Which Skills Do Financial Analysts Need?

A view of Wall Street in New York City, on Mar. 29, 2020. (Chung I Ho/The Epoch Times)

The financial services industry holds a plethora of career options anywhere in the world, and not just restricted to Wall Street. Both public and private sectors have a significant demand for skilled and experienced professionals in fields such as investment banking, insurance, and quantitative analysis.

Such types of work provide comparably high salaries and incentives. However, one of the most coveted professional niches is that of the financial analyst. Here is a breakdown of what the job entails, what you would need to qualify for a job as a financial analyst, and how it is different from other career options in the finance sector.

How Hard Is It to Become a Financial Analyst?

As a financial analyst, one is required to research macroeconomic and microeconomic conditions, and have a comprehensive understanding of the core interests of a company. This should enable an analyst to make accurate predictions about businesses, sectors, as well as various industry verticals.

An analyst should also be able to make recommendations with regards to investing in a company’s stock by making a sound evaluation of its business principles, economic model, profitability, competitive standing, and overall performance.

As an analyst, it is imperative you stay updated on market developments in your area of specialization, and build financial models that provide an advantageous perspective into various future economic scenarios based on any set of variable factors.

Apart from that, companies may seek the services of a financial analyst to provide a clear picture of how efficient and cost effective the marketing techniques adopted by the company are, and suggest improvements to enhance its efficiency. This requires countless hours of study and research.

Apart from identifying patterns and acquiring the necessary knowledge to provide suggestions, a financial analyst must present his findings in a way that is both easy to understand for clients and persuasive enough to align with a stated perspective.

Which Course Is Best for Financial Analysts?

There are many tracks to become a financial analyst.

One is a course in managerial finance from the Kellogg School of Management has been found to be ideal for mid-level to senior managers. The course is designed to provide you a strategic perspective with modules on risk measurement, capital asset pricing models, cost of capital, and investment decision making. The course also covers cash flow forecasting, financial modeling, capital structure, and the assessment of the optimal capital structure of a firm.

Another is finance and quantitative modeling for analysts specialization from Wharton Online, which gives you access to some of the topmost professors in statistics, finance, and accounting. Apart from the standard financial curriculum, the course has a module on financial acumen and corporate finance, and provides a comprehensive understanding of handling spreadsheets, which is one of the most crucial skills a financial analyst must have to make a strong impression on management.

The online professional certificate in corporate finance from New York Institute of Finance can help boost your financial analyst CV branding. This specific course provides the most detailed breakdown of financial analyst concepts of the three mentioned here. It covers topics such as project valuation, corporate finance, credit analysis, mergers and acquisitions, treasury management, and more.

How to Become a Financial Analyst

The core function of a financial analyst is to analyze high volumes of data and identify trends or signs for an investment opportunity. Based on recommendations provided by the financial analyst, a critical business decision or investment in a specific niche is considered by the firm. There can be various tiers of financial analysts in the same organization based on experience and specialized skill sets in a specific sector.

The qualifications, skill sets, and experience needed to gain employment as a financial analyst may vary with a company based on their particular requirements; however, most reputable firms have a minimum standard requirement for the analyst to have a financial degree, preferably a major in statistics, economics, or finance. Advanced degrees in other fields such as engineering or even biology are also sought after in candidates, depending on the sector.

High-tier investment banks that pay the most lucrative salaries are known to hire only from prestigious universities, such as Princeton or Harvard. For the majority of analysts coming from other institutions, the playing field can be leveled out by having advanced degrees with in-depth subject-specific certifications or significant exposure in a niche market.

Are Financial Analysts Better Than Accountants?

Though on the surface the job profiles of both accountants and financial analysts seem similar, they work toward different outcomes, and have completely different operating styles.

Accountants are responsible for monitoring daily operations and keeping tabs on an organization’s capital account, reviewing debt, and cash availability. An accountant generally ends up working significantly more hours during the months of March, April, and June every year owing to tax filings.

Meanwhile, a financial analyst’s responsibility goes beyond record keeping. The analyst has to review the data and provide a game plan for the future of the organization. Though both jobs technically require just a financial degree, or a degree in economics, or business administration to get started, financial analysts tend to draw a higher beginner salary.

How to Become a Financial Analyst Without a Degree

Having a degree or certification alone cannot get you far as a financial analyst. There are qualities that can be natural or nurtured that form the foundation for a financial analyst’s career. If you possess above-average quantitative skills, a natural drive to stay updated on market developments, are a naturally prolific problem solver, and have the ability to grasp a situation quickly and apply logic, along with excellent communication skills, you can perform well in the sector.

There are several methods that can be pursued for an aspiring individual to become a professional financial analyst without a financial degree. Finding a mentor is a great start. This could be a college professor or someone you know with an established career in finance. You would be surprised to find how generous people can be if you approach them with a sincere request. You could also try applying for an internship at a finance firm.

Though getting a paid internship would be difficult, the experience you gain through an internship or voluntary work for a broker could be leveraged to increase your likelihood of landing a job in the firm as you would have a much shorter learning curve. Apart from that, work on expanding your knowledge base in finance through free and paid resources on the Internet or through the local library. Using a trading simulator can provide you with exposure to market behavior with just about zero investment.

Which Finance Qualification Is Best?

There are a number of financial certifications that could put you on the top tier of recruitment by major finance companies around the world. As lucrative and rewarding as they are, they can be extremely tough to obtain.

The CFP (certified financial planner) is one of the most sought after globally recognized qualifications. The certification enables you to provide consultation in areas such as taxes, investments, insurance, and estate laws. To qualify, an advisor must complete 6,000 hours of professional experience apart from taking a difficult and lengthy test.

The CPA (certified public accountant) is another highly regarded certification in finance that is acquired through attending 150 hours of classes. A finance professional who has earned the CPA certification is highly regarded in financial services as someone with profound knowledge about accounting and tax issues.

Which Is the Hardest Financial Exam?

The most difficult financial exam would be the chartered financial analyst (CFA) exams. More than 100,000 people around the world take the test every year. Less than half of them qualify. This is after more than 300 hours of study for the test. There are three levels to the exam administered by the CFA Institute. Composed of 240 multiple choice questions, the whole three levels takes six challenging hours to complete. Successfully completing all three levels is a game changer for anyone looking to have a career in finance.