How To Become a Senior Financial Analyst

In the financial services industry, one of the most coveted careers is that of an analyst. The primary role of a financial analyst is to crunch data to identify opportunities or evaluate the results of business decisions or investment recommendations. Financial analysts can work in both junior and senior capacities within a firm, and this is a position that often leads to other career opportunities.

The financial services industry is competitive and breaking into the field can be difficult. If you’re interested in a career as a financial analyst, read on to find out what you can do to prepare yourself for the job.

  • A financial analyst manipulates data to identify business opportunities or make investment recommendations.
  • More junior analysts tend to do a lot of data gathering, financial modeling, and spreadsheet maintenance.
  • More senior analysts spend time preparing investment papers, talking with company management teams and other investors, and marketing ideas.
  • A bachelor’s degree in a math or finance-related major is often sought.
  • A master’s in finance, a math-related field, or an MBA will also help get your foot in the door, as will industry certifications such as the CFA charter.

What is a financial analyst?


Financial analysts examine financial data and use their findings to help companies make business decisions. Often, their analysis is intended to inform companies’ investment decisions.

More specifically, financial analysts research company fundamentals as well as macroeconomic and microeconomic conditions to make predictions about businesses, sectors, and industries. They also often recommend courses of action, such as buying or selling a company’s stock based on its overall performance and outlook.

An analyst must be aware of current developments in the field in which he specializes, as well as predict future economic conditions for any number of variables in order to develop financial models.

Not all financial analysts analyze the stock or bond market or help their employers make investments. Companies can also hire an analyst to use numerical data to identify the cost-effectiveness of various marketing techniques. Businesses that use the franchise model often have financial analysts who are responsible for tracking individual franchisees or groups of franchisees in a geographic area. Analysts determine where strengths and weaknesses lie and make profit and loss forecasts.

Required skills and education


Compared to many higher-paying careers, the qualifications to become a financial analyst are much less rigorous and well-defined. Unlike law and medicine, there is no career-wide educational minimum. Whether you face any required licensing depends on factors, such as your employer and your specific job duties.

That said, in the 21st century, a bachelor’s degree — preferably with a major in economics, finance, or statistics — has become a de facto requirement to become a financial analyst. Other majors that are favorably considered include accounting and mathematics, and even biology and engineering, especially if one is interested in specializing in these industries as an analyst. Competition is fierce, and undergraduate or advanced degrees are very common in the job market, with less than a bachelor’s degree standing a serious chance of applying for an analyst position.

Big investment banks, where first-year salaries are high, recruit almost exclusively at elite colleges and universities, such as Harvard University and Princeton University. Candidates applying with degrees from less prestigious schools can increase their chances by continuing their education and getting an MBA from a top-ranked business school. MBA graduates are often hired as senior analysts right out of business school.

Regardless of education, a successful career as a financial analyst requires strong quantitative skills, adept problem-solving abilities, mastery of logic, and above-average communication skills. Financial analysts have to crunch the numbers, but they also have to report their findings to their superiors in a clear, concise and persuasive manner.

Certification Exams


If you are not an economics major as an MBA graduate student or undergraduate, you may want to consider taking the Series 7 and Series 63 exams or the Chartered Financial Analyst (CFA®) program. Keep in mind that taking the Series 7 exam will require sponsorship from a FINRA member firm or a regulatory organization.

In October 2018, FINRA created a new exam called the Securities Industry Essentials (SIE) exam to reduce duplication of knowledge testing when taking multiple categories of registrants and make it easier to enter the securities industry. can go.

While the CFA exam is highly technical, the Series 7 and Series 63 exams are other ways to demonstrate a basic familiarity with investment terms and accounting practices. If you look at the sample CFA exam and it seems overwhelming, start by taking the SIE and then work up to the CFA exam, or start interviewing for junior analyst positions after passing the SIE. Many institutions also have training programs for candidates who show promise in the field.

Types of Analyst Positions


The field of financial analysis is broad, covering a variety of job titles and career paths. Within the financial/investment industry, there are three major categories of analysts who work:

  • Buy-side firms (investment houses that manage their own funds)
  • Selling Firms
  • Investment banks

Financial analysts may also work for local and regional banks, insurance companies, real estate investment brokerages, and other data-driven companies. Any business that makes frequent weighty decisions about how to spend money is a place where a financial analyst can potentially add value.

Buy Side Analyst


The majority of financial analysts work on what is known as the buy side. They help their employers make decisions about how to spend their money, whether that means investing in stocks and other securities for an in-house fund, buying income properties (in the case of real estate investment firms ), or allocating marketing dollars. Some analysts perform their jobs not for a specific employer but for a third-party company that provides financial analysis to its clients. This describes what a financial analyst does. An entire industry exists around it.

Buy-side financial analysts rarely have the final say on how their employers or clients spend their money. However, the trends they reveal and the predictions they make are invaluable in the decision-making process. With global financial markets evolving faster than ever and the regulatory environment seemingly changing daily, the demand for skilled buy-side financial analysts will increase in the future.

Cell Side Analyst


At a sell-side firm, analysts evaluate and compare the quality of securities in a particular sector or industry. Based on this analysis, they then write research reports with certain recommendations, such as “Buy,” “Sell,” “Strong Buy,” “Strong Sell” or “Hold.” They also track the stocks that are in the fund’s portfolio to determine when/if the fund’s position in that stock should be sold. The recommendations of these research analysts carry a lot of weight in the investment industry, including those employed by buy-side firms.

Perhaps the most prestigious (and highest paid) financial analyst job is that of a sell-side analyst for a large investment bank. These analysts help banks price and market their own investment products. They compile data on bank stocks and bonds and use quantitative analysis to predict how these securities will perform in the market. Based on this research, they make buying and selling recommendations to the bank’s clients, steering them to specific securities from the bank’s menu of products.

Even within these specialties, there are subspecialties: analysts who focus on stocks or fixed income instruments; Many analysts also specialize within a specific sector or industry. An analyst might focus on energy or technology, for example.

Investment banking and equity analysts


Analysts at investment banking firms often play a role in determining whether certain deals between companies, such as initial public offerings (IPOs), mergers and acquisitions (M&A), are feasible based on corporate fundamentals. Analysts examine current financial conditions – as well as relying heavily on modeling and forecasting – to make recommendations on whether a particular merger is appropriate for an investment bank client or a client for an enterprise. I should invest in venture capital.

Analysts who help make buy and sell decisions for large banks and who try to find good IPO opportunities are called equity analysts. Their focus is primarily on equity markets; They help find companies that offer the most profitable opportunities for ownership. In general, equity analysts are among the highest paid professionals in the field of financial analysis. This is partly a function of their employers. Big investment banks use huge salaries to attract the best talent.

Equity analysts often deal with large sums of money. When they predict a win, the benefit to the employer is often in the millions of dollars. Thus, equity analysts are well compensated.

The median salary is not insignificant.


Most financial analysts earn significantly less than other professions in the finance industry, especially in New York City. However, the average annual income of an entry-level financial analyst is significantly higher than the average annual income of a full-time wage or salary worker in the United States as a whole. For 2021, according to the US Bureau of Labor Statistics (BLS), the average weekly wage for any full-time wage or salary worker in the US was $1,010. For a 40-hour work week, this translates to an annual income of about $52,520.
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Compare that to the median annual income for financial analysts at all experience levels in 2021, $81,410 per year (or $39.14 per hour).
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So, on average, financial analysts start off much better paid than the average worker. In addition, financial analysts at major Wall Street firms often earn a lot during their first year.

Financial Analyst Job Outlook


In terms of employment, the outlook for the financial analyst profession is good. While it’s a competitive field, there were about 492,100 jobs in the field in 2020, according to the latest available BLS statistics, and the occupation should grow by about 6% in the decade between 2020-2030.


The BLS notes:

Demand for financial analysts increases with overall economic activity. Financial analysts are needed to evaluate investment opportunities when new businesses are established or existing businesses expand. In addition, emerging markets around the world are providing new investment opportunities, which require expertise in the geographic areas where those markets are located.

What to expect on the job


Financial analysts need to be vigilant about gathering information at the macroeconomic level as well as gathering information about specific companies, particularly assessing their financial fundamentals through company balance sheets. To stay on top of financial news, analysts will need to do a lot of reading on their own time. Analysts use publications such as the Wall Street Journal, Financial Times, and The Economist, as well as financial websites.

Being an analyst also often involves a certain amount of travel. Some analysts visit companies to get a first-hand look at ground-level operations. Analysts also often attend conferences with colleagues who share the same specialty as they do.

While in the office, analysts learn to master spreadsheets, relational databases, and statistical and graphics packages. They use these tools to prepare recommendations for senior management and prepare detailed presentations and financial reports that include forecasting, cost-benefit analysis, and trend analysis. Analysts also interpret financial transactions and must verify documents to comply with government regulations.

Development opportunities


In terms of interoffice protocol, analysts typically interact with each other as colleagues, while also reporting to a portfolio manager or other senior management role. A junior analyst can work his way up to senior analyst over a period of three to five years. For senior analysts who continue to seek career advancement, there is the possibility of becoming a portfolio manager, a partner at an investment bank, or a senior manager at a retail bank or insurance company. Some analysts become investment advisors or financial advisors.

Skill set for success


The most successful junior analysts are those who develop skills in the use of spreadsheets, databases and PowerPoint presentations and learn other software applications. However, the most successful senior analysts are those who not only put in long hours but also develop relationships with superiors and mentor other junior analysts. Analysts who are promoted also learn to develop communication and people skills by preparing written and oral presentations that impress senior management.

What is the job outlook for a financial analyst?


According to U.S. government estimates, employment of financial analysts is projected to grow 6 percent from 2020 to 2030 (faster than the average for all occupations), with 41,000 new jobs opening each year. Many of these jobs are expected to result from the need to replace workers who move into different occupations or exit the labor force, such as retirement.

What is the difference between a financial analyst and an equity research analyst?


Financial analysts look at market trends to help with investment decisions or review companies’ financial statements to identify investment potential.

An equity research analyst instead looks closely at a company’s financial information, examining, interpreting and reporting on the data collected to achieve a stock price target.

What kind of education do I need to become a financial analyst?


According to the BLS, the majority of financial analysts hold a bachelor’s degree in a finance-related field, including finance and accounting, economics, statistics, analytics, business management, or mathematics.

The bottom line

A career as a financial analyst requires preparation and hard work. It has the potential to provide not only financial rewards, but the real satisfaction that comes from being an integral part of the business landscape.
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