You’ve been considering a new career in a business-related field and there’s one position in particular that piques your interest: financial analyst. On the surface, it sounds like the perfect opportunity to leverage your mathematical, methodical mind to provide some financial stability for your family.
But the more you think about it, the more ambiguous it seems. You can guess it has something to do with numbers and data analysis, but the details are hazy. What does a financial analyst do, exactly?
“Financial analysts are really the nerds of accounting,” says Jim Miller, an accounting professional who has employed financial analysts for over a decade. “I say that in a loving way, but they are the real numbers people who do the hard math.”
Just as you predicted, financial analysts deal a lot with numbers. But there’s much more to their job than that. We enlisted the experts to help you get a better understanding of what a financial analyst actually does. Keep reading to find out if this could be your future job title.
What does a financial analyst do, anyway?
Even though financial analysts are constantly crunching the numbers, their work extends much further than spreadsheets and dollar signs. It’s their responsibility to help businesses make sound investment decisions. They do this by evaluating stocks, bonds and other investments and assessing how or if they can benefit the business.
"They are the translators of information to the management team."
Financial analysts use past and present data to help their company determine solid financial plans. They’re consistently adapting and learning alongside changing market conditions in order to forecast investment opportunities.
“A financial analyst's biggest responsibility is identifying a trend in the business before anyone else,” Miller explains. “They are the translators of information to the management team.”
Managers rely on financial analysts to keep the investment health of their company stable. Financial analysts meet regularly with company leaders to gain insight into organizational goals and share written reports they’ve prepared. They may also occasionally meet with investors.
What are the different types of financial analysts?
There are two main categories of financial analysts: buy-side and sell-side. Buy-side analysts create smart investment strategies for companies that have a significant amount of money to invest, such as insurance companies or some universities and nonprofits.
Sell-side analysts advise financial agents who sell investments. Though buy-side or sell-side may determine which type of company you work for, the job duties of both categories are very similar.
Most financial analysts in either camp will choose to specialize in order to focus their efforts on a certain industry, region or type of product, according to the U.S. Bureau of Labor Statistics (BLS). Here are four common types of financial analysts:
1. Portfolio managers
These professionals supervise a team of other analysts and determine the products, industries and regions on which to focus their company’s investment portfolio. They are responsible for the overall performance of the portfolio and are especially involved when it comes to meeting with investors about investment decisions and strategies.
2. Fund managers
Fund managers oversee hedge funds or mutual funds. They need to be confident decision-makers since their job requires them to make split-second decisions to buy or sell depending on the current state of the market.
3. Ratings analysts
These analysts monitor the capability of other companies or governments to repay their debts, especially bonds. Their evaluation reports help management teams assign risk to companies or governments based on their ability to pay what they owe.
4. Risk analysts
Risk analysts determine how to manage unpredictable market conditions and limit their company’s potential for loss. They help companies reduce risk by maintaining a diversified portfolio and consistently assessing the risk of their current investments.
What are some common financial analyst job duties?
Every financial analyst’s job will hold different responsibilities depending on their specialty and where they work. But the BLS does list some common tasks a financial analyst can expect to face:
- Researching and evaluating past and current market trends
- Determining a company’s value based on financial statements
- Recommending investments or portfolios for a company to purchase
- Creating charts and graphs and preparing reports to share investment or risk information with management
- Analyzing and interpreting data about business trends that may affect a company’s investments
- Monitoring the company’s current investments and the present economic climate
There are a variety of important skills that financial analysts need in order to complete these job duties. Critical thinking, written comprehension, interpersonal skills and knowledge of economics and accounting are listed among the top skills for financial analysts, according to the U.S. Department of Labor (DOL).
Where do financial analysts work?
Now that you have a better idea of what a financial analyst does, you may be wondering where they go to get the job done. As you might have guessed, financial analysts generally work in offices. But many are frequently traveling to visit companies or potential investors.
Buy-side analysts often work in offices located at large financial institutions in large metropolitan cities. Financial analysts may also work at banks, pension funds, insurance companies and other businesses.
Sell-side analysts typically work for a firm that manages accounts for their clients. These analysts can expect to spend plenty of time travelling to meet with clients in addition to working from their “home base” at their firm.
Is a career as a financial analyst right for you?
Financial analysts can work in various places and have differing roles, depending on who they work for and what their specialty is. This is one reason why being a financial analyst can be such an exciting career!
So what does a financial analyst do? You now have a basic understanding to answer that question. If you’re still contemplating whether it’s the best career for you, it’s time to dig a little deeper. Get an exclusive look at the industry in our article: What I Wish I Knew Before Working in Finance.