Financial Analysis Careers and Degrees | Becoming a Financial Analyst (2024)

What is a Financial Analyst?

A financial analyst is responsible for giving individuals, businesses, and organizations guidance regarding their financial decision-making. That is, a financial analyst is an expert in stocks, bonds, IRAs, CDs, and other forms of investments, which allows them to provide expert analysis for their clients such that they can maximize the return on their financial portfolio.

This expertise is garnered from studying current and historical economic trends to determine what’s best for buy-side clients (those that want to invest money) and sell-side clients (those that want to divest themselves of certain investments).

What Does a Financial Analyst Do?

The primary role of a financial analyst is to assist their clients with financial decisions. At its core, this means that financial analysts make informed recommendations about where their clients should invest their money, and how much money to invest as well. For example, a financial analyst working with an individual investor would offer their expert guidance regarding what stocks and bonds their client should add to (or remove from) their investment portfolio.

But financial analysts don’t just work for individual investors. Rather, many of them work for companies large and small to determine the value of the company. That means that financial analysts working in this position would spend much of their time examining financial records and financial statements as a means of valuing the company in the current market.

Regardless of whether a financial analyst works for individual investors, a company, or something in between, their work is based on thorough research of the economy. This includes exploring historical trends as it pertains to economic performance, as well as examining what’s currently happening in the financial world. By understanding business trends from the past and the present, financial analysts are able to make much more informed suggestions to their clients regarding the appropriate financial decisions to make.

Some financial analysts specialize in a specific area. For some, this means working in a specific economic sector, like the automotive industry. Specialization can occur based on other factors as well, including geographic region (i.e., North America) and even specific products, like mobile phones.

Financial analysts can also specialize in the type of analysis they do. For example, a risk analyst examines the risks associated with certain investments and strives to limit potential losses for their clients. Again, the success of a financial analyst – regardless of their specialty – rests on their ability to conduct thorough research that pertains to the economic performance factors within their specialty.

That research focus is important in another area as well – in the regulatory realm of finance. New policies, procedures, and laws are enacted (and repealed) all the time, so it’s necessary for a financial analyst to keep their ear to the pulse of how their industry is governed such that they can offer sound financial advice to their clients.

Where Does a Financial Analyst Work?

As noted earlier, financial analysts can work in a variety of settings, from large corporations to government entities to being self-employed in their own investment firm. In fact, according to the Bureau of Labor Statistics, nearly one-quarter of financial analysts work in the securities, commodities, and investment realms. These jobs are typically clustered in specific geographic locations, like New York City and other world financial centers.

What Do You Learn in a Financial Analyst Degree Program?

Though not a complete list, the following represents some of the common learning targets and skills that students are usually required to master in a financial analyst degree program:

Accounting – Financial analysts must be well versed in methods of communicating the financial health of an individual’s or company’s portfolio.
Statistics – Students in financial analyst degree programs are required to take introductory and advanced courses in statistics in which they learn how to use descriptive statistics, inferential statistics, correlation coefficients, and other statistical analyses to make informed decisions.
Business Administration – Many financial analyst degree programs include studies in business administration in which students learn how to be leaders in the business world and manage company operations.
Economics – A healthy understanding of economic principles is a necessity for a prospective financial analyst. This includes understanding both microeconomic and macroeconomic forces that influence financial markets.
Investment Banking – Courses in investment banking typically center on methods that can be used to procure capital and explore different ways that financial analysts can underwrite investment deals.
Risk Management – Learning how to be proactive to manage potential financial risks in the future is a key skill that financial analysts should possess.
Ethics – Students in these programs learn how to practice ethically, such as providing sound advice to clients, even if that advice means making less money from commissions and other forms of reimbursem*nt.
Psychology – Financial analysts often need to draw on basic psychological principles to understand why people make the financial decisions that they do.
Interpersonal Communications – To be successful in the field of financial analysis, one must develop strong interpersonal communication skills, including the ability to communicate effectively both verbally and nonverbally.

What are the Requirements to Become a Financial Analyst?

Educational Requirements

At a minimum, financial analysts should have a bachelor’s degree in finance or a closely related field, like economics, marketing, management, or business administration. Regardless of the selected major, these programs typically take four years to complete approximately 120 credit hours of coursework.

Common courses for students in financial analysis degree programs revolve around finance, including mathematics, statistics, and accounting. Many programs also include courses in research, business ethics, microeconomics, and macroeconomics. General coursework is also required to complete a bachelor’s degree, and includes classes in the humanities, sciences, communications, physical education, and the arts, just to name a few.

Though usually not required, a master’s degree in finance or a related field can be advantageous for future financial analysts. With two or three more years of education and skill development under their belts, students that have a master’s degree might find it easier to gain employment and higher-paying employment at that. Because coursework at the master’s degree level is more advanced and focuses more specifically on issues related to things like market analysis, risk management, and investment strategies, students might find that they are more prepared to enter the workforce as well.

Licensure Requirements

Unlike other professions, careers in the financial analysis sector are not as strictly governed by licensure requirements. That is, where a financial analyst at one company or in one state might be required to be licensed, another financial analyst with different job duties might not have such a requirement.

Because licensure typically requires applicants to be sponsored by a company, licensure is not required to get or start a job as a financial analyst. Once a job is procured, licensure is usually handled through the Financial Industry Regulatory Authority, which provides licenses for all types of workers in the financial and securities industries. Before work can begin, though, one must pass a qualification exam to demonstrate competence in the specific field of work.

Financial Analyst Certification

Like licensure, certification is not always required. However, many employers prefer that financial analysts be certified. Being certified allows financial analysts to improve their chances for advancement in the industry, in addition to communicating to others via their credentials that they are highly qualified in their line of work.

One example of financial analyst certification is as a Chartered Financial Analyst (CFA) from the CFA Institute. Workers that have a bachelor’s degree, at least four years of experience in the field, and who pass three finance exams can obtain this designation. Certification is also available for financial analysts that specialize in a certain field.

What Does It Take to Become a Financial Analyst?

There are certain hard and soft skills, personality traits, and qualities that a financial analyst must possess to be successful. These include, but are not limited to, the following:

Financial Analysis – Naturally, financial analysts must be adept at deconstructing complicated financial issues in order to understand how they relate to one another to improve financial performance.
Data Analysis – A must-have hard skill for financial analysts is the ability to collect, analyze, and interpret a tremendous amount of financial data.
Financial Modeling – Not only do workers in this field need to be able to analyze data, but they must also possess the ability to build financial models that make it easier to see and understand financial issues.
Mathematics and Statistical Skills – From calculating complex equations to using statistics to project future financial performance, financial analysts should have very strong mathematics and statistics skills.
Strategic Thinking – Much of the work in financial analysis is looking to the future. As such, financial analysts need to be able to utilize available information to set long-term goals and make plans for achieving those goals.
Computer Savvy – Financial analysis takes place almost wholly in the digital environment. Workers must have computer skills and be well versed in using financial software to complete their daily job duties.
Communication Skills – Not only do financial analysts need to be able to speak and write well, but they must also have the ability to explain very complex concepts and topics in terms that everyday people can understand.
Attention to Detail – A simple mathematical mistake could have significant financial impacts. Being able to work quickly without making errors is a must.
Good Under pressure – There are many personality traits that are needed to be successful in this line of work, but primary among them is the ability to work well under tremendous pressure.

What Software Tools are Used by Financial Analysts?

Some of the most popular financial analysis software tools being used today include, but are not limited to, the following:

SAS

The SAS Institute’s SAS software offers a complete suite of tools for financial analysts with robust statistical methods, cross-platform support, and dozens of pre-written statistical analysis procedures.

Tableau

Tableau Software is the go-to software for preparing financial data in a way that allows you to combine information in a clean, easy-to-understand way. It even includes smart features that fix the most common data preparation and analysis problems.

Qlikview

With its patented Associative Engine, Qlikview gives financial analysts a more complete picture of their data. This is achieved by combining multiple data sets so that the process of financial analysis can take place with the totality of information included.

Spotfire

Spotfire is used by financial analysts to compile data, analyze it, and communicate the findings based on the data in a way that’s intuitive and easy to understand. What’s more, this software enables analysts to better predict future financials based on current data.

What are the Pros and Cons of Being a Financial Analyst?

There are many benefits of working as a financial analyst. These include, but are not limited to:

Solid income potential – Financial analysts make, on average, $81,410 per year. However, the top 10 percent of workers in this field make over $163,60 per year, as of May 2021.
Variety of workplaces – Though most financial analysts work for large financial institutions, there are opportunities to work in a variety of other workplaces, from government agencies to insurance companies to the private sector.
Minimal education requirements – Many positions as a financial analyst require just a four-year degree.
Opportunity for advancement – Careers in finance typically have excellent advancement opportunities, which can mean better working hours, improved compensation, or relocation to a more desirable location.
Chance to effect change – Whether working with an individual client to improve his or her future savings or working with a large company to turn their financials around, financial analysts can be agents of positive change for their clients.
Great working conditions – Most financial analysts work in climate-controlled offices that provide them with a comfortable place to work.

There are a few negative aspects of being a financial analyst as well:

High stress – Financial analysts are responsible for an individual’s or company’s financial health. With so much money on the line, stress levels can be through the roof.
Long hours – Most financial analysts work far more than 40 hours a week, including nights and weekends.
Economic highs and lows – Working in an industry that depends on the health of the economy means that when the economy slows, work can be difficult to find.

What is the Demand for Financial Analysts?

This field of work is not expected to grow at a very rapid rate for the foreseeable future. In fact, the Bureau of Labor Statistics estimates just an 6 percent change in employment in this sector over the next eight years. Though this represents above-average job growth, it certainly isn’t as robust as many other career areas, some of which are predicted to experience growth of more than 20 percent over the same time frame.

Part of what is expected to fuel additional growth in this field is the current strong economy. As the economy goes, so goes jobs in this line of work, so as long as there is robust economic growth, financial analysts will be in demand.

This is especially true given the increasingly diverse offerings of financial products and services and the need to have experts that can evaluate very specific products, services, and industries, as well as the performance of markets in different areas of the world. However, if the economy slows, job growth for financial analysts will slow down as well.

What is the Difference Between a Financial Analyst and a Business Analyst?

The primary difference between a financial analyst and a business analyst is in the scope of their work. Where a business analyst concentrates on analyzing all aspects of a business’ operations, a financial analyst focuses solely on the business’ financials.

For example, a business analyst might be hired to investigate how a business is being run and how that business’ overall performance can be improved. This usually involves meeting with members of management as well as regular employees to determine things like workplace policies and procedures that might hinder productivity.

However, this would be just one aspect of the business analyst’s job. They might also explore how the company is handling marketing, recruitment of new employees, accounting procedures, and even the production methods being used to build products for market.

Conversely, a financial analyst hired by the very same business would work specifically on finding ways to improve the company’s financial health. This might be done by analyzing the business’ current investment portfolio and making recommendations for bringing about more stability and improved financial performance. Likewise, a financial analyst would likely examine current market trends and economic conditions to make recommendations to a company regarding pricing of products and services, employee compensation, and other factors that impact the company’s financial health.

What Professions are Similar to Financial Analyst?

Personal Financial Advisor

Personal financial advisors work with individuals to help them determine the best financial decisions to make for their future. This includes advising people on what investments to make, saving for retirement, planning their estate, starting college savings plans for their children, and even advising their clients on mortgage programs and insurance companies that best fit their needs.

Financial Manager

Typically, financial managers work for organizations like businesses in the private sector and direct the financial activities of that organization. The decisions that financial managers make are based on thorough research of the organization’s financial reports, the current conditions of the economy, and market trends, among other things.

Budget Analyst

A budget analyst is responsible for assisting businesses, organizations, and even government entities with organizing their finances. A large part of that process is researching and analyzing the business’ past and current budgets, monitoring expenditures, and estimating the future financial needs of the organization.

Insurance Underwriter

Insurance underwriters determine whether to provide insurance to a potential client, and also decide on the terms under which coverage will be provided, if at all. To do so, they must analyze data provided by the prospective client, determine the level of risk that the client presents, devise appropriate premiums for clients, and select the amount of coverage offered.