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Gauri Chhabra

With the economic crests and troughs becoming more and more prominent and the shifts in the economic cycles becoming more frequent, the world economy has changed. As volatility and uncertainty become persistent features of the economic landscape, the ability to sense and respond swiftly to change will be a key competitive differentiator. Greater agility in responding to business threats and opportunities has become a larger source of competitive advantage over the past five years. The coupling effect of one economic condition over the other necessitates the need for careers and roles that study the economic swirls and are able to guide both the consumers and the producers as to how and when to take the investment decisions. One such coveted role of a Financial Analyst. Though seemingly a niche career option, it often serves as a catalyst to other career opportunities. 

Here is a snapshot of what the profile of a financial analyst involves.

Who is a Financial Analyst?

A financial analyst, securities analyst, research analyst, equity analyst, investment analyst, or rating analyst is a person who performs financial analysis for external or internal clients as a core part of the job. Besides, he also researches macroeconomic and microeconomic conditions along with company fundamentals to make business, sector and industry recommendations. After analysing the market trends, he often recommends a course of action, such as to buy or sell a company's stock based upon its overall current and predicted strength.

The Financial Analyst or Researcher also writes reports that help take decisions. The reports give a micro level picture of the analysis of the market conditions. Thus, a financial analyst is a storehouse of knowledge who shares his expertise with colleagues who aren't financial experts and sometimes communicates his perspectives to the public and financial media. 

Getting in

In order to become a financial analyst, you need to be a graduate, with mathematics as one of the subjects. Additionally, a degree in business administration, accounting, finance or statistics benefits a lot in getting a job in finance organisations. A strong hand in statistics, business, economics, administration and accounting enhances the growth potential within an organisation. There are various other routes for becoming a financial analyst e.g. doing BCom and MCom, Chartered Accountantcy, Company Secretaryship, etc.

Skills that would help

In addition to your financial and research skills, technology also plays a vital role in your job. You'll be required to be adept in Microsoft Office to create spreadsheets, as well as other statistical software to analyse financial data, spot trends, and develop forecasts. Some of the soft skills required to beef up your job profile would be analytical and decision-making skills, teamwork and collaboration, communication, influence, flexibility and problem solving skills. Besides, vigilance about gathering information on the macro economy as well as information about specific companies and the fundamental microeconomics of their balance sheets would also help. You can do that by staying on top of financial news, and reading extensively.

Career Pathways

Financial analysts tend to specialise based on the type of institution they work for. As an analyst, you would be hired by banks, buy- and sell-side investment firms and insurance companies. Of these specialties, three major categories of analysts are those who work for 'sell-side' investment firms, those that work for 'buy-side' investment firms and those that work for investment banks.

Within the investment industry, most analysts tend to work either for buy-side investment firms, where they research stocks for an in-house fund, or sell-side firms that write research reports for buy-side firms. Buy-side firms are investment houses that manage their own funds. In these companies, analysts research companies as they look for stocks to add to an investment fund. They also track the stocks that are in a fund's portfolio in order to determine when or if the fund's position in that stock should be sold.

At a sell-side firm, you would need to both evaluate and compare the quality of securities in a given sector or industry. Based on this analysis, you would then generate reports with certain recommendations such as: buy, sell, strong buy, strong sell or hold. These recommendations carry a great deal of weight in the investment industry including analysts working within buy-side firms. Furthermore, you may also go in for niche areas and might specialise in equities or in analysing fixed-income instruments. You may also specialise within a specific sector or industry like energy, or technology.

Analysts in investment banking firms, however, differ from analysts in buy- and sell-side firms as they often play a role in determining whether or not certain deals are feasible based on the fundamentals of the companies involved in a deal for example IPOs, mergers and acquisitions. Analysts assess current financial conditions as well as rely heavily on modeling and forecasting to make recommendations to senior partners as to whether or not a certain merger is appropriate for that investment bank's client or whether another client of the investment bank should invest venture capital in a particular company.

The road ahead

According to the World Economic Forum, Innovative technology is reshaping financial services and this would cause changes to the structure of the banking, insurance and asset management industries. Disruption in the sector will not be a "one-time event", but more a "continuous pressure to innovate" that will change the long-term structure of the finance industry which becomes global with Financial giants like CitiMartgage.Inc, Bank of America, Wells Fargo, National City Bank, PNC Bank, National Association, Technology Credit Union. So, the scope in this field is going to increase multifold.

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Certifications

The CFA Institute offers a Chartered Financial Analyst (CFA) designation to qualified professionals. To enroll in the certification programme, applicants must be CFA Institute members and have completed or be in the final year of a bachelor's degree programme. They then must pass three examinations, a process that can take 2-5 years to complete. Before being granted the CFA designation, as a financial analyst, you must have earned at least four years of professional investment experience. The CFA Institutes in India are in Ahmedabad, Bangalore, Chandigarh, Chennai, Hyderabad, Jaipur, Kolkata, Mumbai and Pune.

Institute watch

Some of the institutes offering courses in financial analysis are:

• Narsee Monjee Institute of Management, Mumbai offering BSc Finance
• SP Jain Institute of Management and Research, Mumbai
• Xavier Institute of Management, Bhubaneshwar, offering MBA.
• International College of Financial Planning, New Delhi offering MBA in Financial Analysis.
• University of Delhi, DU offering Master of Finance and Control.
• ICFAI Business School, Kolkata offering MBA in Finance Management.
• Indian Institute of Education Society Bangalore, Master of Investment and Financial Analysis (Distance Education)