Financial Analysts


Quick Facts: Financial Analysts
2017 Median Pay $84,300 per year 
$40.53 per hour
Typical Entry-Level Education Bachelor's degree
Work Experience in a Related Occupation None
On-the-job Training None
Number of Jobs, 2016 296,100
Job Outlook, 2016-26 11% (Faster than average)
Employment Change, 2016-26 32,200

Join Nextstep Career Mentorship Programs in Financial Analysts with our partners:


Financial Analysts Career, Salary, and Education Information

What Financial Analysts Do

Financial analysts provide guidance to businesses and individuals making investment decisions. They assess the performance of stocks, bonds, and other types of investments.

Financial-Analytics.jpg

financial analysts

Duties of Financial Analysts

Accountants and auditors typically do the following:

  • Examine financial statements to ensure that they are accurate and comply with laws and regulations

  • Compute taxes owed, prepare tax returns, and ensure that taxes are paid properly and on time

  • Inspect account books and accounting systems for efficiency and use of accepted accounting procedures

  • Organize and maintain financial records

  • Assess financial operations and make best-practices recommendations to management

  • Suggest ways to reduce costs, enhance revenues, and improve profits

Financial analysts typically do the following:

  • Recommend individual investments and collections of investments, which are 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 investment opportunities. They work in banks, pension funds, mutual funds, securities firms, insurance companies, and other businesses. Financial analysts are also called securities analysts and investment analysts.

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, and nonprofit organizations with large endowments, such as some universities.

  • Sell-side analysts advise financial services sales agents who sell stocks, bonds, and other investments.

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

The following are examples of types of financial analysts:

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.

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

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

Risk analysts evaluate the risk in investment decisions and determine how to manage unpredictability and limit potential losses. This job is carried out by making investment decisions such as selecting dissimilar stocks or having a combination of stocks, bonds, and mutual funds in a portfolio.


Work Environment for Financial Analysts

Financial analysts held about 296,100 jobs in 2016. The largest employers of financial analysts were as follows:

Securities, commodity contracts, and other financial investments and related activities: 24%

Professional, scientific, and technical services: 14%

Credit intermediation and related activities: 13%

Management of companies and enterprises: 12%

Insurance carriers and related activities: 7%

Work Schedules

Most financial analysts work full time, and about 3 in 10 worked more than 40 hours per week in 2016. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.


How to Become a Financial Analysts

Financial analysts typically must have a bachelor’s degree.

Education

Most positions require a bachelor’s degree. A number of fields of study provide appropriate preparation, including accounting, economics, finance, statistics, and mathematics.

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 financial analyst 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 can 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, 4 years of qualified work experience, and pass three exams. Financial analysts can also become certified in their field of specialty.

Advancement

Financial analysts typically start by specializing in a specific investment field. As they gain experience, they can become portfolio managers and select the mix of investments for a company’s portfolio. They can also become fund managers and 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.

Important 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.

Decisionmaking skills. Financial analysts must provide a recommendation to buy, hold, or sell a security.

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.


salaries for Financial Analysts

The median annual wage for financial analysts was $84,300 in May 2017. 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 $51,780, and the highest 10 percent earned more than $165,580.

In May 2017, the median annual wages for financial analysts in the top industries in which they worked were as follows:

Securities, commodity contracts, and other financial investments and related activities: $100,180

Professional, scientific, and technical services: $83,970

Management of companies and enterprises: $82,580

Credit intermediation and related activities: $80,870

Insurance carriers and related activities: $76,860

Most financial analysts work full time, and about 3 in 10 worked more than 40 hours per week in 2016. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.


Job Outlook for financial analysts

Employment of financial analysts is projected to grow 11 percent from 2016 to 2026, faster than the average for all occupations. A growing range of financial products and the need for in-depth knowledge of geographic regions are expected to lead to strong employment growth.

Demand for financial analysts tends to grow with overall economic activity. Financial analysts will be needed to evaluate investment opportunities when new businesses are established or existing businesses expand. In addition, emerging markets throughout the world are providing new investment opportunities, which require expertise in geographic regions where those markets are located.

Job Prospects

Despite employment growth, competition is expected for financial analyst positions. Growth in financial services is projected to 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 and a graduate degree can significantly improve an applicant’s prospects.

Employment projections data for Financial Analysts, 2016-2026:

Employment, 2016: 296,100

Projected Employment, 2026: 328,200

Change, 2016-2026: +11%, +32,100


Careers Related to financial analysts

Budget Analysts

Budget analysts help public and private institutions organize their finances. They prepare budget reports and monitor institutional spending.

Financial Managers

Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization.

Insurance Underwriters

Insurance underwriters decide whether to provide insurance, and under what terms. They evaluate insurance applications and determine coverage amounts and premiums.

Personal Financial Advisors

Personal financial advisors provide advice on investments, insurance, mortgages, college savings, estate planning, taxes, and retirement to help individuals manage their finances.

Securities, Commodities, and Financial Services Sales Agents

Securities, commodities, and financial services sales agents connect buyers and sellers in financial markets. They sell securities to individuals, advise companies in search of investors, and conduct trades.

OccupationENTRY-LEVEL EDUCATION2017 MEDIAN PAY
Budget AnalystsBachelor's degree$75,240
Financial ManagersBachelor's degree$125,080
Insurance UnderwritersBachelor's degree$69,760
Personal Financial AdvisorsBachelor's degree$90,640
Securities, Commodities, and Financial Services Sales AgentsBachelor's degree$63,780

Citation:

Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Financial Analysts,
on the Internet at https://www.bls.gov/ooh/business-and-financial/financial-analysts.htm