Rising juniors
considering applying to Marquette’s AIM program should evaluate different
career options. In the finance industry, one of the most desirable careers is
that of being a financial analyst. In this article, we examine what financial
analysts do.
The financial
industry is highly competitive and it is challenging to break into the field,
but it is possible to find a position as a financial analyst. After reading
this article, if it seems like something you are interested in as a career, then
maybe the AIM program is for you. Read on to find out more about a career as a
financial analyst.
What Does a
Financial Analyst Do?
A financial analyst researches economic, industry and company fundamentals to make business decision and investment recommendations. They often propose a course of future action, such as to buy or sell common stock based upon the firm’s current and forecasted strength. A financial analyst must be aware of current developments within the markets and industry trends. They must be capable of producing complex financial models in order to predict future economic conditions based on a wide number of variables.
Background of Financial Analysts
Since you might still be an undergraduate student who is considering a career as a financial analyst, it is best to take courses in finance, economics, accounting and mathematics. Other majors that are looked upon favorably include those in STEM (science, technology, engineering and math). Many of the entry level analysts hired by firms have these backgrounds, while MBA graduates are often hired as senior analysts right out of business school.
A financial analyst researches economic, industry and company fundamentals to make business decision and investment recommendations. They often propose a course of future action, such as to buy or sell common stock based upon the firm’s current and forecasted strength. A financial analyst must be aware of current developments within the markets and industry trends. They must be capable of producing complex financial models in order to predict future economic conditions based on a wide number of variables.
Background of Financial Analysts
Since you might still be an undergraduate student who is considering a career as a financial analyst, it is best to take courses in finance, economics, accounting and mathematics. Other majors that are looked upon favorably include those in STEM (science, technology, engineering and math). Many of the entry level analysts hired by firms have these backgrounds, while MBA graduates are often hired as senior analysts right out of business school.
If you are not
an MBA graduate student or an economics major as an undergraduate, you may want
to consider studying for the Series 7 and Series 63 exams or
participating in the Chartered Financial Analyst (CFA®) program.
It is important to keep in mind that participating in these exams are
challenging and will require sponsorship.
The CFA charter
requires the passage of three annual exam that are highly technical; however,
the Series 7 and 63 exams can be other ways for a student to prove a basic
familiarity with investment terms and accounting practices. If you look at a
sample CFA exam and it seems overwhelming, start with practicing for the Series
7 and 63 exams and then work your way up to the CFA exam or begin to interview
for junior analyst positions after passing those Series exams. This is where
being a member of the AIM program can help prepare you for the rigorous CFA
exams.
Types of
Analyst Positions
Financial analysts tend to specialize based on the type of institution they work for. Analysts are hired by banks, buy- and sell-side investment firms, insurance companies and investment banks. Of these specialties, three major categories of analysts are those that work for 'sell-side' investment firms, those that work for 'buy-side' investment firms and those that work for investment banks.
Financial analysts tend to specialize based on the type of institution they work for. Analysts are hired by banks, buy- and sell-side investment firms, insurance companies and investment banks. Of these specialties, three major categories of analysts are those that work for 'sell-side' investment firms, those that work for 'buy-side' investment firms and those that work for investment banks.
Within the
investment industry, most analysts tend to work either for buy-side investment
firms, where they research stocks for an in-house fund, or sell-side firms that
write research reports for buy-side firms. Buy-side firms are investment houses
that manage their own funds. In these companies, analysts research companies as
they look for stocks to add to an investment fund. They also track the stocks
that are in a fund's portfolio in order to determine when or if the fund's
position in that stock should be sold.
At a sell-side
firm, analysts evaluate and compare the quality of securities in a given sector
or industry. Based on this analysis, the analysts then make reports with
certain recommendations such as: buy, sell, strong buy, strong sell or hold.
These recommendations carry a great deal of weight in the investment industry
including analysts working within buy-side firms.
Even within
these specialties, there are subspecialties such as analysts who specialize in
equities and those that specialize in analyzing fixed-income instruments. Many
analysts also specialize even further within a specific sector or industry. An
analyst may specialize in energy or technology, for example.
Analysts in
investment banking firms, however, differ from analysts in buy- and sell-side
firms as they often play a role in determining whether or not certain deals are
feasible based on the fundamentals of the companies involved in a deal. This type
of analysis can include IPOs or mergers and acquisitions (M&A).
Analysts assess current financial conditions as well as rely heavily on
modeling and forecasting to make recommendations to senior partners as to
whether or not a certain merger is appropriate for that investment bank's
client or whether another client of the investment bank should invest private
equity or venture capital in a particular company.
What to
Expect on the Job
Financial analysts need to remain observant about gathering information on the overall economy as well as information about specific companies and the fundamental microeconomics of their balance sheets. In order to stay on top of financial news, analysts will need to do a lot of reading on their own time. Analysts tend to read publications such as The Wall Street Journal, The Financial Times and The Economist as well as financial websites.
Financial analysts need to remain observant about gathering information on the overall economy as well as information about specific companies and the fundamental microeconomics of their balance sheets. In order to stay on top of financial news, analysts will need to do a lot of reading on their own time. Analysts tend to read publications such as The Wall Street Journal, The Financial Times and The Economist as well as financial websites.
Being an analyst
also often tends to involve a significant amount of travel. Some analysts
travel to companies to get a first-hand look at company operations on the
ground level. Analysts also frequently attend conferences with colleagues who
share the same specialty as they do.
When in the
office, analysts learn to be proficient with spreadsheets, relational databases
and statistical and graphics packages in order to develop recommendations for
senior management and to develop detailed presentations and financial reports
that include forecasting, cost benefit analysis, trending and results
analysis. Analysts also interpret financial transactions and must verify
documents for their compliance with government regulations.
Opportunities
for Advancement
As interoffice protocol goes, analysts interact with each other as colleagues while they tend to report to a portfolio manager or other senior in management. A junior analyst may work his or her way up to a senior analyst in a period of three to five years. For senior analysts who continue to look for career advancement, there is the potential to become a portfolio manager, a partner in an investment bank or senior management in a retail bank or an insurance company. Some analysts go on to become investment advisors or financial consultants.
As interoffice protocol goes, analysts interact with each other as colleagues while they tend to report to a portfolio manager or other senior in management. A junior analyst may work his or her way up to a senior analyst in a period of three to five years. For senior analysts who continue to look for career advancement, there is the potential to become a portfolio manager, a partner in an investment bank or senior management in a retail bank or an insurance company. Some analysts go on to become investment advisors or financial consultants.
Tips for
Success
The most successful junior analysts are ones that develop proficiency in the use of spreadsheets, databases, PowerPoint presentations and learn other software applications. Most successful senior analysts, however, are those who not only put in long hours, but also develop interpersonal relationships with superiors and mentor other junior analysts. Analysts that are promoted also learn to develop communication and people skills by crafting written and oral presentations that impress senior management.
The most successful junior analysts are ones that develop proficiency in the use of spreadsheets, databases, PowerPoint presentations and learn other software applications. Most successful senior analysts, however, are those who not only put in long hours, but also develop interpersonal relationships with superiors and mentor other junior analysts. Analysts that are promoted also learn to develop communication and people skills by crafting written and oral presentations that impress senior management.
The Bottom
Line
While a career as a financial analyst requires preparation and hard work, it also has the potential to deliver not just financial rewards but the genuine satisfaction that comes from being an integral part of the business landscape.
While a career as a financial analyst requires preparation and hard work, it also has the potential to deliver not just financial rewards but the genuine satisfaction that comes from being an integral part of the business landscape.
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