There are two basic types of financial analysts: sell-side analysts and buy-side analysts. Sell-side analysts assist financial institutions and other securities dealers in selling bonds, stocks and other investments. Buy-side analysts are generally employed by companies that have a lot of money to invest. These institutional investors include hedge funds, mutual funds, independent money managers, nonprofit organizations with large endowments and insurance companies.
Financial analysts usually focus on trends that may affect a product, industry or region. They sometimes work for large companies with research departments that have a number of financial analysts working in very narrow categories. Financial analysts commonly use statistical software packages and spreadsheets to analyze data, develop forecasts, create portfolios and identify trends before recommending their employer or client to sell, buy or hold investments.
Financial Analyst Job Summary
- A bachelor’s degree or master’s degree is required for a financial analyst position.
- Depending on their field and employer, financial analyst may be required to have licensing and certification.
- These highly paid positions tend to draw a lot of competition.
Work Environment for Financial Analysts
Most financial analysts work in offices, but they may travel to visit potential investors or companies. They often have strict deadlines to meet, so they may have to work long hours. Since their days are busy with meetings and telephone calls, they often must do research after office hours. Financial analysts spend a lot of time examining company financial statements and analyzing expenses, tax rates, sales and commodity prices, as well as meeting with company managers to learn about the business. Computers are frequently used by financial analysts to review data and statistics that support their recommendations.
Training and Education for Financial Analysts
Most employers seek candidates that have a bachelor’s degree in business, finance, accounting, economics or statistics. Some prefer to hire applicants with a master’s degree in business administration. To prepare for a career in this field, students should take advanced courses in risk management, bond valuation and options pricing.
The primary licensing organization for the securities industry is the Financial Industry Regulatory Authority (FINRA). Most licenses are sponsored by the employer, so candidates are not expected to have them before beginning a job. Those who change jobs will need to have their licenses renewed with their new employer. Various other licenses may be required for sell-side analysts, although buy-side analysts are less likely to need them.
Strong analytical, problem-solving and math skills are important qualities for financial analysts, and good communication skills are required to present strategies and concepts to others. A familiarity with tax laws, money markets and how the economy works are also necessary. Financial analysts must be mature and able to work independently. For those who analyze foreign markets, companies often prefer that they have an understanding of the business environment, culture, language and political conditions of the country they are assigned to cover.
Job Projections, Outlook and Financial Analysts Salaries
Financial analysts held about 235,240 jobs in May 2009, according to research published by the U.S. Bureau of Labor Statistics (BLS). Many of these financial analysts work at large financial institutions in New York City or major financial centers. Around 47% worked in the finance and insurance industries, where they are commonly employed by banks and credit institutions, insurance carriers, and securities and commodity brokers. Other financial analysts worked in government and private industry.
Employment in this field is expected to grow much faster than the average for all occupations. The BLS projects a 20% increase in jobs from 2008 to 2018. This growth will be spurred by the global diversification of investments and an increase in the amount of assets under management.
The BLS reported that the median annual wage for financial analysts was $73,670 as of May 2009. The middle 50% earned between $55,640 and $98,920, while the lowest 10% had a yearly salary at or below $44,080. The highest 10% earned upwards of $139,350. Annual performance bonuses are common in this field, and can add a significant amount to the financial analyst’s total earnings.