What Financial Analysts Do

Interested in investing? Let’s get to know about financial analysis and what financial analysts do.

Financial analysts, also known as investment analysts or securities analysts, assess the financial performance of a company or industry and make recommendations to investors to help them decide where and how much to invest.

Financial analysts work for investment banks, insurance companies, mutual and pension funds, securities firms, the business media, and other businesses.

Different Types of Financial Analysts

Financial analysts read company financial statements and analyze commodity prices, sales, costs, expenses, and tax rates in order to determine a company’s value and to project its future earnings. They often meet with company officials to gain a better insight into the firm’s prospects and to determine its managerial effectiveness.

Financial analysts may work on the “buy” side, for companies or organizations with money to invest, or on the “sell” side, to help their companies sell securities. They often focus their analysis on a specific industry or region, such as the utilities industry or Asia.

Some experienced analysts, called portfolio managers, supervise a team of analysts and help guide a company in selecting the right mix of products, industries, and regions for their investment portfolio.

Others who manage mutual funds or hedge funds perform a similar role and are generally called fund managers.

Still other analysts, called risk managers, analyze portfolio decisions and determine how to maximize profits through diversification and hedging.

Personal financial advisors work with individuals or families to set up investments such as college education funds, or perform retirement or estate planning. Some personal financial advisors also handle life insurance policies and tax advice. As such, accounting courses are recommended for aspiring PFAs, and certifications may be necessary in certain states, or if you choose to specialize in certain types of advice.

Personal financial advisors generally operate as self-employed individuals. This means that, in addition to your understanding of business and mathematical acumen, you must have a certain flair for selling yourself and networking in order to grow your client base. 

Financial Analyst vs Accountant

Financial analysis

The roles of the financial analyst and the accountant overlap quite a bit. But there are also some key differences between them that you should be aware of.

Starting with what they share in common, financial analysts and accountants both deal with numbers, expense reports and budgets as part of their job. Both roles are also crucial for a business’ wellbeing and survival.

In terms of differences, a financial analyst tends to look at the overall picture of a business and the industry where it stands, comparing trends and making forecasts for the future. The accountant is more focused on the day-to-day bookkeeping operations and the performance of a business in the past.

An accountant deals with financial documents of a company to report to financial analysts and external stakeholders. Their aim is to account for all day-to-day transactions and make sure the budget is accurate. Accountants mainly deal with tax and financial statements.

To illustrate, services provided by a contractor accountant may include: business expense management, financial planning to maximise earnings, pension tax planning advice, payroll preparation and submission, tax planning advice, preparation and submission of tax returns, and regular reviews of book-keeping data.

On the other hand, a financial analyst’s responsibility is to oversee market trends, current financial situation, investment opportunities and spending and revenue projections. The main goal is to predict the future performance of a company. They usually communicate their progress to the management so they can make an informed decision for their next steps and growth strategy.

Training to Become a Financial Analyst

Financial analysts need at least a bachelor’s degree, often in accounting, statistics, finance, economics, or business administration and management.

Coursework in statistics, economics, and business is required, and knowledge of accounting policies and procedures, corporate budgeting, and financial analysis methods is recommended. Many analysts earn a master’s degree in finance, or an MBA.