How to Become a Financial Analyst
Becoming a financial analyst is a challenging and exciting journey into a world where mathematics, formulas, and financial metrics intersect to create forecasts into the financial future of businesses, projects, and investment opportunities. Since a financial analyst works with assessments involving significant sums of money, reputable firms, organizations, and government employers look for a blend of education, experience, certifications, and developed skillsets.
Education Requirements for Financial Analysts
While a formal education is not necessary for many careers, in order to become a financial analyst in such a highly competitive field, you will need to earn the minimum of a bachelor’s degree in finance, accounting, economics, mathematics, or business administration. Start right away to find a college to meet your needs. Make sure to research the institutions thoroughly to discern their reputations in the finance community and whether or not they are accredited. Read reviews as to their suitability for your goal to become a financial analyst. Online programs are available in abundance from some of the most respected colleges and universities, and of course, there are traditional on-campus options. If you cannot financially afford to attend a four-year degree program right away, consider attending a junior or community college to satisfy your general education requirements. One important thing to remember—make sure any credits you earn from the junior or community college will be transferable to the 4-year college you are interested in eventually attending.
Develop Your Skills as a Financial Analyst
To become a financial analyst, develop expertise and gain experience in at least the two following areas.
1. Data Gathering
Learn how to read financial statements such as income statements, balance sheets, company filings and disclosures, and cash flow statements. These are the tools by which a financial analysis will be achieved based on assessments regarding performance, liquidity, and the solvency of an organization, government entity or private company.
Another aspect of data collection is learning how to do market research. Market research involves gathering information regarding industry trends, reading industry reports and trade publications, monitoring economic indicators, and following financial news and media.
2. Financial Knowledge
To become a financial analyst, you will want to learn about and master valuation techniques, risk management, and financial modeling. Valuation techniques determine the intrinsic value of an asset, investment, or business. Risk management is when you will identify risks to a company’s or organization’s financial health, stability, or performance. Financial modeling is taking mathematical simulations and other data, in order to formulate market assumptions, create projections and scenarios using Excel spreadsheets, specialized financial modeling software, or programming languages like Python.
Get Experience Via an Internship
The best way to learn how to be a financial analyst is to secure an internship with a private company, non-profit organization or governmental agency. One of the most important resources for these opportunities is membership in associations and trade organizations where you can create and enhance your network of contacts and resources. One such organizations is the Chartered Financial Analyst Institute (CFA) (https://www.cfainstitute.org/).
The CFA is a international association of finance professionals. It offers the Chartered Financial Analyst (CFA) designation, and it provides members with educational opportunities, advocacy, an interview simulator, surveys and studies regarding compensation, and a CV builder, just to name a few. One of the most exciting benefits of membership is the CFA’s extensive Career Center. Through this portal, members can meet and get to know employers, apply for jobs, and stay current with regards to trends in the industry via “featured career management resources.”
As a financial analyst, you may be required to adhere to federal and state regulations. Highly respected associations such as the CFA, will keep you up to date on what you need to do and how to do it. Certain certifications are necessary to excel in the field, and you will find these organizations are the granting and governing bodies.
Job Outlook as a Financial Analyst
According to the U.S. Bureau of Labor Statistics (https://www.bls.gov/), Financial Analysts have promising opportunities for the time period spanning 2022-2032. The field is growing by 8% per year, which is slightly faster than the 6% average growth rate. Government experts predict that each year over 27,400 openings will become available (between 2022-2032), due to replacing workers who leave the profession, leave the work force and/or retire. Over the ten-year time span (2022-2032) it is projected that a total of 29,000 new positions will be created. In 2022 there were 376,100 individuals working as financial analysts. The median pay per year was $96,220, while the median hourly wage was $46,26. (As a reminder, the “median” amount is not an average, it is the middle value of a dataset. For the U.S. BLS definition go to: https://www.bls.gov/cps/definitions.htm#medianearnings) .
By pursuing your education, participating in an internship or having experience from an entry-level job, becoming certified in accordance with state and federal regulations, maintaining continuing education requirements, and networking with others in the field, you will be on your way to a prosperous and satisfying career as a financial analyst.
