According to the best estimates, there are over 260,000 business and financial analysts working across the United States, but what exactly is a financial analyst? These financial professionals assist companies of varying sizes with their core processes and strategic decisions.
Here’s everything you need to know about this vital profession.
What Is a Financial Analyst?
A financial analyst is both a historian and a visionary. Financial analysts review and analyze an organization’s past financial data, which in turn allows them to identify key trends and risks or use that data to predict outcomes for strategic business decisions.
What that means is that financial analysts play a unique role in guiding a company’s strategic decisions. While they don’t have the authority to execute these decisions, their analysis and guidance are invaluable when it comes to making transitions, identifying new opportunities, or making investment recommendations.
Still, as every company’s needs are different, the exact job description of a financial analyst can vary considerably. Many organizations will tailor the actual day-to-day tasks of a financial analyst to fit their strategic goals or corporate vision.
Where Do Financial Analysts Work?
Financial analysts work at a variety of organizations, including:
- Consulting firms
- Investment brokers
Financial analysts are commonly used to influence the C-suite’s executive decisions, which is why they can occupy a role that encompasses a variety of sectors and industries.
Financial Analyst: Job Requirements
At a minimum, financial analysts must meet the following educational and occupational requirements:
- Bachelor’s degree
- Zero to two years in a related field
- Proficiency in basic accounting software
- Knowledge of the basic principles of finance
- Excellent reporting and communication skills
- Strategic thinking
- An aptitude for working with large datasets
- Attention to detail
In some cases, a master’s degree in business administration can substitute for experience or increase an applicant’s chances of being hired, though one is not strictly necessary. In still other cases, a Chartered Financial Analyst (CFA) designation is preferred, and the highest-paid financial analysts will have experience in corporate finance.
Financial analysts can also improve their value through soft skills, such as communication, leadership, or the ability to use project management tools to work with teams.
What Does a Financial Analyst Do?
Financial analysts occupy several different roles within an organization. Some of the most common include the following:
Analyze Historical Data
The primary role of a financial analyst is to examine an organization’s financial data. The goal here is to identify errors, trends, or other risk factors that might influence the company’s future, and analysts may then use this data to create new models that minimize or eliminate these risks to maintain greater organizational efficiency.
Guide Future Decisions
Financial analysts use such historical data to guide future decisions. Again, financial analysts play an advisory role within most companies, but executive leadership relies on their insight to guide their own leadership processes.
Evaluate Expenditures and Depreciation
An analyst will evaluate the company’s expenditures as well as measure depreciation, which will help leaders understand how their company’s expenses and assets inform the broader picture of the organization’s financial health.
Produce Regular Reports
Financial data must be organized and presented in regular reports that present a company’s key metrics and keep senior leadership apprised of the company’s financial health. Financial analysts prepare these reports, and for small businesses and startups, a financial analyst can also help leaders assemble the documentation they’ll need to secure funding.
Support Annual Budgeting
In most cases, financial analysts are called upon to conduct annual or quarterly budget projections. That’s because the budget is typically based on the financial forecast provided by the analyst, who will have the knowledge required to make predictions about the company’s future revenue.
Maintain Knowledge of Industry Best Practices
The best financial analysts maintain a working knowledge of industry best practices and keep up with changes in regulatory or tax issues. Depending on the company, financial analysts may need to understand the issues affecting a particular industry, such as the way that environmental policies can impact tax credits.
How Much Does a Financial Analyst Make?
According to the employment site Glassdoor.com, the nationwide average salary for a financial analyst is $67,674. However, in 2020, the median average salary was $83,660. The top 25% of financial analysts made an average of $112,460 for the year, while the lowest 25% made an average salary below $65,000.
Like any position, exact salaries can vary by location, experience, and the company, making it another reason why those with a master’s degree or certification may receive top treatment.
Financial Analysts Drive Corporate Strategy
As you can see, financial analysts play an important role in unpacking a company’s history, as well as helping to inform its future. Now that companies are relying on data to drive their corporate strategy, it’s clear that financial analysts will remain an important part of a company’s financial team and that they can augment the decision-making process of senior leadership.
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