Financial Analyst

Financial analysts guide businesses and individuals in decisions about expending money to attain profit. They assess the performance of stocks, bonds, and other types of investments.

Duties

Financial analysts typically do the following:

  • Recommend individual investments and collections of investments, known as portfolios
  • Evaluate current and historical financial data
  • Study economic and business trends
  • Examine a company’s financial statements to determine its value
  • Meet with company officials to gain better insight into the company’s prospects
  • Assess the strength of the management team
  • Prepare written reports

Financial analysts evaluate opportunities to commit money for the purpose of generating profit.

Financial analysts can be divided into two categories: buy-side analysts and sell-side analysts.

  • Buy-side analysts develop investment strategies for companies that have a lot of money to invest. These companies, called institutional investors, include hedge funds, insurance companies, independent money managers, nonprofit organizations with large endowments, private equity firms, and pension funds.
  • Sell-side analysts advise financial services sales agents who sell stocks, bonds, and other investments.

Analysts may work for the business media or other research houses, which are independent from the buy and sell side.

Financial analysts generally focus on trends affecting a specific geographical region, industry, or type of product. For example, they may focus on a subject area or a foreign exchange market. They must understand how economic trends, new regulations, policies, and political situations may affect investments.

Investing has become more global, and some specialize in a particular country or world region. Companies want these specialists to understand the business environment, culture, language, and political conditions in the country or region that they cover.

The following are examples of types of financial analysts:

Financial risk specialists, also called financial risk analysts, evaluate threats to investment decisions and determine how to manage unpredictability and limit potential losses. They make investment decisions such as selecting dissimilar stocks or having a combination of stocks, bonds, and mutual funds in a portfolio. They also make recommendations to limit risk.

Fund managers work exclusively with hedge funds or mutual funds. Both fund managers and portfolio managers frequently make buy or sell decisions in reaction to quickly changing market conditions.

Investment analysts assess information involving investment programs or financial data of institutions, such as business valuation. They also respond to queries from clients and client advisors regarding asset allocation and alternative investment topics including hedge funds, real property, and venture capital.

Portfolio managers select the mix of products, industries, and regions for their company’s investment portfolio. These managers are responsible for the overall performance of the portfolio. They are also expected to explain investment decisions and strategies in meetings with stakeholders.

Ratings analysts evaluate the ability of companies or governments to pay their debts, including bonds. Based on these evaluations, a management team rates the risk of a company or government not being able to repay its bonds.

Securities analysts evaluate securities markets and trends to identify high-yield assets for clients and companies. They may use resources such as bond performance reports, daily stock quotes, market and economic forecasts, and other financial statements and publications.

Work Environment

Financial and investment analysts held about 317,300 jobs in 2021. The largest employers of financial and investment analysts were as follows:

Securities, commodity contracts, and other financial investments and related activities           24%
Professional, scientific, and technical services 12
Credit intermediation and related activities 11
Management of companies and enterprises 11
Insurance carriers and related activities 7

Financial risk specialists held about 56,500 jobs in 2021. The largest employers of financial risk specialists were as follows:

Credit intermediation and related activities 30%
Securities, commodity contracts, and other financial investments and related activities         17
Management of companies and enterprises 14
Insurance carriers and related activities 14
Professional, scientific, and technical services 10

Financial analysts work primarily in offices but may travel to visit companies or clients.

Work Schedules

Most financial analysts work full time and some work more than 40 hours per week.

Education and Training

Financial analysts typically need a bachelor’s degree to enter the occupation.

Education

Most entry-level positions for financial analysts require a bachelor’s degree; a common field of degree is business. Some employers prefer to hire job candidates who have a master’s degree.

Licenses, Certifications, and Registrations

The Financial Industry Regulatory Authority (FINRA) is the main licensing organization for the securities industry. A license is generally required to sell financial products, which may apply to some positions. Because most of the licenses require sponsorship by an employer, companies do not expect individuals to have these licenses before starting a job.

Employers often recommend certification, which may improve the chances for advancement. An example is the Chartered Financial Analyst (CFA) certification from the CFA Institute. Financial analysts can become CFA certified if they have a bachelor’s degree and several years of work experience and pass multiple exams. They also may choose to become certified in their field of specialty.

Advancement

Financial analysts typically start by specializing in an investment field. As they gain experience, they may become portfolio managers and select the mix of investments for a company’s portfolio. They also may become fund managers of large investment portfolios for individual investors. Having a master’s degree in finance or business administration may improve an analyst’s chances of advancing to one of these positions.

Personality and Interests

Financial analysts typically have an interest in the Thinking, Persuading and Organizing interest areas, according to the Holland Code framework. The Thinking interest area indicates a focus on researching, investigating, and increasing the understanding of natural laws. The Persuading interest area indicates a focus on influencing, motivating, and selling to other people. The Organizing interest area indicates a focus on working with information and processes to keep things arranged in orderly systems.

If you are not sure whether you have a Thinking or Persuading or Organizing interest which might fit with a career as a financial analyst, you can take a career test to measure your interests.

Financial analysts should also possess the following specific qualities:

Analytical skills. Financial analysts must process a range of information in finding profitable investments.

Communication skills. Financial analysts must explain their recommendations to clients in clear language that clients can easily understand.

Computer skills. Financial analysts must be adept at using software packages to analyze financial data, see trends, create portfolios, and make forecasts.

Decision making skills. Financial analysts must provide a recommendation to buy, hold, or sell a security. Fund managers must make split-second trading decisions.

Detail oriented. Financial analysts must pay attention to details when reviewing possible investments, as small issues may have large implications for the health of an investment.

Math skills. Financial analysts use mathematical skills when estimating the value of financial securities. 

Pay

The median annual wage for financial and investment analysts was $91,580 in May 2021. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $57,900, and the highest 10 percent earned more than $166,560.

The median annual wage for financial risk specialists was $100,000 in May 2021. The lowest 10 percent earned less than $59,370, and the highest 10 percent earned more than $171,000.

In May 2021, the median annual wages for financial and investment analysts in the top industries in which they worked were as follows:

Securities, commodity contracts, and other financial investments and related activities       $100,800
Professional, scientific, and technical services 96,600
Management of companies and enterprises 83,990
Insurance carriers and related activities 81,150
Credit intermediation and related activities 79,910

In May 2021, the median annual wages for financial risk specialists in the top industries in which they worked were as follows:

Securities, commodity contracts, and other financial investments and related activities           $127,110
Management of companies and enterprises 102,750
Credit intermediation and related activities 98,320
Professional, scientific, and technical services 98,250
Insurance carriers and related activities 91,770

Fund managers are typically compensated by fees, usually structured as a percentage of assets under management and a percentage of the fund’s annual return.

Most financial analysts work full time, and some work more than 40 hours per week.

Job Outlook

Overall employment of financial analysts is projected to grow 9 percent from 2021 to 2031, faster than the average for all occupations.

About 32,000 openings for financial analysts are projected each year, on average, over the decade. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire. 

Employment

Demand for financial analysts generally increases with overall economic activity. These workers will be needed to evaluate investment opportunities when new businesses are established or as existing businesses expand. In addition, emerging markets throughout the world are providing new investment opportunities, requiring expertise in geographic regions where those markets are located.

Demand also is projected to increase as big data and technological improvements allow financial analysts to conduct high-quality analysis. This analysis will help businesses manage their finances, identify investment trends, and deliver new products or services to clients.

For More Information

For more information about licensure for financial analysts, visit

Financial Industry Regulatory Authority (FINRA)

For more information about training and certification, visit

CFA Institute

For more information about certifications in financial analysis, visit

Global Academy of Finance and Management

 

FAQ

Where does this information come from?

The career information above is taken from the Bureau of Labor Statistics Occupational Outlook Handbook. This excellent resource for occupational data is published by the U.S. Department of Labor every two years. Truity periodically updates our site with information from the BLS database.

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I am not sure if this career is right for me. How can I decide?

There are many excellent tools available that will allow you to measure your interests, profile your personality, and match these traits with appropriate careers. On this site, you can take the Career Personality Profiler assessment, the Holland Code assessment, or the Photo Career Quiz.

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