How to Become a Financial Analyst?

If you want to learn about how to become a great financial analyst in the USA, the following comprehensive guide on how to become a financial analyst would be of great help to you. It contains information about what a financial analyst does, the steps to become a great financial analyst after college, what is the estimated salary for financial analysts and how to become a great financial risk analyst.
With so much growth in business and financial markets in recent times, employers are increasingly showing interest in qualified individuals to provide them with a complete and comprehensive understanding of the financial aspects of their business. According to a recent report by Forbes magazine, the growth in demand for financial analysts is expected to surpass the demand for professionals in many other careers by as early as 2026.
To learn more about this job and how you can get it, continue reading the following guide.

What does a Financial Analyst do?

Financial analysts, also referred to as securities analysts or investment analysts, are professionals who perform a multitude of duties, such as collecting, monitoring and evaluating information, and making forecasts relevant to the company’s business. The typical job duties of financial analysts include the following:

  • Make recommendations about individual investments or a collection of investments, commonly known as portfolios
  • Analyze current and previous financial data
  • Evaluate trends in the world of economics and business
  • Examine comprehensively the financial status of a company to get a better look into its future prospects
  • Prepare written reports detailing the financial information
  • Analyze the management team and its strengths

Financial analysts may perform additional duties depending on their exact job titles.

Types of Financial Analysts

When learning about the job duties of financial analysts, it is important to know the different kinds of financial analysts.

Financial Risk Specialists: These professionals analyze threats and risks associated with financial decisions and determine how to limit potential losses from unpredictability. They make investment decisions such as determining the optimal combination of bonds, stocks and funds in a portfolio.
Fund Managers: These professionals work with mutual funds or hedge funds. Fund managers are required to have quick thinking abilities and have to frequently make decisions about buying or selling in reaction to a rapidly changing market.
Investment Analysts: These professionals analyze information including investment programs and also carry out business valuations. They respond to client queries about asset allocation and investment opportunities such as property, venture capital and hedge funds.
Portfolio Managers: These professionals determine the ideal mix of investments for their clients. They are responsible for the overall profitability and performance of a portfolio. In addition to that, they are also expected to explain strategies and marketing decisions in meetings with stakeholders.
Ratings Analysts: These professionals evaluate the ability of a company to pay off its debts. Based on evaluations conducted by these professionals, the relevant management team rates the risk of a company not paying its debts, or bonds.
Securities Analysts: These professionals analyze the securities markets and identify high-yield assets for their clients. They make use of resources such as daily stock quotes, economic forecasts, bond performance reports and market trends.

Steps to Become a Financial Analyst

In order to become a financial analyst, there are several educational requirements that need to be fulfilled. The following steps to become a financial analyst would help you understand the entire process clearly.

Step 1: Get a Bachelor’s Degree

The minimum level of education required to become a financial analyst is to get a 4-year long bachelor’s degree in finance or a related subject. According to the US Bureau of Labor Statistics, most entry-level positions for financial analysts require a bachelor’s degree. Typical fields of study include accounting, economics, finance, statistics, business and mathematics. In some cases, employers might prefer to hire those with a master’s degree at least.

Step 2: Get Your License and Certifications

Once you have completed the minimum education requirement, you can move on to the licensure process. While this may not be mandatory, it is certainly recommended to get professional licenses and designations later on during your career for greater salary and growth benefits.
In certain cases, Financial Analysts are required to be licensed or certified by law. For instance, if the company sells financial products, it must comply with specific regulations to ensure that customers are protected against fraud and unfair activities. The Financial Industry Regulatory Authority (FINRA) that entities under its umbrella comply with its rules. According to their regulations, financial analysts must be licensed by FINRA. Please note that many employers prefer financial analysts who are FINRA-licensed. It must also be noted that FINRA licenses require employer sponsorship, therefore job applicants who show potential might be sponsored by their employers for this license.
In addition to that, employers often recommend that Financial Analysts pursue additional certifications, such as the Chartered Financial Analyst (CFA) credential. Even though this is also not required by law either, it can greatly improve the chances of professional advancement and better salary outlook.
According to the US Bureau of Labor Statistics, in order to become CFA certified, aspiring candidates will need to have at least a bachelor’s degree and several years of work experience. Following this, they would have to pass certain exams to become certified. Applicants may also choose to become certified in a certain specialty.

Step 3: Get Relevant Job Experience

Once fully qualified to begin working, it is important for financial analysts to get the right experience and move up the corporate ladder. Candidates with hands-on experience in the fields of finance, accounting, and economics might have a better chance at advancement opportunities than those with no work experience, as per Occupational Information Network.
If you want to learn about how to become a financial analyst without experience, you would be glad to know that it is possible to get a job in this field without experience. However, for better and more advanced job opportunities, it is important to work your way up with experience or additional educational qualifications.

Step 4: Get a Master’s Degree (Optional)

In addition to experience, financial analysts can also strengthen their resumes by investing in further education. Many professionals choose to go for a master’s degree in finance or accounting to increase their knowledge and skill set. Some professionals prefer to go for a general Master of Business Administration (MBA) while others go for a Master of Science in Accounting. To get a master’s degree in a related field, students must get around 30 to 60 credits in addition to their undergraduate studies. Typical coursework at this level includes advanced auditing, managerial methods, strategic analysis and advanced financial accounting and reporting.

Skills Required to Be a Financial Analyst

According to the US Bureau of Labor Statistics, there are certain skills that make a good financial analyst. These important qualities include the following:
Analytical Skills: These are required since financial analysts must evaluate a range of information when looking for profitable investment opportunities.
Detail Oriented: Financial analysts must pay great attention to detail since even small errors can lead to major financial losses in investment portfolios.
Computer Skills: Financial Analysts need to be updated about the latest software in the financial markets in order to effectively organize data, create portfolios and make recommendations.
Math Skills: Being good at mathematics is a given with Financial Analyst occupations. These professionals need to be quick with numbers when estimating the value of financial securities.
Communication Skills: These are important as financial analysts have to clearly explain their recommendations to clients.

How much does a Financial Analyst make?

According to the US Bureau of Labor Statistics, Financial Analysts made an annual median income of $83,660 in 2020. The lowest 10 percent of these professionals earned less than $48,760 while the highest 10 percent earned more than $159,560. The top-paying industry for financial analysts was securities, commodity contracts and other financial investments and related activities, with an annual median income of $98,850, followed by professional, scientific, and technical services, with an annual median income of $86,300. The top-paying state for Financial and Investment Analysts, Financial Risk Specialists and Financial Specialists was New York, with an annual mean wage of $130,670, followed by District of Columbia, with an annual mean wage of $109,070, Massachusetts, with an annual mean wage of $105,680, Connecticut, with an annual mean wage of $105,020 and New Jersey, with an annual mean wage of $101,780.

Job Outlook for Financial Analysts

According to the US Bureau of Labor Statistics, jobs for Financial Analysts are expected to grow by 6% in the years from 2020 to 2030, which is as fast as the average growth for all occupations. This growth will add an approximately 41,000 new jobs every year in the field in the time period from 2020 to 2030. Most openings are expected to be a result of the need to replace workers who move to other jobs or exit the labor force entirely. Demand for financial analysts increased with an increase in overall economic activity, as more and more workers are required to evaluate investment opportunities. In addition to that, emerging markets throughout the world are providing new investment opportunities, creating a lot of jobs for financial analysts.