Financial Analyst Job Description - Requirements, Skills, Duties and Career Path
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What Does a Financial Analyst Do?
A financial analyst is an expert who helps businesses make investment decisions. Financial analysts perform financial analyses and assess economic and statistical data in order to make forecasts regarding financial market and share price trends and provide recommendations and guidance in relation to prospective financial transactions and investment decisions.
One of the principal tasks carried out by a financial analyst is to analyse and interpret a company’s financial statements with the aim of determining the profitability of the business and making predictions about its future growth, with the help of key business valuation methods. Financial analysts also assess the performance of stocks, bonds and other securities, perform SWOT and market analyses and conduct screenings of potential investment opportunities. Financial analysis is a complex and sophisticated evaluation process, whose aim is to provide guidance and advice to investors making investment decisions - for example, to buy or sell shares in a particular company. Financial analysts also support companies by drafting investment memorandums and business plans for financial planning purposes.
As part of their work, financial analysts have regular contact with stockbrokers, banks and the heads of finance and administration of corporations.
Financial analysts are mainly employed by financial consulting firms, banks, insurance companies, brokerage firms, asset management companies, investment banks and investment funds, pension funds and governments, as well as within the finance departments of large corporations.
Others choose to work as independent financial analysts providing freelance consultancy services.
The duties of a financial analyst working for a company (such as a publicly listed company) will include checking and monitoring the company’s financial position and performance, its use of liquidity, asset allocation and its sources of financing (equity, debt and derivatives). Financial analysts are responsible for establishing the optimal capital structure for a company and providing guidance as to its future growth in the shape of forecasts. Analysts use financial statements and stock market values to provide top management and investors with recommendations for financial planning purposes. Prepare reports regarding investment transactions, support management with the process of raising investment capital and monitor the execution of operations/transactions.
Financial analysts also have a fundamental key role to play in stock market flotations and IPOs (initial public offerings) and are responsible for providing recommendations with regard to potential mergers and acquisitions.
In organizations such as banks, insurance companies, government agencies and social security institutions, analysts are responsible for monitoring national and international securities markets, deploying financial models to forecasts future macro and micro economic conditions and assess the risk factors associated with financial investments.
The duties of a financial analyst working as a consultant include providing clients with recommendations to enable them to reach their financial objectives, monitoring the performance of companies in their portfolio, calculating the risks and potential financial returns on investments, monitoring the stock market performance of national and international companies to identify the best investment opportunities and recommending stocks to buy and sell. Analyst also support their clients in complex transactions such as mergers and acquisitions or financial restructuring operations.
The job of a financial analyst comes with both a very high degree of autonomy and responsibility, since the financial analysis and stock price forecasting work they perform can be critical for the success of investments.
Financial Analyst Duties and Responsibilities
Financial analysts are responsible for the following tasks:
- Analyzing financial status by collecting and monitoring data
- Creating financial models for decision support
- Analyzing and interpreting financial statements
- Determining the impact on businesses of changes in financial variables
- Contributing to the preparation of business plans, annual budgets and financial plans
- Simulating, evaluating and implementing financial transactions
- Conducting screenings of securities and portfolio evaluations
- Performing market analysis
- Identifying investment opportunities
- Studying financial models for evaluation of investments
- Preparing presentations for national and international investors, banks, funds
- Monitoring investment portfolios and preparing performance reports
- Drafting detailed financial reports
- Maintaining relations with key contacts in world of finance
In addition, financial analysts are responsible for ensuring that financial transactions are compliant with all legal and governance requirements.
How to Become a Financial Analyst - Education and Requirements
Usually, a financial analyst requires a degree in economics or a similar field, while specializing in financial analysis, corporate finance or business administration may prove an advantage. University degree courses in business management cover areas such as macroeconomics, microeconomics, statistics and law and provide graduates with the abilities required to read, analyze and interpret financial statements, plan stock market investments, monitor financial market trends and manage financial transactions.
Equally essential for an aspiring financial analyst - particularly in view of the growing importance of financial technology - are IT skills, especially the ability to use spreadsheets such as Excel and other software programs for preparing reports, statistics, business plans and financial documents.
Another key asset for a financial analyst is previous experience in a financial analysis, planning and control, budgeting, auditing or corporate finance role, in a consulting firm or the finance and control department of a company.
In a highly competitive sector such as finance, holding an MBA is not only a great advantage but may even for the most prestigious roles represent a basic requirement.
The financial markets are an extremely complex phenomenon, governed by a series of detailed laws and regulations. It is essential for a financial analyst to be familiar and up-to-date with all the national and international laws and regulations applicable to the finance and banking sectors and to be able to ensure that they are complied with.
Financial Analyst Skills
The skills required by a financial analyst include:
- Knowledge of the principal financial analysis tools and software applications
- Knowledge of national and international accounting standards (IFRS, GAAP etc.)
- Analytical skills and ability to handle complex data
- Ability to work on own initiative
- Good communication and interpersonal skills
The career of a financial analyst will usually begin with a junior financial analyst position under the supervision of a more expert colleague. As an analyst gains in experience, he or she may be assigned greater responsibilities and eventually progress to a senior financial analyst position - perhaps specializing in a specific sector or market, for example as an M&A analyst, or as a securities analyst in the technology, sovereign bonds, commodities or emerging markets sectors.
The most motivated and able analysts may progress to a career in management - for example, as a supervisor of a group of financial analysts, a portfolio manager in an investment bank, or a fund manager - and may even go on to a top management role such as Chief Financial Officer - the person responsible for all of a company’s financial operations.
Another interesting option for a financial analyst is to work on a self-employed basis as a financial consultant - a job which combines independence with excellent financial rewards.
Top Reasons to Work as a Financial Analyst
A career as a financial analyst is an interesting option for anybody with a passion for finance and investments. This is a highly specialized position that, in addition being well paid, also comes with a significant amount of responsibility. Financial analysts make a significant contribution to the success of the companies they work for (or provide consulting services to), by helping them to identify the most profitable investment opportunities. Finally, the finance sector offers genuine opportunities for career advancement to people who show talent and a desire to rise to the top of their profession.