What Does a Financial Analyst Do? Beyond the Numbers
You’ve been considering a new career in a business 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 all day?
“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—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 the job description than that. We enlisted experts to offer you a better understanding of what a financial analyst actually does. Keep reading to find out whether this could be your future job title.
What is a financial analyst, anyway?
“Financial analysts are the translators of information to the management team,” Miller says. Like an ocean diver, a great financial analyst goes deep into the weeds of finance and market data and brings vital insights to the surface for an organization to act upon.
Though financial analysts constantly crunch numbers, their goal is to help businesses make sound investment decisions. They do this by evaluating stocks, bonds and other investments, and assessing how or whether they can benefit the business.
You can imagine why someone would want a great financial analyst—their insights usually lead to larger profit margins, decreased financial risk and other benefits that keep companies or individuals financially stable and lucrative.
Financial analysts use past and present data to help their company determine solid financial plans. They constantly adapt and learn 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. 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. Managers rely on financial analysts to keep the investment health of their company stable.
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
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 do financial analysts do?
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:1
- 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
What skills do financial analysts need?
You can probably guess that those job duties require training and education—and you’d be right! Understanding the economic climate and finding valuable action steps take training as well as some natural skill.
We analyzed over 100,000 financial analyst job postings from the last year to find out what skills employers prioritize most in their hires. This list can give you a better idea of what a financial analyst does on the job.2
- Financial analysis
- Financial reporting
- Microsoft Excel™
- Financial modeling
- SAP (Systems Applications and Products)
Learning these skills and the required mathematical and economic knowledge for the job typically starts in a Finance degree program.
Where do financial analysts work?
Now that you have a better idea of what financial analysts do, you may be wondering where they go to get the job done.
Buy-side financial 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 financial analysts typically work for a firm that manages accounts for their clients. These analysts can expect to spend plenty of time traveling 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 have several options when it comes to work setting and specialty. This is one reason why working as a financial analyst can be so exciting!
So what does a financial analyst do? You now have a better answer to that question. But your picture of a financial analyst might not yet be complete. If you’re still interested in what this career is like from within, 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.”
1 Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, [information accessed February 19, 2019] www.bls.gov/ooh/. Information represents national, averaged data for the occupations listed and includes workers at all levels of education and experience. Employment conditions in your area may vary.
2Burning-Glass.com (analysis of 119,215 financial analyst job postings, Feb. 01, 2018 - Jan. 31, 2019).
Microsoft Excel is a registered trademark of Microsoft, Inc.
EDITOR’S NOTE: This article was originally published in 2016. It has since been updated to include information relevant to 2019.