Financial analysts, also known as securities analysts or investment analysts, work for banks, insurance companies, mutual and pension funds, securities firms, or other businesses gathering data, analyzing financial information, and making recommendations to either firms or the clients of firms. They read company financial statements and, using spreadsheet and statistical software packages, analyze commodity prices, sales, costs, expenses, and tax rates in order to determine a company’s value or project future profits. They often study the entire industry in which they are employed. They prepare reports and make presentations to company officials on whether or not to buy a particular security or investment, or on the financial risks associates with making a particular investment decision. Those who work for investment banking departments of securities or banking firms often work in teams to analyze the prospects of companies going public for the first time. Others, called ratings analysts, evaluate the repayment ability of companies or governments that issue bonds.
Those job candidates seeking positions as financial analysts need to have excellent mathematical, computer, analytical, and problem-solving skills. Because their jobs require them to constantly explain complex financial concepts and strategies to clients and professionals, they must have highly-developed verbal and written communication skills. Other desirable qualities include self-confidence, maturity, and self-motivation.
In 2002, financial analysts earned a median annual salary of $57,100. Earnings ranged from the lowest 10%, who earned less than $34,570, and the highest 10%, who earned more than $108,060. The following shows the median annual salaries for the industries employing the highest numbers of financial analysts:
- Other financial investment activities – $74,860
- Management of companies and enterprises – 60,670
- Securities and commodity intermediation/brokerage – 58,540
- Nondepository credit intermediation – 51,700
- Depository credit intermediation – 51,570
Training and Education
A college education is required for those wishing to become financial analysts. Most employers prefer candidates who have at least a bachelor’s degree in business administration, accounting, statistics, or finance. Knowledge of accounting policies and procedures, corporate budgeting, and financial analysis methods is recommended, while courses in statistics, economics, and business are prerequisites. A master’s degree in business administration is highly recommended. Although not required, financial analysts may obtain professional certification by receiving the title Chartered Financial Analyst (CFA) from the Association of Investment Management and Research. Applicants for this designation must have a bachelor’s degree, 3 years of experience, and must pass 3 examinations on topics such as accounting, economics, securities analysis, asset valuation, and portfolio management. Financial analysts may advance to portfolio manager or financial manager positions.
In 2002, financial analysts held about 179,000 jobs. Many worked at the headquarters of large financial companies. 19% worked for securities and commodity brokers, exchanges, and investment services firms. 17% worked for depository and nondepository institutions, including banks, savings institutions, and mortgage bankers and brokers.
Between 2002 and 2012, the number of financial analysts is expected to increase faster than the average. This will be due to an increase in the need for investment advice among baby boomers saving for retirement and among a better educated and wealthier public. People are also living longer in general, and so must plan more comprehensively and carefully for retirement. In addition, the globalization of the securities markets and the deregulation of the financial services industry will increase demand for investment counseling.