Financial Analyst – Job Description

This article written by Akshit Gupta (ESSEC Business School, Master in Management, 2022) presents the job description of a Financial Analyst.

Introduction

A financial analyst is an individual who is responsible for making financial and investment decisions for a company. The work involves a broad area of expertise and a financial analyst generally works in corporate and investment roles. In the corporate roles, a financial analyst is responsible for making the revenues, costs, budgets and forecasting reports. In the investment side, financial analysts are generally responsible for gathering information about a company to compute their fundamental value. They are employed by different companies including corporates, investment banks, investment firms, hedge funds, equity research firms and mutual funds to serve their specific purpose.

Types of financial analysts

Depending on the company or bank a financial analyst is employed at, he/she can have different roles and responsibilities. Two of the most notable profiles of a financial analyst include:

Buy-side analyst

Buy-side analysts generally work in asset management firms, investment funds, and trading firms, which buy and hold onto securities for a fixed time frame on the basis of the financial analysts’ reports.

The analyst is responsible for gathering financial and non-financial data of a company and make future predictions about its earnings and growth prospects in form of a report. The reports are then given to the asset managers and traders who use the information to execute trades in the financial markets.

Buy-side analysts are commonly more prestigious than sell-side analysts. The competition is stiffer and entry into this job requires a knowledge of corporate finance and a strong experience in the sector followed.

Sell-side analyst

Sell-side analysts are generally employed by the research division of investment banks, investment firms and brokerage houses.

Sell-side analysts are responsible for producing reports on the future performance of a company and making predictions about the financial results that will be published by them in the near future. The reports made by the sell-side analysts are not used by their employer but instead sold to private investment companies and retail investors, who use this information to make informed decisions about their own investments. The sell-side analysts usually specialize in a particular sector or a geographical region and produce reports within that area.

How the work is done?

The job of a financial analyst includes researching and gathering of quantitative and qualitative financial and non-financial information about a company, organizing the data, making forecasts about the future course, and presenting the results to the different stakeholders in form of reports. The stakeholders depend on the company the financial analyst is working for but generally includes internal divisions (portfolio managers, traders, and quantitative analysts) and external clients (private investment firms, retail investors, individual traders, etc.).

Studying market trends A financial analyst is expected to be aware of the past and current market trends based on which the investment decisions are to be made.

Data gathering In the data gathering phase, the financial analyst gathers financial and non-financial information about a company from different sources, which include company annual reports, media releases, financial platforms (Bloomberg, Capital IQ, etc.), investor relation departments of the companies, or reports by other brokerage firms.

Financial modelling The information is then analyzed to build financial models (generally on a spreadsheet like Excel) and do predictions about the company’s future performance.

Using the reports Once the financial models are made, the findings are produced in form of a report which is issued to different internal or external stakeholders.

With whom does a financial analyst work with?

A financial analyst works in collaboration with a lot of different teams:

• Brokerage firms and Investor relations department of companies for gathering data for the reports
• Sales and Trading Divisions for selling the reports produced by the sell-side analysts and executing
  trades on basis of reports made by buy-side analysts
• Portfolio managers – to advise them on different assets
• Sector specialists and Economists – to gather information about specific sectors and economies

How much does as financial analyst earn?

The remuneration of a financial analyst depends on the type of role and organization he/she is working in. As of the writing of this article, an entry-level financial analyst working in a bank earns between €38,000–50,000 in the initial years of joining (source: Glassdoor).
As the analyst grows in experience, he/she earns an average salary of €60,000–70,000 including bonuses and extra benefits.

What training to work as a financial analyst?

An individual working as a financial analyst is expected to understand the different financial statements and their analysis, financial modelling (commonly on Excel), accounting and budgeting techniques, advance research skills and interpersonal skills.

In France, a Grand Ecole diploma with a specialization in corporate finance is highly recommended to get an entry level financial analyst position in a reputed bank or firm.

Also, to gain industry experience as a financial analyst, students ae advised to work as interns and apprentices before stepping into this domain as full-time employees.

Relevance to the SimTrade Certificate

By taking the Market information course in Period 2 of the SimTrade Certificate, you will understand how information is incorporated into market prices and the associated concept of market efficiency.

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Article written by Akshit GUPTA (ESSEC Business School, Master in Management, 2022).