An easy guide on how to become a financial analyst

The world of business and finance is booming, and companies are hungry for talented financial analysts. Forbes predicts that the demand for these professionals will skyrocket in the coming years, outpacing many other careers. If you’re a numbers whiz with a knack for analysis, you might be wondering what it takes to become a financial analyst and what exciting opportunities await you in this field.

An Indian financial analyst earns an average of ₹6,60,000 per annum. Let’s dive into the employment landscape of financial analysis and a guide to enter it.

Read about financial management career prospects: salary & opportunities

Essential skills and qualifications

To become a good financial analyst, you must possess technical competencies and soft skills. Below are the technical skills required for a financial analyst:

1. Hard Skills

• Financial Modeling: Developing business forecasts to estimate the economic performance of an enterprise. For instance, forecast and comparison analysts apply Excel in developing models, such as DCF models for valuations.
• Data Analysis & Statistics: Proficiency in SQL, Python, or Excel and an understanding of the basics of finance and accounting. These tools might apply to an investment banking analyst to look at some past information about the prices of shares.
• Accounting Knowledge: Professorial knowledge of balance sheets, income statements, and cash flow statements is essential. Many analysts consider knowledge of GAAP or IFRS accounting standards essential for reporting corporate information.
• Valuation Techniques: Procedures in company valuation, such as company analysis and rations, help estimate the value of stocks and investments.

2. Soft Skills

• Communication Skills: Financial analysts must know how to translate highly technical financial information into easily understandable reports. For example, a corporate finance analyst makes observations of raw financial trends easy for top management to understand.
• Attention to Detail: High precision is crucial when preparing reports and models or estimating valuations because even small mistakes in decimals or percentages can result in poor decisions or financial losses.
• Problem-solving and Critical Thinking: Financial firms deal with high stakes, and teams must work in stressful situations. Financial analysts must stay calm, understand the problem, and think critically to find helpful solutions.
• Collaboration and Teamwork: Based on the specific job, you may need to collaborate a little or a lot with accountants, economists, business managers, and other colleagues. Thus, the ability to work together and contribute appropriately is essential.

Read here about analytical roles in the financial industry!

Educational pathways

Below are some academic ways regarding how to become a financial analyst:

1. Undergraduate Degrees (UG)

Undergraduate programs give the students a basic understanding of financial operations and general business knowledge. Here are the most relevant undergraduate degrees:

• Bachelor of Commerce (B.Com)

This popular degree provides lessons in accounting, finance, economics, and taxation. It also teaches the fundamentals of financial analysis, and students can graduate to become financial analysts.

• Bachelor of Business Administration (BBA)

This degree emphasizes both management procedures, such as ethics and governance, and finance topics, such as corporate finance and investment. This degree prepares graduates to work as financial planners or management consultants.

2. Postgraduate Degrees (PG)

Master’s degrees enable professionals to progress in their chosen career path by providing advanced financial knowledge mixed with business management skills.

• MBA in Finance

An MBA in Finance is the most common postgraduate qualification for those keen on management careers in stock analysis, banking, or managerial economics. MBA graduates are usually employed as portfolio managers, financial consultants, or senior analysts.

• Master’s in Business Analytics and Data Science

With finance companies today working with more data than ever, analytics degrees have surged in popularity. Big data, SQL, and Python skill holders are sought for in investment banking and financial services.

3. Professional Certifications

Many employers now recognize additional certification as a financial analyst qualification. These certifications can help demonstrate your mastery in a field, improving your chances of getting hired and increasing your earning potential.

• The Charter of the Financial Analyst (CFA)

The CFA is highly respected worldwide as the most respected certification for individuals in the investment field. The course involves efficient and effective principles of investment analysis, portfolio management, and financial ethics.

CFAs are in high demand by investment banks, hedge funds, and asset management firms nationwide and globally.

• Certified Financial Planner (CFP)

This certification is suitable for professionals who wish to practice as financial planners or wealth managers. The course covers different topics, such as investment planning, estate planning, retirement planning, and asset management.

• Financial Risk Manager (FRM)

The FRM certification is a great boost for individuals interested in risk management as a profession. Professionals can land jobs as research analysts, market risk analysts, risk managers, and more.

Also read: Navigating the Future of Finance: The irreplaceable human element in key financial roles

Practical experience

• Internship

The most real way of training, which gives a direct taste of actual business environment practices or a typical working day, is the internship. Interns learn from experienced professionals and learn about the business, tools, strategies, software, and office dynamics.

For example, you can look into companies offering equity research intern, trainee equity research analyst, or risk management intern positions.

• Volunteering

Budding analysts can try out their skills at a nonprofit social service in need of financial assistance.

For example, you can work at a nonprofit in budget forecasting or financial reporting. You may also take up promoting or delivering a financial literacy program in low-income areas.

• Personal Projects

Undertaking personal projects or conducting independent case studies is an added advantage for aspiring financial analysts seeking desirable jobs.

You can create a portfolio of your virtual trading sessions or develop valuation models of a listed firm.

Also read: Credit Risk Analyst vs Financial Analyst: What’s best for you

Career paths and specializations in financial analytics

1. Investment Analysis

Investment analysis focuses on evaluating financial instruments and advising clients or organizations on investment strategies.

a) Equity Analyst

• Analyzes company financials to recommend buy, hold, or sell positions on stocks
• Monitors stock market trends and economic news
• Prepares research reports for investors and portfolio managers

b) Portfolio Manager

• Manages investment portfolios by allocating funds across various asset classes
• Monitors portfolio performance and rebalances investments to meet targets
• Works with analysts to devise strategies to maximize returns

2. Corporate Finance

This specialization involves managing a company’s financial operations and ensuring optimal capital structure.

a) Financial Analyst

• Creates financial models to forecast revenue, expenses, and cash flow
• Evaluates financial performance and prepares reports for management review
• Assists with budgeting, planning, and strategic decision-making

b) Treasury Manager

• Manages the company’s liquidity to ensure adequate cash for operations
• Oversees cash flow forecasts, investment decisions, and financial risks
• Develops strategies to manage currency exposure and interest rate risks

3. Risk Management

Risk management professionals assess, monitor, and mitigate financial risks to protect organizations from potential losses.

a) Credit Risk Analyst

• Evaluates the creditworthiness of borrowers and recommends loan options
• Uses statistical models to predict the likelihood of default
• Monitors credit risk exposures and provides risk mitigation strategies

b) Market Risk Analyst

• Monitors risks arising from market fluctuations in interest rates, currencies, and commodity prices
• Uses risk models like VaR (Value at Risk) to assess potential losses
• Works with traders to set risk limits and ensure compliance

4. Financial Consulting

Financial consulting professionals provide expert advice to businesses and individuals on financial management.

a) Financial Consultant

• Assists clients in managing investments, taxes, and retirement planning
• Prepares customized financial plans based on client goals
• Advises on risk management and wealth creation strategies

b) Business Valuation Analyst

• Assesses the worth of a business or asset for mergers, acquisitions, or investments
• Analyzes financial statements, market conditions, and industry trends
• Prepares valuation reports for stakeholders

Salary overview of Financial Analytics roles in India

Role	Average Annual Salary (INR)
Equity Analyst	6 – 8 LPA
Portfolio Manager	12 – 18 LPA
Financial Analyst	5 – 7 LPA
Treasury Manager	10 – 15 LPA
Credit Risk Analyst	7 – 9 LPA
Market Risk Analyst	9 – 12 LPA
Financial Consultant	8 – 10 LPA
Business Valuation Analyst	8 – 12 LPA

Source

Tips for success in a financial analyst career

Building a career as a financial analyst requires many skills, and once you are confident of your abilities, you can take these actionable tips to thrive in this competitive field:

1. Embrace continuous learning

Finance is a fast-developing field due to constantly emerging new techniques, rules, and trends. Staying updated with these changes can improve your chances of employment.

• Enroll in online courses: Coursera, edX, and LinkedIn Learning offer programs in areas such as financial modeling, risk management, and data analysis.
• Stay updated: You can do this by utilizing resources such as financial magazines, news channels, research papers, etc.
• Pursue advanced certifications: Gaining additional certifications such as CFA, FRM, or CAIA demonstrates your eagerness to learn and advance and makes you a candidate for promotions.

2. Build professional connections

Networking is greatly beneficial to an individual’s career progression. It enables you to connect with experts, mentors, recruiters, employers, and well-wishers and enter into mutually beneficial relationships.

• Join finance communities: For instance, join local finance clubs, organizations, or LinkedIn groups.
• Attend networking events: Attend conferences, seminars, and finance meetups to interact with professionals and prospective employers.
• Seek mentorship: Discover a team of qualified experts who can not only help shape your career but also give you sound advice and guidance.

3. Work on case studies

Case studies use real-life examples to build profound practical knowledge and skills in the field of analysis. These exercises can help you apply your theoretical knowledge and formulas to real-world scenarios and develop solutions.

• Work on mock case studies: To work on and gain experience in cases, you can access online simulations on the Internet or approach university sources.
• Enroll in case study competitions: You can compete in case study contests by yourself or as a group. You will have to assess real-world cases in real time and provide solutions along with your reasoning, which will then be judged.

Conclusion

Financial analysis, as a profession, provides diverse roles, such as investment analyst, corporate financial analyst, and risk analyst. To succeed as a financial analyst, you need academic achievement, work experience, and hard and soft skills. Pursuing a degree provides a great foundation; however, to make a successful leap to becoming an analyst, you can obtain certification and work on projects.

By engaging in continuous learning, networking, and branding, you can thrive within this field and easily attain your career goals.