In the financial services industry, one of the most coveted careers is that of the Financial Analyst. Financial Analysts or Financial Research Analysts as they are sometimes called can work in both junior and senior capacities within a firm and it is a niche that often leads to other career opportunities. The financial services industry is competitive, and it can be tough to break into the analyst field, but there are some preparations you can make to position yourself for this career. If you're interested in a career as a financial analyst, there are certain things you need to know to groom yourself for the job.
Financial Analysts conduct quantitative analyses of information affecting investment programs of public or private institutions. They assess the performance of stocks, bonds, and other types of investments. Thus they provide guidance to businesses and individuals making investment decisions.
In a nutshell we can say that Financial Analysts evaluate investment opportunities. They work in banks, pension funds, mutual funds, securities firms, insurance companies, and other businesses. They are also called securities analysts and investment analysts.
There are several different kinds of financial analysts. Some are called investment analysts. They can function internally to a company representing the buy-side (These could be investment banking analysts, or analysts for mutual funds). They could also be sell side analysts, Who are specialists in their given sector or area of expertise. These are the people write most of your analyst reports you read in the popular financial media.
Financial Analysts normally deal with financial planning and analysis, or FP&A (Forecasting, cost structures, and capital budgeting for projects.) Investment analysts come from an economics or finance background usually, and financial analysts come from a strong accounting background.
Financial analysts can be divided into two categories:
Buy-Side Financial Analysts develop investment strategies for companies that have a lot of money to invest. These companies, called institutional investors, include mutual funds, hedge funds, insurance companies, independent money managers, and non-profit organizations with large endowments, such as some universities. So they work in helping “Buying Investments”
Sell-Side Financial Analysts advise financial services sales agents who sell stocks, bonds, and other investments. They help in pricing and selling Investments Your typical Investment Bankers fall in this category.
Some analysts work for the business media and belong to neither the buy side nor the sell side.
Financial Analysts generally focus on trends affecting a specific industry, geographical region, or type of product. For example, an analyst may focus on a subject area such as the energy industry, a world region such as Eastern Europe, or the foreign exchange market. They must understand how new regulations, policies, and political and economic trends may affect investments. Investing is becoming more global, and some financial analysts specialize in a particular country or region. Companies want those financial analysts to understand the language, culture, business environment, and political conditions in the country or region that they cover.
Despite employment growth, strong competition is expected for these high-paying jobs. Growth in financial services should create new positions, but there are still far more people who would like to enter the occupation than there are jobs in the occupation. Having certifications like Accredited Financial Analyst from a Global Body like American Academy of Financial Management USA and a graduate degree can significantly improve an applicant’s prospects.
Financial analysts typically must have a bachelor’s degree, but a master’s degree is often required for advanced positions.
Most positions require a bachelor’s degree. A number of fields of study provide appropriate preparation, including accounting, economics, finance, statistics, mathematics, and engineering. For advanced positions, employers often require a master’s in business administration (MBA) or a master’s degree in finance. Knowledge of options pricing, bond valuation, and risk management are important.
The Financial Industry Regulatory Authority (FINRA) is the main licensing organization for the securities industry in USA. It requires licenses for many financial analyst positions. Most of the licenses require sponsorship by an employer, so companies do not expect individuals to have these licenses before starting a job. In India there is no such Licensing Requirement as on Date but Certification is often recommended by employers and can improve the chances for advancement.
An example is the Accredited Financial Analyst (AFA) certification from the AAFM USA, which financial analysts can get if they have a bachelor’s degree, and pass two exams.
Financial analysts typically start by specializing in a specific investment field. As they gain experience, they can become portfolio managers, who supervise a team of analysts and select the mix of investments for the company’s portfolio. They can also become fund managers, who manage large investment portfolios for individual investors. A master’s degree in finance or business administration can improve an analyst’s chances of advancing to one of these positions.
To be successful, financial analysts must be motivated to seek out obscure information that may be important to the investment. Many work independently and must have self-confidence in their judgment.