What Does a Financial Analyst Do?
Financial Analyst is an incredibly broad term that covers a lot of different areas, industries, positions, and asset classes. There isn’t one answer that covers what all financial analysts do. The responsibilities and day to day will depend on what needs to be done.
Odds are you’ll be working with numbers and trying to understand the finances behind a company, investment, project, or transaction. It’s incredibly valuable and important to know what’s going on behind the numbers, and what the best way to move forward is.
The most educated analysts are only as good as the information they are able to work with. Whether that’s high level, deal-specific, or basic fundamentals, it’s important to be prepared with the right information.
You’ll need to be able to keep track of the economy on both a macro and micro level, as well as evaluate market dynamics, and make buy-side and sell-side suggestions. Businesses will be counting on you for investment advice and financial advice (whether they should buy, sell, hold or pivot).
The company’s main objectives are to make money and generate returns for their investors or clients. As a Financial Analyst, you’re there to help make that happen and put the pieces together.
Industries with Financial Analysts
- Private Equity
- Hedge Funds
- Corporate Finance
- General Finance
- Real Estate
- Accounting
- Consulting
- Investment Banking
- Operations
- Venture Capital
Responsibilities of a Financial Analyst
The responsibilities of a Financial Analyst vary on the industry, company, and position. Typically trying to enhance operations, make improvements, or upgrades wherever possible. Analysts evaluate the company’s current financial state and anything that could have an influence on it in the future. Whether that’s reducing expenses, analyzing the effects of new investment, or understanding the company’s operations.
Other tasks that might be assigned to financial analysts are:
· Looking for trends within the market and then capitalizing on them accordingly
· Ensuring that the finance department of your firm is working seamlessly with your requirements
· Comparing the forecasted financial reports alongside the actual reports, charting up the differences and inconsistencies
· Figuring out areas in which the firm you work for could save money or even generate more profit
· Generating revenue/profit through trades that you’ve put together
· Curating financial models that are incredibly detailed for both analysis and comparison purposes
· Curating financial reports for both stockholders and executives
· Maintaining the financial databases that are kept for company records – this is for both visualization and comparison needs
Some of these responsibilities will only be present if you’re a financial analyst for a major corporation, or a senior level analyst; it’s all a matter of how large the business you work for happens to be, as well as what industries they operate in.
What Kind of Skills Should I Have?
An expert in any field is going to have years of experience under their belt, with the skills to match. As a financial analyst, you’ll be working with data. You’ll have to understand what market trends are and how they can have an effect on your financial endeavors. You’ve also got to understand the likes of investments, the effects of the micro-economic events and just skills pertaining to data analysis as a whole. When you’re a financial analyst, it’s almost like being a utility player in baseball – you can do a little bit of everything, and you’re good at it.
While the role that you will be playing is going to differ from business to business, you’re more than likely going to be assigned to a specific sector or region of operations. If you’ve got a solid understanding of both macro and micro-economics (alongside regional/industry trends regarding your data), you’ll be able to change sectors within any given business.
Analytical Skills – This is arguably the most important skill for a financial analyst to have. You need to be able to look through data and analyze them in a quick and efficient manner, as well as having the problem-solving skills needed to overcome any hurdles that may arise. Impactful statistical skills and a firm grasp on your problem-solving skills will take you further than most.
Numerical Skills – You need these skills in order to effectively analyze and clarify the numerical information at hand. Having an understanding in regards to the relationships between individual numbers is important, as well as being able to interpret the mathematical information to your peers.
Financial Modeling – This is the process of putting your data into the form of a model, allowing it to be easily presented to those who are interested (or those who pay you to show them, of course).
Financial Analysis – As a financial analyst, you’ll be given the task of breaking down intricate financial problems and putting them into a much simpler context. You’ve got to be able to show those who don’t understand all of the financial “mumbo jumbos” exactly what you’re talking about.
Data Analysis – Digital data is the new wave, and this profession calls for your data analysis skills to be on point. You’ll need to know how to read and interpret digital data, as well as use that data to create actionable solutions.
Marketing Skills – As a financial analyst, you’ve got to be convincing when it comes time to make your recommendations. You have to be convincing, whether you’re talking to the CFO of a company or simply a group of investors.
Thinking Strategically – When it comes to thinking strategically, you’ve got to be creative as an analyst. You’re going to be dealing with complex problems that relate themselves to the financial well being of a company, and it’s up to you to create thorough financial solutions (as well as maximize their profits in the process).
Making Decisions – You’ll be responsible for helping make some of the toughest decisions surrounding the finances of a company, particularly when it comes to making investments (buying, selling and trading). You’ll have a lot on your plate, and you need to be able to deal with it all.
Mathematical Skills – You’ve got to be able to run a mathematical equation through your head, as it could be the difference between turning a profit and losing money for your company. You will also find yourself going through intricate calculations for final projection reports, which need to be 100% accurate.
Eagle Eye – Your attention to detail needs to be impeccable, as there are a lot of intricacies that could be associated with the financial data you’re analyzing. If you aren’t careful, you could lose quite a bit of money for your employer.
Buy-Side vs. Sell-Side Analysts
There are a variety of ways that a financial analyst can be applied in regard to helping business, and they aren’t always going to be covering the same areas. The activities that you take part in are going to vary, and it’s all going to be a direct result of what industry you’re working in.
Buy-Side Financial Analysts – This particular type of financial analyst would focus on advising or helping companies to purchase investments or allocate capital (which is a fancy term for companies and corporations that have money to invest!).
Sell-Side Financial Analysts – A “sell-side” firm is where you’ll be looking at selling or orchestrating the sale of a company, bonds, or equities. These are the financial analysts that focus on advising agents who sell stocks, bonds and essentially any other type of potential investment.
Deals happen and transactions happen when these two sides come together. But there ultimately are financial analysts on both sides of the table. If you already know the side of the table you want to work in, you may have an idea as to what your day-to-day activities will look like. Understanding any potential challenges and benefits that may come with the role you have as a financial analyst can be important, for a plethora of reasons.
Note: Most people want to be on the buy side, but the best way to get there is by working on the sell-side first.
REMEMBER: Although you are working within a given industry, it doesn’t mean that your analyst role is going to stay the same all the way through.
Are There Any Jobs Similar To a Financial Analyst?
As a financial analyst, you’re going to be responsible for putting together financial models, financial analysis, and financial solutions. Every company and in every industry are needed.
Financial Analyst has a ton of roles that are similar. Any role that could be described as analyzing data, interpreting numbers, or finding solutions to financial problems could be considered similar to a financial analyst role.
While there are plenty of jobs that could be considered similar, the general term of a financial analyst is prevalent in a lot of the tasks in every company.
Any position or company that’s goal is to help understand and try to predict how well an investment is going to work out, or even just to have a general feeling of what the outcome regarding a specific business decision could look like is similar or what we consider a financial analyst role.
If becoming a financial analyst was something that you were interested in due to the data analytical process, you could also consider pursuing a career as a Data Scientist, a business development professional, or even as operations.
Conclusion
Financial Analysts perform a wide variety of tasks involving finances, operations, projects, and transactions. Often times, they’ll be trying to analyze, understand, and evaluate what is happening at a company or in a given situation. This could involve a new investment, a future investment, the company’s current or future operations, or a new business.
Typically, they are trying to understand what is going on behind the numbers, and figure out a way to improve it. They’re trying to decipher what to do in the present, in order to make the future more profitable, or more efficient.
Within every industry, and every asset class, what a financial analyst does varies. If they’re in real estate as a financial analyst, then they’ll be analyzing rents, comparable sales, and market dynamics. If they’re a financial analyst in corporate finance, they’ll be trying to understand and improve the company’s operations, or possibly even try to understand a potential acquisition’s business model or future outlook.
The term financial analyst is a general term, that covers a lot of different industries, areas, positions, and fields, all that involve numbers, money, and different transactions.
