An expert in the field of finance, economics, capital and market, conducting analysis of assets, investment objects, competitors and counterparties.
The work of a specialist is in many ways similar to the work of an economist, although more attention is paid to research and evaluation of the results of the functioning of economic entities. The responsibilities of a financial analyst include:
- preparation of regular reviews on the results of the enterprise’s activities in the industry;
- macroeconomic analysis of sustainability, benefits and risks for investors;
- economic consulting;
- publication of materials in specialized press;
- drawing up forecasts and recommendations necessary for investing and trading;
- analysis of the effectiveness of top management, assessment of economic indicators.
A financial analyst, having studied the documents, can tell a lot about the company, its development prospects, and main problems. He outlines optimization paths, determines economic stability, capital adequacy, tax burden and other indicators, and draws conclusions about the effectiveness of purchasing shares of the enterprise and other operations.
What a professional financial analyst should know and be able to do
The services of financial analysts are in demand by legal entities and individuals. This specialist is invited to check potential partners, before purchasing securities, to identify weaknesses in the management of the company. A financial analyst, if he is a professional, must:
- have solid knowledge of economic disciplines;
- master macroeconomic theory;
- know the features of the industry under study, development trends, profitability indicators;
- be able to work with accounting and financial reporting, know the procedure for drawing up accounts;
- have an analytical mind in order to conduct a comprehensive analysis of the profitability of specific transactions.
A financial analyst is an auditor who audits a company and makes a forecast for stakeholders. He issues a conclusion where, with particular accuracy, he draws conclusions about the effectiveness of work, the introduction of new resources or the purchase of shares.
How to become a financial analyst
A necessary condition for employment in the profession of financial analyst is the presence of a higher economic education, for example, in the profile “Economics”, “Finance and Credit”, “Accounting”. However, today leading Russian universities are training specialists in the field of analytics as part of their master’s programs:
- Higher School of Economics, Financial Analyst program;
- REU Plekhanov, program “Financial Analytics”;
- Financial University under the Government, “Financial Analyst”;
- Kazan Federal University of Economics and Management, “Financial Analytics”.
A future specialist only needs to spend 2 years learning a new profession to gain theoretical knowledge in the field of analysis. A significant advantage will be the presence of an international certificate of financial analyst, which is necessary when working with large companies abroad.
WHAT DOES A FINANCIAL ANALYST DO?
The task of training highly qualified specialists in the field of market economics is very urgent.
What is the role of financial analysts in this process and what exactly do they do? The answer to these questions is by no means so simple, because the importance of these specialists is quite often misunderstood, even in countries with developed market economies.
Let's start with a short historical excursion. The first group of specialists who professionally analyzed the securities market arose in 1928 in Chicago. However, before the end of the Second World War, the specialty had not yet received a meaningful definition and official recognition in any country, including the United States.
For example, the British Society of Investment Analysts (currently the Institute of Investment Management and Research) was created only in 1955. Thus, the specialty is one of the youngest in the world.
The name of the profession includes a word to which various definitions are added: , etc. However, all definitions are based on the fact that a specialist of this kind analyzes securities and the activities of the companies that issue them.
As part of these functions, a financial analyst must analyze the economy as a whole, since the macroeconomic environment has a direct impact on the activities of companies, the state of a particular industry, and the peculiarities of the activities of a particular company in the market.
When analyzing the activities of a particular company, a financial analyst must pay attention not only to financial indicators (although these are extremely important), but also to the broader context of its activities. Thus, the work of a financial analyst includes analysis of key indicators: the macroeconomic climate, the effectiveness of the company’s financial and non-financial structures and indicators, the quality of its management, etc. You can often hear that financial analysts focus only on the indicators of the coming year. However, it is not.
Studies of the activities of this type of specialists in many countries and the impact that their analysis has on prices in the securities market clearly show that the role of analysts is similar to the role of senior management of companies. Thus, when planning the activities of their companies, their top management takes into account the same factors that are the object of study by analysts working outside the companies.
In a number of countries, I have heard more than once that the role of analysts is clear and understandable when it comes to corporate planning and attracting direct investment (in production facilities, equipment, real estate), but much less clear when it comes to portfolio investments, especially when evaluating quoted securities. In reality, it is in the capital market that the role of analysts is revealed especially clearly and fully.
Let us take as an example a well-organized stock exchange where free transactions in liquid stocks and bonds occur between buyers and sellers, without the interference of players who have any inside information. As it turns out, these factors alone are not enough for the market to function effectively.
To function properly, sellers and buyers need confidence that the price prevailing in the market is realistic. And this can only be achieved if this confidence, like the behavior of the market as a whole, is based on forecasts and advice from professionals, based on an analysis of both the economic situation in general and the prospects of a particular quoted security in particular. Otherwise, transactions with securities would be carried out in the absence of an idea of their real prices, which would lead to large discounts on risks. In other words, in the absence of recognized methods for assessing the value of securities, their market will be at a significantly lower price level due to the fears of buyers insuring themselves against possible adverse events.
It must be emphasized that the above-mentioned circumstance, namely the presence of a qualified analysis of the development of the market situation, is extremely important for the successful development of the economy of a particular country. It must be remembered that capital is very timid. If there is uncertainty in the economic environment in a certain country (due to poor reporting standards, lack of qualified financial analysts), then capital will always require a certain premium for its income and thus will cost more for that country. Accordingly, in relation to companies in this country, capital will act according to the principle.
RETURN AND RISK ANALYSIS
An important issue is the risks associated with uncertainty regarding future earnings from companies in which investments were previously made. In efficient markets, there is a clear relationship between risk and return. Assessing this interdependence and the possibility of exchange between them is one of the most important areas of work for financial analysts. The economy of any country benefits greatly if it has the opportunity for financial analysts to make such an assessment not only at the level of a specific transaction, but also for the market as a whole.
The following main elements that make up the professional baggage of qualified financial analysts can be identified.
Firstly, this is a certain level of knowledge of the economy as a whole. The analyst must understand the mechanism of influence of macroeconomic factors and be well versed in issues of changes in interest rates and fluctuations in inflation rates.
Secondly, he must have very good knowledge of accounting and financial reporting, as well as experience in specific industries.
Third. If the analyst works with unquoted securities, then he must be able to carry out a particularly detailed study of the state of the object in which the investment is proposed to be made. If he works in the market with quoted assets, then he should be familiar with the theory of markets and the changes that have occurred in it over the past 40 years.
Fourthly. He must understand how a particular market operates, what its efficiency is, the relationship between risks and profitability, and what are the possibilities for their interchange.
All these questions are very complex, but the answers to them are not based only on intuition, which is how the market itself differs from a casino. In well-organized markets, capital is able to act rationally, despite the large fluctuations that occur in them. These fluctuations, by the way, reflect the fact that markets themselves cannot predict the future better than people. The task of analysts is precisely to understand the whole complex of problems associated with this.
Initially, most representatives of this new profession called themselves analysts. Recently, however, a number of professional organizations have changed their names to reflect the fact that analysts also manage investment portfolios. Thus, the US Federation of Investment Analysts became known as the Investment Management and Research Association. The British Society of Investment Analysts is now called the Institute of Investment Management and Research.
In connection with the development of the practice of investment portfolio management, the corresponding theory has also developed, becoming an integral part of the professional knowledge that analysts must possess. An important element of the theory and practice of portfolio management has become its international diversification. This reflects, on the one hand, the significantly increased interconnection and interdependence of national economies, and on the other, the benefits of such diversification, revealed in serious research conducted in recent decades.
International portfolio diversification has become a very important area of professional activity. This circumstance has important practical significance for Russia, as international investors are beginning to view Russian securities as an integral part of their portfolios, and not just as random one-time acquisitions. The arrival and then the massive departure of foreign investors did, in a number of cases, give rise to very significant fluctuations in national markets. Such cases may repeat in the future. However, these shocks cannot cancel the fact that there has been a real globalization of investment flows and related professional activities. Investors are now interested in all markets, although not to the same extent.
This new situation must be taken into account in Russia and efforts must be focused on creating an efficient market, creating a favorable information environment that attracts investors, and training qualified specialists in the field of financial analysis and portfolio management.
OTHER FINANCIAL ANALYSIS APPLICATIONS
Training specialists in the field of financial analysis in its broadest sense will have a positive effect and application in other areas. For example, in investment banking, in which financial analysts perform work very similar to that required in the formation and management of investment portfolios.
There are, of course, certain differences between these types of activities. Thus, an investment bank is driven by the desire to raise funds for a specific project on behalf of a specific client, while a financial analyst working within the framework of portfolio management is guided by a more neutral view, recommending the purchase of certain stocks. However, highly qualified specialists - financial analysts - are needed in both cases. Training in financial analysis can greatly benefit both government regulators and agencies responsible for implementing economic policy.
At the same time, it is necessary to focus on truly high qualification standards, and not on a limited set of knowledge and skills required for the current activities of narrow specialists (for example, a trader or investment consultant to private investors). Qualification in the field of financial analysis should presuppose the presence of a level of knowledge that allows this specialist to discuss at a high professional level a wide range of investment problems (including both direct and portfolio investments) and with various categories of interlocutors (company managers, investment consultants, representatives of government agencies). regulation).
It is possible that the considerations I have expressed seem obvious and too general. They are indeed obvious, but despite this, many of them are ignored. Therefore, their discussion, in my opinion, can help advance the establishment of truly high standards of professional activity of financial analysis specialists in all countries, including Russia.
And this work must be done as quickly as possible.
I think that the work of GIFA, which began to create a national qualification program and organize regular qualifying exams to obtain a certified financial analyst certificate, recognized by the international professional community, is very important for Russia. The introduction of such qualifications will take the discussion of professional problems in the field of investment to a new level.
Investing has always been and remains a process in which it is impossible to make absolutely accurate forecasts. However, qualified professionals can and should help investors clearly understand risks and their relationship to profitability.
Each of us can observe the work of financial analysts on on a daily basis in thematic TV programs dedicated to the situation in the economy and the securities market. However, the activity of these specialists is not limited to appearances in the media with explanations for investors.
As financial analysts themselves admit, for them this is a side activity, the need for which arises mainly in those periods when it is necessary to increase the “citation” and recognition of the company.
If we give a general “cut”, then main goals financial analysts are involved in market research, searching and collating information, developing investment proposals, assessing the level of risks for the company and advising clients.
However, the functionality of such specialists can vary significantly depending on where they work. If this is a small-scale company, then the financial analyst will focus on preparing reports and recommendations for management on the advisability of certain steps in carrying out business activities.
Large investment companies oblige their employees to study specific markets, compile reviews for clients and external consumers, and update current information on the value of securities.
All analysts are united by the need to spend hours every day working on financial calculations, studying graphs and charts, reading reports from specialized publications, for example, Bloomberg and the Wall Street Journal, in order to form their opinion about the ongoing economic processes. Wherein not less important clearly and clearly convey your vision to the client or your immediate supervisor.
Job Requirements
If you ask experienced financial analysts what skills and abilities a good specialist in their field should have, the last thing you will hear is about deep knowledge in specific industries and the specifics of the activities of individual enterprises. The point is that such information can be gleaned in the process of obtaining specialized education. What you really can't learn is ability to competently analyze information.
The heads of many large consulting companies admit that they themselves have to train specialists, and only a few of them ultimately become truly in demand in their chosen profession.
This problem is often encountered, for example, at Finam Investment Company, which gives preference to applicants for the position of financial analyst who are able to clearly and competently present the material.
It should be noted that in this field of activity, not just analytical abilities and the ability to operate with large volumes of data are highly valued, but originality of thinking, intellectual independence and the ability to look at the situation from different angles.
Therefore, it is quite natural that people come to this profession not only from specialized universities. Among financial analysts there are many humanists who do not build complex mathematical models for managing investment portfolios, but are engaged, for example, in fundamental analysis of the stock market, other financial instruments, and the macroeconomic situation.
General provisions of the job description
The job description of a financial analyst is standard document, similar to those that are signed when entering other specialties. It also contains list of responsibilities(which were mentioned above), the position of this specialist in the company is secured in accordance with the official subordination, his rights and competence.
Sometimes, by the way, if this is required for better performance of activities, knowledge of international financial reporting standards (GAAP, IAS) is separately prescribed.
However, in some companies the job description is not just formal. This document sets out strict requirements for the corporate culture that a hired specialist must follow.
It defines the rules of conduct when interacting with clients and is designed to protect their interests in order to prevent damage to the business reputation of both the performing company and the customer himself.
In this regard, the loud scandal with the leak to the media of a closed Sberbank CIB report on the activities of Gazprom is noteworthy. Then the authors of the report - analysts with many years of experience - were fired for “violations of internal regulations” and “gross violations of ethical standards.”
In general, if we talk about the responsibility of financial analysts (and it, of course, is prescribed in the job description), then cases of serious penalties for mistakes they have made are extremely rare. As experts in this field themselves admit, they often get away with inaccurate forecasts and wrong investment decisions, since they always have the opportunity to leave room for maneuver by accompanying their conclusions with a mention of probable risks.
Financial analyst of the commercial department
The beauty of being a financial analyst is that it gives ample opportunities for self-realization and growth. This is the very specialty where you can start from scratch and grow to the very top.
An illustrative example is the position of a financial analyst in a commercial department. This is one of the narrow areas in the work of a specialist of this kind, with which you can begin your activity on the path of financial analysis.
If you look at the list of vacancies, you can get a job in a small company without experience to perform tasks primarily related to tracking orders in the public procurement system.
This kind of work will be springboard for transition to a larger company, in which the financial analyst of the commercial department is already required to have knowledge of budgeting, plan/actual analysis and ways to optimize commercial business processes.
In other words, the principle of the career ladder really works in this area. This is confirmed by many well-known financiers, who, however, call to remember one important component of success: “There are analysts who follow the market, and there are those who are ahead of their time.”
In the modern world, such a huge number of professions have appeared that it is sometimes difficult to even imagine what a specialist does in a particular field. And since the most important industry is finance, working with them attracts a large number of university applicants and their graduates. Thus, the profession of “financial analyst” raises many questions regarding its essence and tasks.
A young but very promising profession
In the modern labor market, a financial analyst is a new specialist, but very necessary. Of course, many unenlightened people get confused when mentioning this profession and do not know whether there are differences between an analyst and a trader. It is worth noting that despite certain similarities, there are still differences in the content of the activities. From the name itself, you can generally determine the main activities and responsibilities of a financial analyst. It is obvious that he works in the field of finance and analyzes them. When working with finances, a certain clarity and attentiveness are required. The analysis of the situation must be of high quality. But finance is a very broad field with many subsections, so it is not surprising that a specific section requires the services of a specific specialist. Thus, a financial analyst can work with the securities market, monitor the performance of a financial company or a certain sector of the economy. It is also possible for the analyst to work with the entire economy as a whole. Thus, the work of each specialist is assessed according to an individual system and is determined by the specifics of the enterprise where he works. Today, the main areas of work remain the stock, foreign exchange and commodity markets.
The wolf's legs feed him. But finances will not be superfluous either...
In general, analysis is a complex process that cannot be carried out in one step. It's best to divide it into parts. The first thing you need to do is collect all the relevant information, implement it. Then you will have to systematize all the data and identify the main trends. The information obtained allows you to create an overall picture of events and identify important changes. A detailed and high-quality analysis of the situation in the financial market can predict the further course of events with the issuance of recommendations regarding behavior and further strategies in the market. Therefore, we can summarize and say that the purpose of the work of a financial analyst is to make a forecast, as well as make recommendations. If a financial analyst fulfills his duties clearly, then by following the algorithm of actions prescribed by him, one can expect profit.
An important cog in the global machine
Each specialist in a company, both young and developing, and in a stable and growing one, must take his place justifiably. A financial analyst is the engine of a company. His responsibilities include monitoring the situation in the financial markets, analyzing the work of the company and competitors, regular consulting on financial issues, as well as drawing up daily analytical reviews and reports. A financial analyst is the person who foretells the “weather” in the market and gives his forecasts as to which way the wind is blowing and how to hedge in case of “rain”. The analyst can also develop an investment portfolio for his clients with economic recommendations for trading, and also create information materials for publication in the media.
What is analytics and how to understand it?
From the outside it may seem that there is no particular difficulty in this work, but how superficial is such a point of view! A financial analyst must perform his duties perfectly, otherwise he does not bring benefit to his company and cannot take his place. Progress in work is demonstrated by the dividends received from his recommendations and forecasts. Working as a financial analyst primarily involves certain financial risks that can be avoided if you have the appropriate skills and knowledge.
What should a financial industry professional know?
A financial analyst must have extensive knowledge of economics and an interest in deepening his knowledge and regularly improving his skills. Also, the specialist must constantly analyze existing changes in the stock and financial markets, having the skills to prepare appropriate financial statements. In addition, it would be useful to be able to consider the economic activities of a particular enterprise and the market in general.
Each enterprise develops its own list of minimum requirements that a financial analyst must meet. The minimum program requires a higher education in the specialty, at least one year of work experience, as well as knowledge of basic financial analysis tools and computer skills at the level of an experienced user. Since the main value of an analyst lies in the accuracy of forecasts, an important component will be the presence of an analyst and a certain financial acumen.
A document documenting the tasks, functions and responsibilities of a specialist
Every enterprise has a job description for a financial analyst, which the hired specialist must adhere to. So, according to this document, the analyst belongs to the category of specialists who are appointed and removed from office by order of the general director of the enterprise. The order must indicate a potential replacement in case the financial analyst is unavailable. The analyst must know the legislative and regulatory legal acts that regulate production, economic and financial-economic activities, tax, civil, banking and administrative legislation, as well as laws on advertising, accounting and the securities market. In his work, he is guided by the law of the Russian Federation and the company’s charter, as well as orders from management and job descriptions.
Financial analyst work process
The analyst's functional responsibilities are based on analysis of the organization's activities, its economic aspects and the work of competitors. The feasibility of concluding contracts, the adequacy of financial reports and the available indicators depend on the final forecast of financial analysts. The forecast they compiled allows us to assess the level of financial risk and give timely recommendations on the timing of investment and purchase and sale transactions. In their work, financial analysts use statistical methods for assessing value, search and systematize the necessary information, and resolve operational issues of production activities with third-party institutions and organizations.
What is a financial professional responsible for?
His competence includes performing a qualitative analysis of available information in compliance with current instructions, orders and directives. If, in the process of work, financial analytics assumes its own problems and solutions in the field of administrative, criminal and civil legislation of the Russian Federation, then an appropriate level of responsibility is possible. Causing material damage by a financial analyst is punishable within the limits determined by the labor and civil legislation of the Russian Federation.
Dream profession, or Why working with finance is so attractive
A financial analyst is a professional expert with an economic education and specialization in a specific market sector. As a professional, he must be attentive, responsible, competent in the issue under consideration, have a high reaction speed and analytical thinking. The analyst's responsibilities include researching companies that issue shares and preparing recommendations for all transactions with securities. His work is not endless seminars reading newspapers and writing reports. If you're thinking about becoming a financial analyst, it's best to be up to date on the state of affairs ahead of time. Probably, in the first years you will have to work in a database in Excel, consolidate data and systematize it by different periods. You will have to go on business trips and perform routine tasks. In practice, you can notice that many young specialists cannot stand the monotony and monotony of tasks, so they move to another job.
What is work?
The popularity of this profession is determined by its proximity to the financial sector and the high social status of a financial analyst when working in a reputable company. The ability to work with large amounts of data, scrupulousness and accuracy allow you to work as efficiently as possible and quickly gain respect in the team. With the proper level of knowledge and experience, a financial analyst becomes the most visible figure in the company, as he turns into an oracle, each word of which entails an immediate reaction from others and, with a successful combination of events, implies an increase in the specialist’s rating.
What are the specialist’s job prospects?
A specialist without work experience, but with a prestigious diploma and additional courses in accounting, can qualify for a salary of $800 at the initial stage of his career. If you have up to three years of work experience, the payment increases to $1,000. More serious experience and additional education add another $500 to your salary. Top-class analysts earn about two thousand USD. f. Thus, higher education is not the last step for the growth of a financial analyst. The bonus will be the received specialized education, master's degree and MBA program. The price of a specialist in Russia is significantly increased by education received abroad or an internship completed there. But the experience gained in other countries may not be sufficient if you want to work in Russia. Therefore, before starting your career, it is better to undergo an internship at a company. In addition, for any specialist in this field of activity, eloquence will be an extremely important condition for career growth. For most people, investing money is too serious a step, involving parting with a significant part of their own savings, so not everyone can convince a potential investor to decide on it. And it is the analyst who completely determines the trust rating of the company. A client who is convinced of the capabilities and power of this specialist will definitely return to him again, which is why many enterprises hold seminars and master classes where financial consultants share their knowledge and demonstrate their capabilities in practice.
Financial analyst- the profession is very ambiguous, one might say risky. Although today, in times of economic instability, financial analysts are in great demand. After all, who knows and understands better how cash flows behave, where to invest money, and which investments should be abandoned.
There are no universities in Russia that produce full-fledged professional financial analysts. Most likely, in order to learn the specifics of this profession, you will have to enroll in the CFA Institute in the USA or ACIIA in Germany. An MBA degree will also allow you to engage in financial analysis.
In the latter case, training lasts only a couple of years. Obtaining a CFA certificate will require completing a three-year program. If you are serious about acquiring such a prestigious profession, you will have to pass not only three extremely difficult exams, but also undergo a three-year course in the field of investment decision making. Among other things, training in this organization exceeds 1000 dollars.
The European CIIA can also be obtained in Russian. At the same time, training costs about 2 thousand dollars.
Most often, those who decide to become a financial analyst do not bother with the cost of training. He is tormented by the question of prestige, because American programs have existed since the 60s of the last century, and European ones since 2000. Meanwhile, it is noted that there are no sharp differences in them and they all provide equal advantages when applying for a job. In addition, since 2003, Russians have had the opportunity to study under the “Financial Analyst” program at the Higher School of Financial Management of the Russian Academy of National Economy and Public Administration under the President of the Russian Federation. Therefore, now there are no particular differences between where a financial analyst studied: in Russia or abroad. After all, it is not a fact that a specialist certified abroad will be more successful than his colleague with a Russian diploma and even without special education in the field of investments.
The whole point of being a financial analyst
There are three types of professionals, based on the scope of their companies: sell-side, buy-side and “production workers”.
Sell-side analysts (the selling side) make offers to buy and dispose of shares to investors. This work in investment houses involves the constant collection of information, its analysis and forecasting in order to influence investors, i.e. buyers of certain shares. The career of a sell-side analyst consists of 2-3 steps: from junior to senior analyst, and each step lasts on average from two to ten years. The age of professionals in this field ranges from 27 to 40 years, no more.
It's a very stressful job. To keep track of all the changes in the market, in world politics and public sentiment, you have to come to work at 8 and leave almost midnight. At the same time, there is no time for thought and entertainment; you constantly have to be in a state of search, analysis and reporting.
Still, the hard work regime of a sell-side analyst is paid in full. At large investment houses, junior analysts earn about $2,000. Experience and success increase this figure by five to ten times. Although the main advantage of working as a financial analyst in banks and investment companies is bonuses, which may not be 100 or 200% of earnings, but much more.
Now it’s clear why you don’t see elderly financial analysts...
Buy-side (buying side) is an internal analysis and creation of your own assets. In other words, the buy-side reports to the trader about the activities of its fund.
Financial analysts of manufacturing companies also work within the enterprise, but analyze financial assets directly, and certain company actions regarding product release, merger or reorganization, etc. In general, this is the work of an ordinary economist, only on a larger scale.
A few words about career
A career as a financial analyst cannot be considered in the usual sense of the word. The success of a professional lies in his intuition and ability to defend his point of view. Soothsayers are those analysts who, contrary to general financial and analytical opinion, assert their views on where to invest and when to sell shares.
That’s when such an analyst-“soothsayer” becomes famous and they begin to refer to him, they quote him, they believe him. Although no one is immune from mistakes, and even in his position, a financial analyst is not responsible for his forecasts.
Under the best circumstances, “stars” (as the most successful financial analysts are usually called) do not stay long in the same company, first making money on their name, and then opening their own hedge funds or firms - that is, they get everything they are talking about dreams of a mere mortal - untold riches, travel, real estate and recreation.
This article has a beautiful ending. However, he recommends reading everything from the beginning before deciding thoroughly whether it is worth it and, most importantly, whether you will have the strength to learn and achieve it.
