home or an office, financial analysts usually work long hours, travel frequently and face many deadlines. A typical day consists of numerous telephone calls and meetings with clients, causing much of an analyst's research to be performed after office hours.
Essential and Recommended Skills
Many financial analysts are required to have at least a bachelor's degree in one of the following areas: finance, business administration, accounting, statistics or economics. A thorough knowledge of accounting processes, financial analysis methods and corporate budgeting is highly recommended. A master's degree in finance or business administration can also be very useful, especially when it comes to taking advantage of promotion opportunities.
For the securities industry, the Financial Industry Regulatory Authority (FINRA) is the main licensing organization. Analysts on the “buy side” do not typically need licenses. Often times, licenses are not expected to be obtained before actual analyst work commences because many require sponsorship by an employer. Upon changing jobs, the analyst must have his or her license renewed with the new company.
Since competition within the business world is strong, companies do not want to put their financial fate in the hands of just anyone. This means there are also several personal qualities involved in becoming a successful financial analyst. Below are just a few of the traits the Bureau of Labor Statistics says companies will look for when hiring their analysts:
- Strong mathematical, analytical and problem-solving skills
- Good communication skills
- Self-confidence
- The ability to work independently
- Motivated
- Detail-oriented
- Comfortable with using computers and other technology
Annual Earnings
The average annual salary for a financial analyst in May 2006, as stated by the Bureau of Labor Statistics, was $66,590. The lower 10% of these analysts earned less than $40,340, while the highest 10% earned more than $130,130. Bonuses are a large part of the job, as well, and can be a significant part of the total earnings. The amount of the bonus depends on how well the company actually performed compared to the initial, predicted investment.
The Benefits Package
Employee benefits tend to vary according to the company. Yearly bonuses add to income and let an employee know where he or she stands in the company.
Employment Opportunities and Trends
As companies continue to grow, the need for financial analysts continues to increase, as well. In 2006, the Bureau of Labor Statistics reported financial analysts held 221,000 jobs. Most of these jobs were located in larger cities, where companies often place headquarters or major financial branches. Overall employment is expected to increase from 2006-2016 by 34%.
This growth is largely due to an increase in the complexity of investments and growth in the industry. Competition for these jobs will continue to increase in coming years as these coveted positions offer generous salaries and benefit packages. Therefore, a strong academic background will become even more essential to prospective analysts in future years.
Advancing Up the Ladder
With a bachelor's degree and four years of work experience, financial analysts can earn their certification as a Chartered Financial Analyst. While this is not required, it does provide many analysts with an edge when it comes to advancing within a company. Financial analysts with master's degrees in business administration or other graduate-level business degrees can prove themselves to be quite hot commodities among established corporations and growing businesses. In the end, the more analysts know about business and finance, the better chance they have at achieving that long-sought after promotion.
With the right education and experience, an analyst can easily become supervisor to a whole team of financial analysts. Additional positions, requiring in-depth credentials and experience, are available to analysts who want to take on more responsibility for larger or more important products. Analysts can eventually become portfolio managers or fund managers, positions that manage a company's investment portfolio.
Source: Bureau of Labor Statistics, U.S. Department of Labor. (2008) Occupational outlook handbook: Financial analysts and personal financial advisors (2008-09 ed.). Retrieved January 4, 2008, from http://www.bls.gov/oco/ocos259.htm