Financial Analyst

When most people hear the term financial analyst they think of someone who spends their days slaving over piles of spreadsheets and numbers. This is only part of the financial analyst's role; they are often the people working behind the scenes to make companies and individuals more profitable.

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Role Of The Financial Analyst
The phrase financial analyst is a broad term used to describe the career of those working in the financial services field. Financial analysts include financial consultants, private bankers, financial planners, wealth managers, and even insurance agents. The jobs of the financial analysts are to provide in-depth guidance to businesses and individuals. Decisions regarding investments, mergers and acquisitions, and even long-term marketplace activities and trends are within the scope of their job description. Financial analysts work for anyone who has investment capital, but doesn’t know quite where to put it. They provide a financial snapshot of a prospective company or service that their client looks to purchase, showcasing the affordability and the wisdom of the purchase. They work much like a jewelry appraiser, valuating and assessing risk involved in a transaction, and gauging how much to pay for a given company.

Financial Analysts tend to be very specific in their training and experience. Most seldom work outside of a given field of analysis. For example, a ratings analyst typically works solely to assess the risk involved in money-lending. Can a business repay a short or long-term loan, and what are the most attractive terms for the lender in terms of risk, affordability, and of course, profits? Personal financial planners are often used to determine the financial needs of individuals and families. These professionals often offer advice and perhaps even sell the products they recommend. They are generally more familiar with personal tax liabilities and legal loopholes in the tax code than are private bankers or wealth managers whose sole purpose is often simply to preserve the wealth of clients. These advisors often act more in the capacity of accountants or insurance agents, though in a more generalized fashion.

Related Occupations
There are many related occupations when you talk about financial analysts. A financial analyst is the broader topic or theme of a type of career. More specifically, a financial analyst often fits several separate categories. Financial consultants, for example, don’t always use the stock market to make decisions. Insurance agents are financial analysts, and their products don’t always tend toward market sensitivity. Insurance agents are more adept at using a client’s own financial situation to find the “soft” spots in their financial plan. An insurance agent will use many different types of financial products to make an efficient and complete financial plan for a customer. Jobs are often industry-specific, meaning that often an employer will hire someone strictly to be a wealth manager, while leaving other specialties, such as financial consultants to their own areas of expertise.

Commodities brokers are another type of financial analyst. Commodities brokers earn their salary and are allowed to keep their jobs only if they’re exceedingly good at what they do. The risk involved in commodities trading often outweighs that of other branches of financial analysis. When they lose, typically they lose billions. They study existing market trends to look for causes in the fluctuation of supplies of a product, such as orange juice. They use looming market events to make educated guesses as to what the price of a commodity will do. Obviously, a major storm will cause a drop in the production of goods in Florida, such as orange juice. Florida’s loss is the commodity broker’s gain. A truly talented commodities broker can take much of the risk out of the market, but with the market still so dependent on outside influence, it can be easy to be overconfident, and lose everything.

How They Work
It’s true that wealth managers, financial consultants, private bankers, and financial planners spend a lot of time hunched over a pile of paperwork trying to crunch numbers to come up with the best options for their clients. With that being said financial analysts get the reputation for being boring, stuffy, and hard to get along with. Nine times out of ten this isn’t the case. Financial analysts can be the office prankster, but where some people don’t know when to stop the pranks these financial consultants know when to stop the fun and get down to work.

There are times a financial analyst might seem hard to approach but that is just because they usually have so much riding on their shoulders. Their analysis of a situation can make or break a profitable deal. If they don’t give this their utmost attention not only could the company lose money, but employees could lose their jobs. The last thing any person wants is to feel responsible for causing a coworker to lose his or her career.

Financial Analysis A Growth Industry
Financial service careers are exploding with new jobs every day. Unlike the mortgage business, or many other financial sectors, the investment counseling and analysis department of most companies grows yearly. Most financial analysts are employed at major banks and holding corporations that deal with mergers and acquisitions on a regular basis doing risk analysis and developing strategies for the takeover and maintenance of corporate America. The vast majority of these major banks and financial institutions are based in major cities such as New York City, Chicago, or even cities such as Omaha, Nebraska, where many of the world’s top financial companies have relocated. Many wealth managers work in larger cities, as well. Wealth managers have to follow the money, and money tends toward the amenities and jobs that larger cities offer.

Nearly two-thirds of all financial analysts work for the private sector, with the balance employed throughout the government services such as the Federal Reserve, the SEC, or the IRS. Financial planners, however, are almost strictly private-sector employees working with finance and insurance, including banks, insurance companies, and investment firms. Of these private sector financial planners, nearly thirty percent are self-employed, many in rural areas or small towns and cities. They provide a crucial link between the less urbanized and financially aware population, and the wider investing world.

How Much They Make
Financial Analysts typically work one of two ways. They are either salary plus bonus, or they are fee or commission-based. Bonuses are often calculated based on how well their projections match their performance. In this case, it often pays to “under-promise and over-deliver”. In other words, by lowering growth expectations of the portfolio, they can more closely align projections with real world performance. Many of the best financial consultants and brokers also put in provisions for loss. This means that they can lose a set percentage of the value of their portfolios before they will actually be outside the estimates they chose.

Personal financial planners in small town jobs, like the ones who handle mid-sized investments in your hometown, or for your local bank, typically are paid a commission based upon the dollar amount of each sale or transaction. Those who are self-employed typically charge a small base fee, and supplement that with the commission from any investment products or insurance that they broker for their clients. Salaried financial consultants typically earn less than those who receive fees or commission. The median annual earnings for a financial analyst were $66,590 in 2006, with the highest 10 percent of earners making more than $145,000 in annual salary.

What Qualifies Them To Do What They Do
Financial Analysts typically must have at least a bachelor’s degree in finance or risk management to be considered for jobs in the field. The majority of the top analysts go on to receive their Master’s degree in finance or get high-level professional designation, such as a ChFC. This is the Chartered Financial Consultant. Annual continuing education is often required to keep an analyst apprised of the most up-to-date information possible, as well as make them aware of any changes in their chosen career path.

When it comes to specific fields, there are other requirements as well. FINRA, the Financial Industry Regulatory Authority, is the entity that regulates the securities business. They were formed with the merger of the regulatory body of the NYSE and the NASD, and are a non-governmental entity, with little in the way of enforcement capabilities. However, the SEC, the Securities and Exchange Commission, regulates the industry as well. They tend to be the main law enforcement body when it comes to investments and the stock market.

Training and Certifications
Of course all that’s required for most of the work that a financial analyst does is that they be licensed with FINRA. Their Series 6, 66, or 7 is a must, especially for those who broker securities. For more basic investments, such as insurance products, a state license is required. These products are regulated by each state, and not the federal government. However, there are some professional certifications that will make them more attractive to employers and to prospective clients as well. These vary from one career to the next, and what’s good for one may not do anything for another.

The first, for Financial Analysts, is the Chartered Financial Analyst. This is a certification that is sponsored by the CFA Institute. To qualify, one must have a bachelor’s degree and four years working in their respective field. There are three exams that are required before one receives this certification. The first is administered twice per year, and the second and third are offered only annually. These exams are comprehensive, and cover everything ranging from accounting to economics.

Financial Analyst Personal Qualifications
The most important weapon for a financial analyst to have in their arsenal is the ability to think critically. In their career they are often called to provide impromptu advice and give on-the-spot opinions to high ranking corporate heads. They must be able to think on their feet in order to be efficient in their jobs. They must be able to tackle a problem from all angles, and frequently have to invent creative solutions to those problems. Not every problem can be solved in the same way, and a bad decision can lead to billion-dollar disasters.

Of course, all the education in the world won’t help you if you can’t communicate what you’re thinking. The ability to effectively communicate an idea or a thought is critical. Having training in speech or communications is essential in this career would be a great help to anyone choosing a career as a financial analyst. Even if you don’t have to speak in front of large groups, it will certainly teach you how to effectively form an argument, and structure a thought.

Obviously it goes without saying that a financial planner will need to be a bit broader in their skill set. Not only do they need all of the skills listed above, but they must reconcile that with the need for consistently good customer service. Along with private bankers and wealth managers, they will be meeting with a wide variety of clientele. While wealth managers and personal bankers typically work with individuals with greater wealth, a standard financial planner is equally at home working with a blue-collar factory worker or a million dollar a year investor. Financial planners must be able to not only help clients with stock market tips and investment strategies, but be able to help set up basic retirement accounts. Without the skills to interact with these differing classes of clientele, a financial planner would quickly find himself without a career, and without a salary.

Personal financial planners may gain the designation “Certified Financial Planner”. This certification is offered by the Certified Financial Planner Board of Standards, and requires 3 years of work experience, the completion of a bachelor’s degree, a comprehensive examination, and adherence to a strict code of ethics. The candidate for CFP designation is tested on their knowledge or financial planning, insurance, employee benefits, taxes and retirement, and estate planning.

Job Outlook
The number of jobs for financial analysts is expected to increase at a much higher than normal rate. With baby boomers nearing retirement in record numbers, it is certain that the personal financial planner will be a major growth industry for the next decade. The Bureau of Labor Statistics projects that the number of jobs for financial analysts, especially personal financial planners, will increase by over 40 percent. This is because as the baby boomers reach their maximum level of retirement savings, their personal investments and insurance needs are expected to increase. More people will need the expert help of an analyst to manage their retirement accounts. In addition to the growing number of consumers, there is a corresponding increase in the number of years spent in retirement, due in large part to ever-increasing lifespan of retirees.

In the past few years, banks and insurance companies have been allowed to get more involved in the marketing of securities than ever before. As a result, many firms are hiring specialized financial planners and wealth managers to their list of business associates. People are retiring wealthier than ever, and wealth managers are poised to take advantage of the increase in retirement income. This coupled with increasingly complex investment offerings, makes it possible for more and more people to enter the field each year in order to keep up with demand.


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