Financial Analyst Overview

Updated October 24, 2023 · 5 Min Read

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Financial analysts basically use the past to predict the future. Here's everything you need to know about breaking into this challenging, in-demand career.

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The role of a financial analyst sounds complicated, but it's pretty simple. There are basically two job requirements: to report on what has happened and to predict what will happen next.

If you were the financial analyst for a donut shop, for example, you would be responsible for tracking and reporting how many donuts were sold in the last quarter, the cost of producing those donuts, and the profits made. Then you would estimate how many donuts the shop is likely to sell in the coming quarter and what it will cost to produce those donuts in order to help build an accurate budget.

Most entry-level financial analysts hold at least a bachelor's degree in economics, business, or accounting. Mid and senior-level analysts are often required to have a master's degree or an MBA. Non-degree certifications can also help financial analysts gain access to better opportunities and better pay. The BLS reports job growth projections for financial analyst careers outpace the average growth of all occupations.

Keep reading to learn more about what a financial analyst does and how to break into this lucrative field.

What Is a Financial Analyst?

Of course, there's more to financial analysis than just donuts. Wealthy investors and companies often need financial analysts to make data-driven decisions to grow capital. Typical job duties include staying up to date on economic trends and reaching out to clients. Financial analysts also provide executives with actionable insights on liquidity, solvency, and profitability.

Financial analysts often assume responsibilities associated with accounting, marketing, and psychology. For instance, a financial analyst may need to submit financial reports to regulatory bodies. They may also engage stakeholders and manage client expectations.

A Day in the Life of a Financial Analyst

Financial analysts' responsibilities depend on their roles and the time of year. For instance, financial analysts who work for publicly traded companies may submit 10-Qs to the Securities and Exchange Commission (SEC). They may also prepare quarterly earnings reports and attend shareholder meetings.

Financial analysts should stay current on market news. They often perform technical analysis, assess uncertainty in investment decisions, and provide actionable information to executives. They may also spend parts of the year completing continuing education requirements to renew licensure or certifications.

Key Soft Skills for a Financial Analyst

Achievement Striving: Achievement striving refers to realizing goals and accomplishing more difficult tasks. This trait enables financial analysts to obtain optimal outcomes for individual clients and corporations.
Emotional Intelligence: Emotional intelligence allows individuals to recognize, understand, and regulate emotions. This soft skill can help financial analysts emotionally engage clients and manage unrealistic expectations.
Perseverance: Overcoming setbacks allows financial analysts to persevere during unfavorable market conditions without internalizing the heightened negativity of clients and corporate leaders.
Adaptability: Financial analysts must quickly adjust to unexpected changes and make rational decisions in uncertain circumstances. This attribute can help financial analysts adapt to ever-changing market conditions.

Key Hard Skills for a Financial Analyst

Technical Analysis: A financial analyst's job description often includes managing securities and other assets (e.g., real estate or cryptocurrencies). Professionals must know how to read price charts, draw trendlines and continuation patterns, and recognize areas of support and resistance.
Financial Reporting: Many financial analysts work with accountants to prepare financial reports for clients, executives, the SEC, and other regulatory bodies. Financial analysts must have strong financial reporting skills and an in-depth understanding of financial regulation.
Risk Management: Risk management refers to assessing uncertainty in investment decisions and reducing excessive risk. Mastering this skill is critical for financial analysts handling financial assets.
Asset Valuation: A financial analyst's job description often includes determining the fair market value of simple asset classes like companies and complex assets like credit default swaps. Mastering this skill requires expertise in identifying net asset values, building absolute valuation models, and analyzing comparable valuation metrics.

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Financial Analyst Salary and Career Path

Financial analyst credentials can pave the way for a rewarding and profitable career. According to the Bureau of Labor Statistics (BLS), the median annual income reached $96,220 for financial analysts as of 2022.

Factors influencing salary include education, industry, experience, and location. Financial analysts working in securities, commodity contracts, and other financial investments and related activities earned a median annual salary of $106,390 as of 2022. Those working in credit mediation and related activities, by contrast, earned a median annual salary of $88,100 during the same year.

How to Become a Financial Analyst

Entry-level financial analysts should hold a bachelor's degree in business administration, accounting, economics, or a related area. An MBA in financial analysis or a master's degree in finance can help boost employment opportunities and salary expectations.

Professional finance or investment experience and CFA certification can also help advance your career as a financial analyst. The CFA Institute serves as the official certifying body for CFA certification. The prestigious CFA designation demonstrates a strong understanding of financial assessment, management, and regulation.

Many financial analyst roles require a financial securities license. The Financial Industry Regulatory Authority and the North American Securities Administrators Association oversee the requirements and exams for different financial securities licenses. A financial securities license requires an organizational sponsorship.

Alternatives to an MBA in Finance

Getting your MBA in finance can certainly help you secure a career as a financial analyst – but it's not necessarily required. What matters most is having a good foundation in finance, problem-solving, analytical skills, industry tools, and market knowledge.

Here are a few different paths you could take to become a financial analyst.

MBA in Accounting

An MBA in accounting is all about the numbers and what they can do for a business. You will dive into financial accounting, managerial accounting, taxation, and auditing. You'll learn how to navigate complex regulations, analyze financial statements, and apply accounting principles to your decision-making. It's a solid foundation for a successful career as a financial analyst.

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MBA in Business Analytics

An MBA in business analytics focuses on using data analysis and statistical methods to solve business problems. Many of the skills and techniques developed in a business analytics concentration — like strategic decision-making, predictive modeling, and data visualization — are directly applicable to financial analysis.

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MBA in Entrepreneurship

An MBA in entrepreneurship is designed for aspiring business owners. It combines all the business fundamentals with courses on start-up strategy and venture financing. You'll learn to develop business plans, identify market opportunities, and navigate the money challenges of starting a new venture. Financial analysts with a background in entrepreneurship are uniquely equipped to launch their own businesses or drive innovations within their companies.

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Where Can I Work as a Financial Analyst?

Financial analysts can secure employment across a variety of industries, including financial investment (e.g., stocks), financial vehicles (e.g., mutual funds), business management, and central banks.

Job opportunities and earning potential vary by industry. For instance, 77,860 financial analysts worked in the investment sector as of 2022, while central banks employed only 740, according to the BLS. Annual salaries averaged $148,040 in the information services sector but only $99,640 in enterprise management.

Location also impacts job outlook and salaries. The BLS notes that 46,720 financial analysts worked in New York as of 2022, while North Dakota employed only 240. Annual earnings averaged $140,880 and $78,290 in the two states, respectively.

Top Locations for Financial Analysts

As of 2022, the top-paying states for financial analysts were New York, Wyoming, New Jersey, Alaska, and California, according to the BLS. Factors like job demand and cost of living can influence earning potential.

The top-employing states for financial analysts in 2022 were New York, California, Texas, Florida, and Illinois.

Resources for Financial Analysts

Professional organizations provide valuable resources for aspiring financial analysts, such as networking and certification opportunities. Below, we list four reputable organizations for finance and investment professionals.

Professional Organizations for Financial Analysts

A financial analyst certification organization, CFI offers online development opportunities for investment and finance professionals. The institute also serves as the certifying body for various designations.

A global nonprofit organization and membership association, GARP offers continuing education and networking opportunities to risk professionals. The association also advocates for higher risk management standards.

PRMIA provides networking and training opportunities for risk managers. The association also promotes the implementation of risk management practices. PRMIA is the official certifying body for the professional risk manager designation.

NAPFA is a national financial planning trade organization. The association advocates for fiduciary financial practices, requiring financial advisors to earn a fee only when their clients benefit.

Common Questions about Financial Analysts

Can I be a financial analyst without a degree?

The days of becoming a financial analyst without a degree are largely gone — most employers want candidates to have at least a bachelor's degree in a relevant field.

But that doesn't mean it's impossible, either — in some cases, with the right work experience and certifications, you may still be able to pursue a career as a financial analyst. The key will be being able to demonstrate a deep understanding of financial principles as well as the skills required to be successful.

Do financial analysts work with people?

Yes! While financial analysts are primarily tasked with research and analysis, the job requires a good amount of collaboration and communication with other people across an organization.

Analysts must work closely with management, communicate with investors, coordinate with teammates, report to stakeholders, and present their findings to various audiences.

What does a financial analyst need to know?

A financial analyst needs to know their way around financial statements, data analysis, financial modeling, and financial analysis tools. They also need to have a good grasp of financial principles, investment evaluation, and risk assessment.

What is the hardest part of being a financial analyst?

Being a financial analyst can be a tough gig because it requires a lot of complex thinking, preparation, and hard work. Many analysts report that the hardest part of their job is communicating sophisticated analysis and insights to decision-makers in a way that is both comprehensible and actionable.