A financial analyst is someone who manages various aspects of other people’s money. Some analysts work as investment advisors, either on their own or with a brokerage firm. Depending on the wealth and size of their clients, they may manage portfolios worth millions of dollars. Other financial analysts work for banks or insurance companies, ensuring that even when a loan defaults or a claim is paid, the company maintains a positive cash flow. Still others specialize in mergers and acquisitions, determining the profitability of two companies combining their forces in a merger or one company buying another company in an acquisition.
Financial analysts and personal financial advisors recommend investment strategies to businesses and individuals. Financial analysts and personal financial advisors collect information from clients and make financial recommendations, but they each provide different types of financial recommendations.
Financial analysts evaluate a company’s financial performance and provide potential investors with this information. They are also known as securities or investment analysts and provide investment recommendations to insurance companies, mutual and pension funds, investment banks, business media, and securities firms. Financial analysts evaluate a company’s commodity prices, costs, sales, tax rates, and expenses to project future earnings and determine company valuation. They meet with company representatives to evaluate management effectiveness and determine a company’s revenue prospects.
Financial analysts either work on the buy side or the sale side. Buy side analysts work for companies with a lot of money to invest known as institutional investors. Hedge funds, mutual funds, insurance companies, charitable organizations with large endowments such as universities, and money managers are considered institutional investors. They also develop investment strategies for a company’s portfolio; whereas, sell side financial analysts assist securities firms and investment banks to sell securities. Moreover, the business media hire impartial financial advisers.
Financial analysts usually specialize in a specific financial product, geographic region, or industry. Big firms with large research departments may also divide specialties into more categories. Specialists analyze business trends, competition, and products as well as stay up to date with new policies and regulations, as well as economic factors affecting investments. Portfolio managers, usually experienced analysts, supervise teams of investors to determine the types of securities and industries a company should invest in. Fund managers supervise mutual and hedge funds. Risk managers evaluate investment decisions and implement strategies to increase revenues and decrease risk through diversification.
Using spreadsheets and statistical software, financial analysts develop forecasts and locate trends. They also use data to determine potential investment risks, and using data, write reports and recommend whether to buy or sell specific securities.
Most financial analysts work in an office environment. Some analysts travel to visit potential investors, potential investments, and perform hands-on evaluations that enable them to accurately decide the value and potential risk of each investment. Financial institutions and insurance industries employ the majority of analysts, usually in financial centres in North America and worldwide.
A person working as a Financial Analyst in Kenya typically earns around KSH192,000 per month. Salaries range from KSH94,000 (lowest) to KSH299,000 (highest).
Demand for financial analysts tends to grow with overall economic activity. They will be needed to evaluate investment opportunities when new businesses are established or existing businesses expand. In addition, emerging markets throughout the world are providing new investment opportunities, which require expertise in geographic regions where those markets are located.
Demand is also projected to increase as the growth of “big data” and technological improvements allow financial analysts to access a wide range of data and conduct high-quality analysis. This analysis will help businesses manage their finances, identify investment trends, and deliver new products or services to clients.
For those interested in gaining employment as a financial analyst and advisor, a bachelor’s degree in an appropriate field is expected. Examples include math, engineering, accounting, finance, accounting or statistics. To obtain a more advanced job, a master’s degree could be required with emphasis in finance or possibly business administration. Understanding the use of bond valuation, risk management and options pricing is essential.
Many positions also require a specific license, such as one from the Financial Regulatory Authority. The FINRA is recognized as the foremost organization for licensing in the securities industry. To obtain a license, it is often required that an employer sponsor the licensing process. A license can be the best way to advance to a better job. The Chartered Financial Analyst position, for example, is a certification that requires a specific set of qualifications including a bachelor’s degree, experience, and the passing of exams.
Popular skills for financial analysts are : Skills in Financial Modeling, Data Analysis and Microsoft Excel are correlated to pay that is above average. Skills that pay less than market rate include Financial Reporting and Financial Analysis.
