What Is a Financial Analyst? (+ How to Become One)

Financial analysts look closely at either a company's or client's financial data, alongside other research, to develop investment recommendations that support their clients' various financial goals. This job tends to pay well and estimates show it's poised to grow faster than other jobs, according to the US Bureau of Labor Statistics (BLS) [1].

In this article, we'll go over financial analysts, what they do, and the skills you'll need to succeed in this role. Afterward, if you'd like to learn more about financial analysis, consider enrolling in the University of Illinois' Financial Analysis - Skills for Success Specialization, where you'll learn the basics of financial statement analysis and how to use financial information to facilitate strategic and operational decision-making.

What is a financial analyst?

Financial analysts provide investment guidance to companies and individuals. This job often requires a great deal of research—about economic trends, current market conditions, and business and financial data—to inform the recommendations they make to clients. They may also monitor investments and make adjustments as needed.

To become a financial analyst, you must be comfortable working with data and have a strong foundation in economics, math, and communications, among other subjects. Financial analysts can work for financial companies, like banks or wealth management organizations, or within businesses. They commonly have academic backgrounds in finance, economics, accounting, or statistics. 

Types of financial analysts

Financial analysts are sometimes classified into two categories: buy-side analysts and sell-side analysts. 

• Buy-side analysts create investment strategies for companies that purchase securities and other assets for money management. These companies, commonly called institutional investors, include mutual funds, hedge funds, insurance companies, independent money managers, and nonprofit organizations. 

• Sell-side analysts assist and provide guidance to financial services sales agents who sell stocks, bonds, and other investments.

What does a financial analyst do?

Financial analysts work with data to help companies make business decisions or to help individuals make investment decisions. The specifics can vary, but typically a financial analyst is expected to perform the following tasks:

• Research: Use business and financial data, as well as current economic and market data, to identify financial opportunities

• Data: Build financial models to forecast trends and predict scenarios to help make business decisions

• Trends: Study economic and business trends, including stock and bond performance, to provide context around investment and business decisions

• Analysis and recommendations: Compile data and reports to analyze financial opportunities and make investment recommendations to clients

• Communication: Compile written reports or visual presentations on financial statuses and recommendations

Financial analyst skills

Financial analysts generally need to have the following technical and workplace skills to be successful:

Technical skills

• Research

• Data analysis

• Financial theory

• Statistics

• Financial modeling

• Financial analysis

• Financial software and tools

• Financial reporting

• Budget management

• Research

Workplace skills

• Communication

• Negotiation

• Critical thinking

• Flexibility

• Resilience

• Collaboration

• Problem-solving

Financial analysts: salary and job outlook

According to the BLS, the average annual US salary for a financial analyst is $99,890 [1]. However, this amount can vary based on your location, education, and experience. Learn more about financial analyst salaries and the different factors that can impact your earnings.

Financial analysts are also in demand. The BLS estimates that the position will grow nine percent from 2023 to 2033.

Financial analyst career paths

Once you've gained around four years of experience in financial analysis, you can explore senior financial analyst and then finance manager roles [2]. Or you can explore the job titles below for additional career advancement:

• Portfolio managers study the market and work with other financial professionals to determine the best investment opportunities and decisions for a company’s business portfolio. They have a deep understanding of current business trends, allowing them to better predict the future of the market. Portfolio managers use this knowledge to guide businesses and individuals in their investment decisions.

• Fund managers work primarily with hedge funds or mutual funds. They stay informed on the overall goals of the fund as well as market trends to help make sound decisions.

• Ratings analysts evaluate and assess the market and a company’s financial abilities and strategies in order to make educated recommendations on how a company should proceed.

• Risk analysts use a combination of both business and financial knowledge to assist companies in determining the amount of risk in possible investment decisions. They make recommendations based on their analysis findings and help track and minimize a company’s financial loss. Risk analysts are often responsible for assessing and reporting asset losses, staying current on investment trends, and collecting and analyzing data.

How to become a financial analyst

It's typical to earn a bachelor's degree and gain experience in an entry-level finance or business role before advancing to be a financial analyst. Here are the common steps to follow:

1. Earn a degree.

Given the economic and financial knowledge this role requires, a bachelor's degree is a common credential. 75.96 percent of financial analysts have a bachelor's degree, and 16 percent have a master's degree, according to Zippia [2].

College majors in finance, accounting, economics, or a related field can be a good choice if you're interested in this line of work. If you are looking for a wider scope of opportunity or a higher salary, getting your master's degree in finance or a master of business administration (MBA) may be helpful.

2. Strengthen your skills with an online credential.

A bachelor's degree program should include coursework on data analysis, economics, and statistics, but you can add to your wheelhouse (and resume) by enrolling in different online programs. Strengthen your knowledge of a skill by taking a course.

• Keep developing your knowledge about Financial Markets from Yale University

• Strengthen key Financial Skills with the University of Illinois

• Create Financial and Quantitative Models with UPenn Wharton

• Bolster your business knowledge with the Microsoft Business Analyst Professional Certificate

3. Get a certification.

Some companies prefer to hire financial analysts who have certifications from the Chartered Financial Analyst Institute. Analysts who want to work specifically in securities can also take its Series 7 and Series 63 exams from FINRA.

4. Gain work experience.

Entry-level positions, such as budget analyst or accountant, can help you build the knowledge and skill set to advance to a financial analyst role. You can also look for titles that generally indicate an entry-level position:

• Junior financial analyst

• Associate financial analyst

If you're in college or newly out of college, you may want to seek out an internship that matches your industry interest. Interning can give you experience, knowledge, and networking opportunities within the financial field to help you land a job afterward.

5. Prepare for your job interview.

Once you've landed a job interview for a financial or financial analyst role, prepare for it by researching the company, practicing your answers in advance, and preparing questions to ask in return. Use the guides below for help.

• 5 Interview Questions to Prepare for When Seeking a Career in Finance

• 9 Accounting Interview Questions + How to Prepare Answers

• 10 Common Interview Questions and How to Answer Them

Build your financial analysis skills on Coursera

You'll find several different ways to build your financial analysis skills—and earn credentials to strengthen your resume—on Coursera. Consider getting started with the Financial Analysis - Skills for Success Specialization from the University of Illinois.

Or get unlimited access to more than 7,000 other Specializations and Professional Certificates with a subscription to Coursera Plus. With both monthly and annual subscription packages available, you can decide how to invest in your learning.