What Is a Financial Analyst? (+ How to Become One) (2024)

What is a financial analyst?

Financial analysts provide informed guidance to companies or individual investors on important business investment decisions by analyzing economic trends and current market conditions. They conduct research to inform strategy for their clients. To become a financial analyst, you must be comfortable working with data and using math to analyze it all.

Financial analysts can work for financial companies like banks or investment companies, or within businesses. They commonly have academic backgrounds in finance, economics, accounting, or statistics.It can be a fascinating and well-paid career if your skills align with a desire to pursue this field.

What does a financial analyst do?

Financial analysts work with data to help organizations make business decisions. The specifics can vary, but typically a financial analyst is expected to perform the following tasks:

• Build financial models to forecast trends and predict business scenarios and other data analysis to help make business decisions

• Study economic and business trends, including stock and bond performance, to provide context around business decisions

• Support budgeting efforts at organizations

• Compile written reports on financial statuses and recommendations

Financial analyst salary and job outlook

According to the US Bureau of Labor Statistics (BLS), the average salary for a financial analyst is $95,570 a year [1]. This amount can vary based on your location, education, and experience.

Financial analysts are expected to be in demand in the years to come. The BLS estimates that the position will grow 9 percent from 2021 to 2031.

Types of financial analysts

Financial analysts are sometimes classified into two categories: buy-side analysts and sell-side analysts.

• Buy-side analysts create investment strategies for companies that purchase securities and other assets for money management. These companies, commonly called institutional investors, include mutual funds, hedge funds, insurance companies, independent money managers, and nonprofit organizations.

• Sell-side analysts assist and provide guidance to financial services sales agents who sell stocks, bonds, and other investments.

Financial analyst skills

Financial analysts generally need to have the following skills to be successful:

Technical skills

• Accounting knowledge

• Analytical skills

• Financial literacy

• Data analysis

• Corporate finance knowledge

• Financial software knowledge

• Budget management training

• Financial reporting skills

• Research skills

• Financial analysis skills

Workplace skills

• Communication

• Negotiation and influencing

• Critical thinking

• Flexibility

• Resilience

• Collaboration

• Problem-solving

How to become a financial analyst

You’ll need to have the basic qualifications, such as experience, skills, and knowledge to succeed as a financial analyst. Here is a guide to embarking on this career path.

1. Earn a degree.

An entry-level financial analyst typically has a degree, with 76 percent of professionals holding a bachelor's degree, and 16 percent holding a master's degree [2]. Acquiring a degree in finance, accounting, economics, or a related field can set you up for a career as a financial analyst. If you are looking for a wider scope of opportunity or a higher salary, getting your master's degree in finance or a master of business administration (MBA) may be helpful.

2. Boost your skills with an online class.

Bolster your knowledge of a skill by taking a course.

• Consider the IBM Data Analyst Professional Certificate to sharpen your data analysis skills

• Take a specialization in Financial Skills from the University of Illinois

• Learn how to create Financial and Quantitative Models, a specialization designed for analysts, from UPenn Wharton

3. Get a certification.

Some companies prefer to hire financial analysts who have certifications from the Chartered Financial Analyst Institute. Analysts who want to work specifically in securities can also take its Series 7 and Series 63 exams from FINRA so you can be ready for any available roles.

4. Gain work experience.

Apply for an internship with a company that matches your industry interest. Interning can give you experience, knowledge, and networking opportunities within the financial field to help you land a job afterward—sometimes at the same company.

Entry-level positions tend to be for analysts who are starting out or switching in their careers. If you're already in the job force, it may be tempting to move laterally, but it may be harder to land a job without the appropriate experience. Look for the following titles in your job search that generally indicate an entry-level position:

• Junior financial analyst

• Associate financial analyst

5. Prepare for your job search.

Search for open positions on job sites like LinkedIn and Indeed. Be prepared for interviews by anticipating questions and having potential answers prepared. Interview questions might include:

• What is your experience with data analysis?

• What do you do to stay informed about this industry?

• How would you create a quarterly sales report?

• What would you do if you found an inconsistency in a financial report?

• What is EBITDA?

• Describe a time you accomplished something as a team.

Financial analyst career paths

These careers can be viable options for people who have skills similar to financial analysts:

• Portfolio managersstudy the market and work with other financial professionals to determine the best investment opportunities and decisions for a company’s business portfolio. They have a deep understanding of current business trends, allowing them to better predict the future of the market. Portfolio managers use this knowledge to guide businesses and individuals in their investment decisions.

• Fund managerswork primarily with hedge funds or mutual funds. They stay informed on the overall goals of the fund as well as market trends to help make sound decisions.

• Ratings analystsevaluate and assess the market and a company’s financial abilities and strategies in order to make educated recommendations on how a company should proceed.

• Risk analystsuse a combination of both business and financial knowledge to assist companies in determining the amount of risk in possible investment decisions. They make recommendations based on their analysis findings and help track and minimize a company’s financial loss. Risk analysts are often responsible for assessing and reporting asset losses, staying current on investment trends, and collecting and analyzing data.

The jobs above tend to be entry- or mid-senior level roles. As a financial analyst, you may advance to being a senior financial analyst if you manage analysts or interns and oversee larger projects. Then, you might rise to become a manager, director, and potentially, a Chief Financial Officer (CFO).

Start advancing your skills today

Enroll in the Financial Analysis - Skills for Success Specialization from the University of Illinois to explore whether this career is right for you. Hone your skills in financial accounting with the highly-rated Financial Accounting Fundamentals from the University of Virginia.

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