Financial analyst career guide

What is a financial analyst?

Financial analysis forms part of financial management and planning. It’s crucial to an organization’s or individual’s long-term economic performance, projections, budgets, business models, and decisions. As a key process, it entails sifting through data to evaluate outcomes, identify investment opportunities, and make forecasts. Professionals in this niche typically analyze data from:

• Particular industries and sectors
• Stocks and bonds developments
• Tax and regulatory controls
• Macroeconomic and microeconomic factors

Are you a critical thinker who enjoys crunching numbers, has a keen eye for detail, strong communication skills, and a penchant for problem-solving? If so, then a career in financial analysis may be an excellent option for you. While it’s an inherently competitive industry, the Bureau of Labor Statistics (BLS) predicts employment will increase by 5% between 2019 and 2029. That’s faster than the average occupation.

This demand is attributed to economic growth and an expanding range of financial products. Furthermore, as emerging markets present new investment opportunities worldwide, experts with in-depth knowledge of specific geographic regions are required. Technological advancements that allow for wider sets of data and more sophisticated analysis tools are also factors.

The role of a financial analyst

Financial analysts play a vital role in the strategic planning of a company, investment firm, bank, institution, or organization. They help executives make informed and data-driven business decisions. With the help of statistical software and data management tools, these professionals are typically responsible for:

• Analyzing financial statements
• Tracking financial performance
• Revenue and expenditure forecasts
• Capital structure modeling

Additionally, financial analysts may be required to collate market trends and company data to identify variances and their causes. Other general duties can include:

• Analysis standards
• Market trends research
• Financial performance reporting
• Recommendations
• Comparative, risk, and cost analysis
• Comparable company analysis
• Tracking and analysis of operational metrics
• Developing reporting tools and dashboards
• Financial analysis process and policy development
• Data mining, valuation comps, and portfolio creation

Financial analyst vs. accountant

Although an accountant’s and a financial analyst’s responsibilities overlap at times, there are crucial differences to keep in mind. The former is concerned with a company’s day-to-day financial data and the finer details thereof. In contrast, the latter focuses on historical and current market trends to determine prospects and an organization’s future position.

Financial analysts

As previously mentioned, financial analysts pore over data to help guide major business decisions. They’re generally concerned with long-term performance. As such, they’re typically tasked with analyzing financial data and economic factors to:

• Make predictions
• Review spending
• Set budgets
• Identify or evaluate investment opportunities

Accountants

While accountants may analyze current financial data, they spend the majority of their time reviewing past financial records. Business transactions and company accounts usually form part of their analysis. They may also be responsible for:

• Taxation
• Auditing
• Compiling financial reports

What qualifications are required?

For an entry-level position such as a junior accountant, employers may accept applicants with a bachelor’s degree in economics, business, or finance. However, the majority typically require candidates to have their bachelor’s strictly in accounting. Conversely, an undergraduate degree in any finance-related field is usually accepted for a junior financial analyst position.

As such, staff accountants, for example, could switch careers and pursue a financial analyst position with their bachelor’s degree in accounting. That being said, a master’s degree in business administration is often required for both accountants and financial analysts seeking to advance their careers. In some cases, it may be a prerequisite for entry-level positions.

…a master’s degree in business administration is often required for both accountants and financial analysts seeking to advance their careers.

Additionally, professionals in both fields may require certification, depending on the specific position they hold. For accountants, the most widely recognized designation is the Certified Public Accountant (CPA) awarded by the American Institute of Certified Public Accountants (AICPA).

This certification allows accountants to file tax returns and legally work with the public. Similarly, the CFA Institute awards the Chartered Financial Analyst® designation, recognized worldwide. While not legally required for practice, the CFA and other certifications demonstrate advanced knowledge and aptitude for senior-level positions. Furthermore, financial analysts who buy and sell securities are generally required to be licensed by the Financial Industry Regulatory Authority (FINRA).

Salaries for financial analysts and accountants

Another noticeable difference between a financial analyst and an accountant is the average salary. According to the BLS’s latest available data, accountants earned a median annual wage of $71,550 in 2019. It’s slightly lower than the median salary for financial analysts in the same year, at $81,590. However, 10% of the highest earners in both professions took home a median annual wage of  $124,450 and $156,150, respectively.

Choosing the right career path

If you enjoy documenting a wealth of financial information, crunching the numbers for accuracy, auditing, and tax preparation, then accounting may be a suitable career path. However, if you prefer analyzing data to assist in the decision-making process for businesses, then a financial analyst career could be ideal.

How to become a financial analyst

Advance your career with a master’s degree

Earning a Master of Business (MBA) degree is the next logical step that many financial analysts take to advance their careers and bolster their earning potential. The average base salary of an MBA holder is $91k. Some graduate schools may even offer specialized concentrations for students planning to complete the CFA exams.

You can also find more flexible part-time or accelerated options.

An MBA degree typically consists of 60 credits hours, amounting to 2 years of full-time study, but it could be longer depending on your chosen program. You can also find more flexible part-time or accelerated options. Alternatively, students can pursue a Master of Finance (M.Fin.) or a dual degree, which combines an MBA with a Master of Science (M.S.) degree.

An MBA or master’s degree is a common prerequisite for senior financial analyst positions and other leadership roles in the field. It equips students with advanced skills and knowledge needed to fulfill portfolio, corporate, and other managerial positions. Coursework may include:

• Hedge fund and portfolio management
• Investments and securities analysis
• Macroeconomics and microeconomics
• Corporate finance
• Derivatives
• Quantitative analysis methods
• Strategic leadership

Admission requirements typically include a bachelor’s degree, a minimum GPA of 3.0, a personal statement, letters of recommendation, official transcripts, and GRE/GMAT scores.

Doctoral degrees

Professionals who wish to enter into advanced research or academic roles in financial analysis may choose to earn their Ph.D. in:

• Finance
• Economics
• Business
• Financial engineering
• Hard sciences

These programs can take anything between 4 and 8 years and usually require students to hold a master’s, undertake original research, and submit and defend a dissertation.

High-level professionals in investment banks, corporate organizations, and financial services firms may benefit from a doctoral degree where applied research and analysis are at the forefront of their roles.

Degree costs

According to the latest Trends in College Pricing and Student Aid Report, tuition and fees per academic year for:

• A bachelor’s degree costs $8,760 at a public 4-year institution and $37,500 at a private nonprofit 4-year institution
• A master’s degree costs $8,950 at a public 4-year institution and $29,670 at a private nonprofit 4-year institution
• A doctoral degree costs  $11,440 at a public 4-year institution and $44,910 at a private nonprofit 4-year institution

While online and hybrid degree program costs vary, they may be more affordable than their traditional on-campus counterparts.

Accreditation

Earning a degree from an accredited and reputable school is essential, especially in the competitive financial services industry. The Council for Higher Education Accreditation (CHEA) reviews and recognizes accrediting organizations that meet its high-quality standards. CHEA-approved accreditors in business and accounting include:

• Association to Advance Collegiate Schools of Business (AACSB)
• Accreditation Council for Business Schools and Programs (ACBSP)
• International Assembly for Collegiate Business Education (IACBE)

Financial aid

Educational, corporate, and federal organizations may offer students financial aid in various forms, including:

• Federal or private loans
• Work-study programs
• Grants
• Scholarships
• Loan forgiveness programs

The competitive nature of the financial services industry means many business schools and private companies assist students with their tuition fees. Therefore, it’s wise to determine whether your chosen school or current employer offers any financial aid initiatives.

You can also complete the Free Application for Federal Student Aid to see whether you’re eligible to receive a government-sponsored grant or loan or participate in a work-study program. The U.S. Department of Education website has more information.

Additional career pathways