The success of a business significantly depends on the groundwork by people who often get due credit.
In major firms, when a profitable deal closes, much of the credit goes to the negotiator and the chief operators, but people often forget about the safety net laid down by the analysts where the negotiators and chief operators fall back to in case anything goes wrong.
How an MNC runs?
A layperson may find it difficult to fathom that a well-run multinational firm hires more than a hundred different analysts to keep the business afloat in the market. While discussing different analysts, the first type which crosses our mind is the position of financial analysts, which almost all the leading firms hire these days to ensure the financial stability of the firm. The work of a financial analyst is not a piece of cake, and it is hard to find a good one in the present market.
What it takes to be a Financial Analyst?
A person with a degree certificate from Ivy League college doesn’t make a good financial analyst. The years of hard work put by a graduate from a reputed college under the guidance of an able person makes a good analyst. The job of a financial analyst is massive, and it is quite difficult to put in a few words.
We will try our best to make our readers understand using some simple examples. Suppose a deep-sea diver when asked to go deep down in the ocean and get something from the ocean bed; he will go down to the depth and get what asked for him. In the money world, that is the job of an analyst who specialized in finance.
When asked by the top brass of a company, he will dig the finance books of his firm and put a report which will give the board of the directors a better understanding about the condition of the firm. The other time where they play a leading role is when a firm looks to close a lucrative deal with some other firm.
The financial analyst digs deep into the financial books of that firm and checks for the feasibility of the deal. Now, on many occasions, a company may look to sell off his shares to cut off the losses incurred by them every year. The job of financial analysts is to determine whether the shares which are about to get auctioned are worth the risk or not.
The life of a financial analyst:
In this blog, we will try to give a better insight into the life of financial analysts. When we hear the term financial analysts, the first thought that crosses our mind is numbers, mathematics, statistics, and economics. One of the leading accounting professional Jim Miller in his books stated on several occasions; the financial analysts are the nerds of accounting.
He later went on to say they are the groups of people who do hard mathematics to keep a firm financially strong and lucrative for investors. Apart from Jim Miller, we referred to several other financial experts to provide a better outline regarding the job done by an analyst in his daily life.
The translation of financial information:
The basic job of a financial analyst is to find a perfect medium to translate all financial information gathered by him to the management team. The number-crunching which gets done by the analyst helps the firm to become more financially independent and less dependent on the investors or its shareholders.
A firm gets considered as a well-run firm when he is financially reliant enough to pay all his expenses without getting financed by an external source. The analyst does that by evaluating the stocks, bonds, and share prices and assesses them properly. The outcome of the assessment either will bear good fruit or bad for the company.
So, it is understandable why a firm will look for an able financial analyst; their uncompromising financial insight may improve the profit margin, a considerable decrease in the debt and several other benefits which will make the company stable and a lucrative destination for bigger investments.
Who determines the goal of a company?
The yearly financial plan drawn by the company which determines the financial goals of the company for that year gets done by an analyst. He will use the past and present data in the company’s archive to put up a financial outline for that year.
A company who can identify the changing trend in business seems to thrive in the present cut-throat competitive market; Jim Miller believes a financial analyst with proper knowledge, can identify a change in business trend before anyone can.
He believes a good analyst must always keep in touch with the top brass of the firm and keep himself well-versed with the organizational goals set by the company. In some cases, he may meet the investors of the firm to build a better understanding of the expectations set by the investors. A manager significantly depends on the financial analysts to keep his business healthy.
Different types of financial analysts:
In the organizational structure, there are two types of financial analysts we generally come across; they are buy-side and sell-side. As the name suggests, a buy-side analyst puts all his efforts in drawing up strategies, which helps his firm to make smart investments; a firm with a significant amount of capital in reserves like insurance companies, universities and large MNC hires such type of analysts.
Sell-side analysts advise his top brass to sell off some shares to stay viable in the market. They focus most of their efforts to pre-determine the longevity of a business. They believe in cutting off an infected leg to save the entire body. Now, a graduate fresh out of college may choose either of the paths, as both of them are highly rewarding.
Though, U.S Bureau of Labor Statistics found most financial analysts take up one option and specialize in it, to improve their employability. Here, we have listed down four commonly found financial analysts:
- Portfolio Manager:
They are one of the senior financial analysts in the firm who have got a team of other analysts working under him. The team focuses all their efforts in improving the investment portfolio of the company. They are held responsible for the performance put by the folio in attracting new investments.
- Fund Managers:
They are arguably one of the few people in an organization who have got exceptional skills to make split-second decisions. They mostly supervise the hedge and mutual funds where the quick decision-making skills prove to be helpful.
- Rating Analysts:
The job of the rating analysts is to look into the books of other companies and in some cases, the financial condition of the government, to repay their debts. Many firms provide financial assistance to perishing company or governments burdened with debts; these firms hire rating analysts to check the ability of the lending firm to repay the debts.
- Risk Analysts:
As the name suggests, they focus most of their energy in predicting the changing business trend to minimize the loss of the company he works for. They also play a leading role in diversifying the investment portfolio of the firm to reduce the risk of their investments.
In the blog, we tried to explain the job done by a financial analyst depending on the type of camp he belongs. Now, BLS listed some common responsibility of an analyst irrespective of the camp they belong:
The day to day work of a financial analyst:
An analyst must regularly research and evaluate the present and past market trends.
- He is responsible for determining the financial health of a company.
- His report should be good enough to convince the top brass of a company while selecting an area of investment.
- He should always use charts and graphs in his report to provide a lasting impact on the minds of the decision-maker.
- He must keep a vigilant eye on the investments of the company to the current market condition.
- He must play a leading role in informing the top brass regarding the financial risk associated with an investment.
The necessary qualification of financial analysts:
As the job of a financial analyst involves a lot many responsibilities with huge financial liabilities; it requires proper education and training to produce a good analyst. While going through various financial analyst job postings over the last few years, we felt there are few basic skills an analyst must possess to get hired.
He must have a good grip over accounting, budgeting, and economics, financial modeling, determining the market trend, and many more. A person can gain these skills and the necessary mathematics and economics knowledge from a well established Finance degree program.
Where financial analyst does get hired?
A question may come to our reader’s mind regarding the workplace of a financial analyst. The Buy-side financial analysts mostly work in the big Multinational companies located in big metro cities. The buy-side analysts may find them working for a bank, insurance agencies, or in some other similar business. The Sell-side analysts mostly work in consultancy firms that manage the account of their clients.
They can find a lot of their time getting spends on traveling to meet with the clients. The job can prove to be quite demanding at times with the burden of financial responsibilities on the shoulder.
A person who loves responsibility and has got a strong grip over mathematics and economics may find the job quite amusing. The variety of career options available to an analyst makes the job one of the favorite ones among the younger generations.
The finance package offered by the leading firms:
The financial package offered by some leading firms can surely pursue a fresh graduate to take up this profession. An entry-level financial analyst working in medium private-owned firms can command a salary in the range of $55,000 yearly, and the number can go as high as $100,000 if the person works in some investment banking and asset management firm.
The lucrative career and handsome salary at the very beginning of the career may encourage many people. When the world is about the get hit by another wave of recession, a financial analyst must not worry as they can find a job in any sector of our society.
People who are looking to learn new things every day may find the field quite interesting as every day is a learning experience in this profession. The challenge associated with the job is undoubtedly quite high, but the level of power financial analyst posses in the hierarchy tree of an organization may amuse a lot many people.
He is Robert Simons. He has done post-graduate with a specialization in Management studies and researches data from the Harvard Business School, Boston, and Massachusetts. Simons has taught courses on strategy execution, accounting, and management control systems. He has been working for the past 30 years now and entirely experiential in this field of management and also has a better hold on accounting and management studies.