So you’ve watched Wall Street a few times and read Barbarians at the Gate cover to cover. You were stunned at the incredible impact the Global Financial Crisis in 2008 had on the world and your brother is the fund manager at one of the top funds in the country and he’s raking it in. You know it in your bones – you want to be an analyst and you want to be in the markets.
So you start typing in words like – How to be a financial analyst? What do financial analysts do? How do I get a job in Financial Analysis? But the problem begins when you say you want to be a financial analyst, and I ask you where? You’re lost. You say – what do you mean? You see Financial Analysis is more of a skill than a job. It’s an exceptionally critical skill when you work in the financial services industry, and that’s where the good news begins. Because Financial Analysis cuts across roles, types of financial institutions and even industry, being a financial analyst means you have a large number of potential careers to choose from. But how do you get the job as a financial analyst?
Develop your analytical skills
A good Financial Analyst studies and interprets data, both qualitative and quantitative, to help both individual clients and companies make a better investment or divestment decisions. A good financial analyst, therefore, needs to have a keen understanding of how the numbers work in the context of the environment.
Quantitative analytical skills required to be a financial analyst include understanding how financial statements interact with each other, calculating and interpreting accounting ratios, understanding the trends they imply, forecasting and valuing cash flows at the bare minimum. Qualitative skills required to be a financial analyst would include understanding both the macroeconomic and microeconomic conditions surrounding the industry along with company/individual/instrument fundamentals to make predictions about businesses, financial commodity markets and industries.
Unlike being a doctor or an engineer, there’s no set education requirement to become a good financial analyst or to get a job in the sector, and therein often lies the problem. History majors can become Investment Bankers, and doctors can become Equity Research Analysts. However employers do look for a keen appreciation of numbers, so a specialisation at undergraduate in finance (if you are a business major) is very helpful. Engineers often make great Financial Analysts because they are good at interpreting numbers and are not intimidated by them. An MBA is very well received as well because most MBA’s include financial analysis and corporate finance and accounting as part of their curriculum. But because the MBA has become such a ubiquitous degree, bulge bracket investment banks will often restrict recruitment from tier one firms or look for additional evidence of affinity towards analysis and analytical skills.
Another way to prepare for a role as a financial analyst is to do a professional qualification like the Chartered Financial Analyst or a short-term course at an institution that will introduce you to the required skills and help you navigate both the career path as well as the role, like the Imarticus Learning EY FAP program. These programs are technical in nature and require a certain amount of study.
However education aside, strong quantitative and problem-solving skills, logical thinking, and good communication are critical in terms of preparing you for financial analyst interviews.
Where do I apply?
As we said before, financial analysts work across industries and roles. But we can break the three main areas down to Corporate Finance on the buy side and financial services on the sell side.
Financial Analyst roles on the buy side include working for a company both as a CFO and as part of the finance function where you handle the investment decisions of a company both with respect to organic and inorganic growth, as well as treasury requirements including any private equity or public market funding they might require.
The Buy-Side is when someone conducts financial analysis on behalf of themselves or their company. So a financial analyst in a private equity firm would be analysing investment opportunities on behalf of the fund. You can also be a financial analyst and work in the mutual fund industry and work your way up to becoming a fund manager.
Financial Analyst roles on the Sell Side include Investment Banking (M&A and Corporate funding advisory), Equity Capital Markets and equity research where you analyse companies and give buy, hold and sell recommendations. Financial analysis roles are not restricted to equity. You can be a Bond Analyst, an Options and Futures Analyst, a gold analyst, a real estate analyst…the options are endless.