By Brian Perry
In this chapter, we will explore financial analyst jobs. These jobs are among the most common in the financial industry and can encompass a variety of different job descriptions and take place at a number of different institutions.
Note: the term "analyst" is widely used in the financial world and there is no one strict definition of what constitutes an "analyst" role. In this chapter, I will simply attempt to define several of the areas of the finance industry in which someone may find themselves working as an "analyst." The different sections of this chapter are not mutually exclusive nor are they exhaustive, but they are meant to provide a general feeling for what an analyst position might look like.
Where the Jobs Are
Jobs as an analyst are extremely common at banks, money management firms, brokerage firms, and other firms involved in the investment business. At these types of firms, analysts are responsible for researching investments and providing opinions on which are appropriate. Financial analyst positions are also available in a wide variety of corporations and other institutions where the role might involve analyzing the financial position of the company and assisting in creating an appropriate budget and capital structure. Because they can be found in many different types of companies, analyst jobs are available in most large cities. However the greatest number of positions are found in the typical international financial center cities such as New York, London, or Hong Kong.
How to Get an Analyst Job
As with almost all finance jobs, becoming an analyst usually requires a college degree. At an investment bank, an analyst role is often the first job someone holds out of college; later on, a research analyst position can be an advanced role at banks and money management firms. At the higher levels, many analysts have a graduate degree or Chartered Financial Analyst (CFA) designation. Some successful individuals spend their entire career as an analyst; the very best might eventually earn the honor of being named to the Institutional Investor All-America Research Team. However, many analysts eventually finish honing their skills for investment analysis and then move on to a portfolio management role at a money management firm or hedge fund. (For more, see Sizing Up A Job As A Ratings Analyst.)
Types of Analyst Jobs
- Entry-Level Analyst Jobs
Perhaps the most common entry point into the investment banking world is as an entry level analyst. Typically someone enters this role after graduating from a prestigious college (with excellent grades usually a necessity.) The analyst than spends two or three years building financial spreadsheet models for more senior investment bankers or securities analysts. The work is hard and the hours are famous for being extremely long; all-nighters are not unheard of and working on weekends is common. At the end of the two or three year period, the analyst usually leaves the firm to return to graduate school. After completing a graduate degree, the individual may return to the same firm they previously worked in or begin work at a new firm; either way they will return at a higher level. While the work is very hard, and an entry-level analyst is unlikely to receive the kind of paydays that a senior investment banker or trader would receive, the pay is still exceptional, especially by the standards of most jobs available to recent college graduates.
- Investment Analyst Jobs
For the purposes of this chapter, an investment analyst job differs from an entry level analyst job in that the former is intended to be a temporary stop in the course of a career whereas the jobs discussed in this section are permanent roles. An investment analyst, as the name implies, analyzes investments. Most analysts will have a specialty such as consumer cyclical stocks, Brazilian stocks, or high-grade corporate bonds. Because of their specialization, analysts will eventually become an expert in their particular area. Investment analysts work at almost every firm involved in investing, from banks to brokerages to money management firms to hedge funds. If an analyst works for a bank or brokerage (the sell side) their job will entail putting out buy and sell recommendations for clients. If an analyst works for a money management firm or hedge fund (the buy side) their job will entail recommending securities for sale or purchase by their portfolio managers. An investment analyst might choose to stay in that role throughout their career; however some may also choose to eventually move on to roles as a portfolio manager. As with most jobs in the investment industry, an investment analyst can be paid extremely well depending upon the types of securities they are analyzing, the type of firm they work at, and of course their skill at their job.
- Financial Analyst Jobs
While the other types of analyst positions in this chapter revolve around working in the investment field, the financial analyst roles described in this section refer to positions at more traditional corporations. Almost every type of corporation, from IBM, to Procter & Gamble, to Ford has financial analysts on staff in order to help analyze cash flows and expenditures and develop a reasonable budget. A financial analyst might also assist in determining the optimal capital structure for the corporation and perhaps participate in capital raising in the equity or debt markets. Over time, a successful financial analyst might have the possibility of moving through the ranks to eventually become the corporation's treasurer or chief financial officer. In addition to roles at corporations, these sorts of jobs are also usually available at many government agencies and other institutions. While these roles can pay very well, particularly at the higher levels, most corporate finance jobs are unlikely to provide the same level of pay as a job with an investment firm. However, corporate jobs may also be more stable, provide a better work/life balance, and carry less pressure. (Learn more in 10 Ways To Avoid Burnout In Corporate Finance.)
While the term "analyst" is very broad, in general people in these roles spend a lot of time producing financial models in Excel or other spreadsheet packages. Therefore, familiarity and comfort with computers and financial modeling is important. Many analysts also have an understanding of accounting. (Pressed for time? Check out Financial Efficiency: The Analyst's Guide To Time Management.)
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