In using the term personal finance, we refer to the banking, investment, borrowing and other financial decisions of individuals. Financial analysts work primarily for non-human entities, such as business corporations, brokers, banks and insurance companies. Many of these firms invest money for growing the savings and retirement funds of their customers and funding sources to pay insurance claims. With an employment history created by experience and consistently reliable reports and advice to senior managers, financial analysts can expand their career prospects to hold those senior roles in financial management.
What Are the Roles of a Financial Analyst?
Firms that deal with stocks, bonds, commodities contracts and other investment products employ the largest number of financial analysts. The U.S. Bureau of Labor Statistics estimated that these entities employed 74,830 as of May 2018. This affirms one of the primary roles of financial analysts, which is guiding companies and individuals in investment decisions. Investors may buy the stocks or bonds of a single company, but often hold diverse types of investments in portfolios. Buyers and sellers of securities and other financial products employ financial analysts. Those on the “buyside” often work for insurance companies, hedge funds, mutual funds and other firms seeking to invest significantly or as their primary business. Higher-education institutions and private endowments acquire investments to help fund university projects or scholarships. Brokerage firms hire financial analysts to inform agents selling financial products. To guide investors, financial analysts assess the financial condition of companies, the historical performance of various investment products and events or economic conditions that affect particular industries or the broader economy. The information for the evaluation of investments comes from market reports, research on companies and economic conditions and meeting with management of particular companies. Entry-level financial analysts gain practical experience through analyzing income statements, balance sheets and other financial statements; forecasting income, expenses, cash flows and company growth; and preparing budgets. Managers of investment funds rely upon reports that the entry-level analysts prepare. Financial analysts also aid corporate managers and executives in formulating strategies for investment and funding business activities. According to the U.S. Bureau of Labor Statistics, nearly 38,850 financial analysts worked in the “Management of Companies and Enterprises.”
What is the Entry-Level Salary of a Financial Analyst?
As reported by PayScale, the average financial analyst salary for those at entry-level stands at $54,618. Analysts with one to four years receive, on a mean basis, $60,055. This includes regular pay, overtime and bonuses. The U.S. Bureau of Labor Statistics states that the lowest ten percent of financial analysts, which may include entry-level ones, earn less than $52,540.
What is the Potential Financial Analyst Salary?
Financial analysts have opportunities for significant compensation. According to the U.S. Bureau of Labor Statistics, the top ten percent of salaries run above $167,420. The median pay is $85,660, and the average financial analyst salary is $100,990. In addition to experience, the type of industry also influences the pay for financial analysts. Those in the “Securities, Commodity Contracts, and Other Financial Investments and Related Activities” sector fetch an annual pay of $130,360, good for third among industries as ranked by the U.S. Bureau of Labor Statistics. The median financial analyst salary in this sector sits at $101,410. Salaries in the “Grantmaking and Giving Services” top industries that employ financial analysts, at an average figure of $137,130. The financial analyst salary for those in the “Management of Companies and Enterprises” averages $91,860. PayScale states that salary investment analyst runs from $46,000 to $97,000. With bonuses, profit-sharing and other compensation, the range for salary investment analysts begins at $47,000 and climbs to $112,000.
What Are the Requirements to Become a Financial Analyst?
Becoming an entry-level financial analyst generally requires a bachelor’s degree in a finance or business-related field, such as accounting, financing and economics. Financial analysts may also major in mathematics or statistics, as math skills feature prominently in the field. We also recommend would-be graduates to take courses in business law, securities regulation, communication, business writing, marketing and banking. Courses in psychology or sociology help aspiring graduates understand the behavior and mental processes employed by investors. A financial analyst salary can grow with experience and advanced learning. According to O*NET, nearly 35 percent of financial analysts hold a master’s degree. For financial analysts who will sell investments, a license by the Financial Industry Regulatory Agency (FINRA) represents a prerequisite. FINRA maintains a registry of brokers, dealers and firms engaged in securities sales and issues standards and regulations for licensees. Entry-level analysts who seek senior-level (and beyond) status may ultimately need certification, such as a Chartered Financial Analyst. Such certification as a CFA requires a bachelor’s degree and four years of work experience and passage of exams. According to PayScale, the average financial analyst salary for “chartered” ones is $88,436. Accounting for profit-sharing and bonuses, a chartered financial analyst salary can reach as high as $196,000, reports PayScale. Students pursuing a financial analyst career should be proficient with spreadsheet programs such as Microsoft Excel. Investors often rely on the financial formulas contained in these applications and what they mean either deciding to buy stocks, bonds, mutual funds or other investments. For brokers, good financial ratios become selling points. A host of investors, managers and others depend upon financial analysts for decisions. This requires sound analytical and communication skills. Financial analysts must be able to speak and write clearly and understandably for those not adept in financial terminology or the finer concepts of finance and accounting.
What Senior-Level Jobs Exist for Financial Analysts?
Prospective financial managers and chief financial officers often start as financial analysts. The experience as an analyst prepares these future financial managers to lead a team of analysts and participate in investments and other decisions involving the companies’ finances. Financial managers may hold titles, such as comptrollers, treasurers and finance officers. In these positions lie the responsibilities of preparing budgets and reports, conducting audits and planning the company’s raising of capital, acquisition of assets or other companies and mergers. Government regulators require some of the reports created by or under the direction of financial managers. With experience in financial analyst jobs and advancement through senior analyst and other financial management roles come opportunities to become a chief financial officer (CFO). The CFO oversees a corporation’s financial strategy and activities and forms part of its executive management group.