The examination of financial statements, economic conditions and market trends is an essential part of running a profitable business and making money on the stock market. Conducting in-depth financial analysis helps companies of all sizes and industry types improve their earning potential and cash flow, ensuring future investments and business decisions yield the desired results. However, turning raw data into actionable insights requires specialized knowledge and a dynamic set of technical skills, which is why financial analysts are in high demand.
According to data from the Bureau of Labor Statistics, the employment of financial analysts is projected to grow by 5% between 2019 and 2029. This faster-than-average job growth is being driven by emerging markets and global partnerships, which have created new investment opportunities across geographic regions. That said, the roles and responsibilities of financial analysts can vary drastically between industries and employers, raising a very important question: What do financial analysts do?
Financial Analyst Job Duties
Financial analysts perform a wide range of activities that help businesses and individuals assess the impact of investments, forecast future earnings and manage risk. They collect and analyze financial data to understand past performance and investing decisions, providing a baseline for further analysis. After sifting through large amounts of data, analysts typically use financial modeling techniques to create accurate market projections. These insights are then transformed into detailed recommendations and financial reports that give key decision-makers the context they need to improve profitability in the long term.
According to the BLS, financial analyst jobs are typically divided into two categories:
- Buy-side analysts: These types of financial analyst roles are focused on developing investment strategies for businesses, including insurance companies, hedge funds and independent money managers. They work to identify sound investment opportunities through a deep understanding of market trends and economic conditions in particular industries.
- Sell-side analysts: Sell-side analysts advise financial management teams that directly sell stocks, bonds and other investments. They create detailed financial reports and use financial modeling to generate earning estimates, price targets and forecasts on expected performance.
Although both types of financial analyst jobs involve gathering data, organizing information and assessing investing decisions, the outcomes of their work are markedly different. For example, a buy-side analyst might evaluate the profitability of certain stocks on behalf of investment banks, while sell-side analysts are more concerned with how new regulations and market trends could impact the price targets of stocks being sold. Ultimately, the job responsibilities of financial analysts depend on the organizations they work for, the industries they monitor and their level of experience.
Financial Analyst Career Paths
Moving beyond buy-side vs. sell-side analysts, professionals in this field have the opportunity to branch out into other specialized roles as their careers progress. Those with years of real-world experience and a proven track record of profitable investing decisions often take on senior-level positions or join management teams at financial services companies. Of course, pursuing these types of financial analyst jobs requires the right educational background, skill sets and competencies. This accounts for why most positions require at least a bachelor’s degree in accounting, economics, finance or mathematics, according to the BLS, and why graduate programs provide a competitive advantage for job-seekers.
Earning a master’s degree in business analytics can open up a variety of career paths for today’s finance professionals; it can also help financial analysts accelerate their advancement and stay current with new technological trends and financial modeling techniques and, acquire career ready and market driven Descriptive-Predictive-Prescriptive Analytics tools. Here’s a quick breakdown of common financial analyst career paths:
Entry-Level Financial Analyst Jobs
Financial analysts typically get their start by specializing in a particular investment area, the BLS noted, such as the energy, technology or agricultural sectors. By monitoring market trends and economic conditions impacting their industry of study, financial analysts build the experience needed to make profitable investing decisions. That said, analysts in entry-level roles spend most of their time conducting research, performing financial modeling and preparing financial reports. Once they’ve developed enough subject matter expertise, financial analysts can begin making recommendations about investment opportunities and moving up the ladder.
Financial Management Teams and Specialized Roles
As financial analysts gain experience, they often begin branching out into other employment areas based on their core skills and career goals. Some choose to become portfolio managers, which are responsible for maintaining the profitability of corporate investments. Others seek out fund manager jobs to help individual investors maximize returns on stocks and bonds, identify new investment opportunities and reduce risk. Here are a few examples of specialized financial analyst job titles:
- Ratings analyst: Ratings analysts assess the debts of companies and government organizations to help rate their risk of defaulting on financial obligations and investments. They often work for credit agencies, banks and investment firms.
- Research analyst: Research analysts are dedicated to examining, interpreting and presenting data on specific markets, according to the Corporate Finance Institute, and primarily concern themselves with performing financial modeling and forecasting. They create charts, graphs and other visuals to make their financial reports more digestible to key decision-makers.
No matter which career path financial analysts choose, they must assemble the right combination of hard skills, financial knowledge and real-world experience to stand out to employers.
Essential Financial Analyst Skills
One of the benefits of becoming a financial analyst is that their core skills and knowledge is translatable to almost every industry and employer. While specializations do play an important role, professionals can leverage their expertise to review financial statements, assess investing decisions and forecast future earnings across industry lines. According to the CFI, the following skill sets are essential to the daily responsibilities of financial analysts:
Financial analysts are expected to gather and organize a massive amount of quantitative data before performing financial modeling. This includes historical financial reports, stock prices, industry research and accounting information. To ensure this data is easy to understand and ready for statistical review, financial analysts use software like Microsoft Excel. These spreadsheet programs offer a range of formatting styles and dynamic functions that keep information organized.
As the job title suggests, financial analysts must be able to effectively process and analyze complex data to locate profitable investment opportunities. They compare ratios and metrics (gross margins, earnings per share, return on assets, etc.) to identify trends and benchmark performance of the investment portfolios they oversee. This requires careful attention to detail and an ability to draw conclusions from large, disparate data sets. Analytical skills are widely considered the most important qualification for financial analyst jobs.
Developing projections and forecasts is another primary qualification for financial analysts, as these models provide key insights on the anticipated profitability of investment opportunities. According to Robert Half, hiring managers expect applicants to have experience with financial modeling software, along with knowledge of Microsoft Excel and enterprise resource planning systems. Of course, technology alone doesn’t lead to accurate forecasts — professionals must also understand how to incorporate regression analysis, year-over-year growth rates and other metrics into their financial modeling.Communication
After deep analysis is performed and forecast models are formulated, analysts create detailed presentations and financial reports for key decision-makers. This requires both written and verbal communication skills, as some investors and management teams may not have extensive financial expertise. The ability to translate complex concepts and recommendations for non-technical audiences is essential to explaining the value of investment opportunities.
Accelerate Your Financial Analyst Career with an MSBA from the University of Nevada, Reno
Pursuing a financial analyst career starts with building a strong foundation in financial analysis and investment strategies. The online Master of Business Analytics program at the University of Nevada, Reno is designed to prepare you to make meaningful contributions to organizations and investors in today’s fast-paced business landscape. With courses in predictive modeling and data mining, information visualization and applied data science, you can gain the real-world insights needed to turn raw information into profitable investing decisions.