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Working as a financial analyst could be one of the first steps you take toward a long and lucrative career in the world of finance. It’s an entry-level job that will expose you to the benefits and challenges of working in the industry. As you gain more experience and a higher education, your career can progress until you’re eligible for prestigious titles like Chief Financial Officer (CFO).
What does a financial analyst do?
The role of a financial analyst, which is also referred to as a securities analyst or investment analyst, requires a lot of research, studying data, and writing reports. You’ll work for businesses and organizations like hedge funds, pension funds, insurance companies, and banks.
The primary goal of your job will be to understand and communicate how stocks, bonds, and other forms of investments perform in the market. Your evaluations will help the firm’s senior management make wise financial decisions for their clients. In other words, you’ll assist with determining how smart or risky certain investments can be, given trends in the market and historical financial data. To be successful at this, you’ll also need to keep yourself updated with political developments and changes to government regulations.
The requirements of an entry-level financial analyst
Regardless of which side of the business you’re on or the kind of firm you work for, there are certain duties and responsibilities that every entry-level financial analyst will need to develop and own. To be considered for the job, you’ll need at least a bachelor’s degree, preferably with a major in finance, business, statistics, or economics.
In the first couple of years, you’ll prepare financial reports, advise businesses about their budgets, conduct studies, review financial performances, and create forecast models, which means predicting a company’s future financial health by analyzing their current statements. You’ll also need to be proficient with computers and mathematics.
How much money will you make as a financial analyst?
Most financial analysts earn an annual base salary plus benefits. There will also be potential to earn bonuses, commissions, and profit shares. Your salary will depend on a variety of factors, including how much experience you have, your level of education, your firm, and the specific area of finance you focus on. According to PayScale, entry-level financial analysts earn $54,000-$60,000 annually. Like most industries, you’ll get raises and promotions as you work your way up the corporate ladder.
The U.S. Bureau of Labor Statistics (BLS) reports a median annual salary for financial analysts of $85,660 in 2018. The bottom 10% of those in this role earns roughly $52,000 a year, while the top 10% make over $167,000.
While these numbers display the earning potential of this career path, they also show that not all financial analysts are well compensated. If your primary goal is to make a lot of money, you’ll need to be careful about which section of the finance industry you go into. You’ll also want to keep in mind that there may be certain certifications and additional education and experience required for higher-paying positions.
The BLS study also explored average wages for financial analysts in specific sub-industries. According to their findings, those who work with securities, commodity contracts, and financial investments earn the highest annual salaries, with a national average of $101,410. This is much higher than other areas like insurance, where the average salary for a financial analyst is $78,870 a year.
The path to becoming a chief financial officer
Many CFOs started their careers as financial analysts and gradually worked their way to the top. As a CFO, you’ll be among the highest paid in the industry, likely making at least six figures a year. Keep in mind, many firms require employees to have a master’s degree and many years of experience before they can be considered for C-level status.
So what does the typical career path from financial analyst to CFO look like? While it’ll depend on a variety of factors, such as the firm you work for, here is a common career trajectory that many working CFOs today can relate to:
Let’s say you’re an experienced financial analyst with a master’s degree. The next step in your career could be getting promoted to a senior financial analyst position. In this role, you’ll direct a team of financial analysts, review their reports, and make recommendations to your managers. PayScale says the average annual salary for a senior financial analyst is $80,062.
After a handful of years as an analyst, the next step could be working as a finance manager. This position is part of the executive team, so you’ll be making decisions for the firm’s clients, rather than simply studying trends and making recommendations. The job involves reviewing reports by analysts to identify areas where costs can be reduced and profits increased. According to PayScale, the median salary for a finance manager is $90,773 per year.
Once you’ve shown success in both analysis and management, you’ll be qualified for the role of director/VP of finance. This position oversees the firm’s daily operations, coordinating with all departments and establishing budgets for projects. You may also be in charge of hiring new team members, outlining strategies for the firm’s future, then ensuring that those strategies are implemented properly. PayScale reports that Director/VPs of finance earn an average annual salary of $112,511.
The next (and typically last) step is becoming a CFO. As a top executive, you’ll oversee all aspects of the firm’s financial activity. You’ll use your many years of studying markets and engaging with investments to create and improve upon your firm’s financial strategies. The average CFO earns $132,467 per year, according to PayScale.
Northeastern University’s Online Master of Science in Finance program
Have you decided to pursue a career in finance? Are you already in the industry but want to take your career to the next level? If so, consider enrolling in Northeastern University’s Online Master of Science in Finance (MSF) program. Earning your MSF will give you the skills and experience necessary to excel in the field. You’ll also be connected to a global network of other finance professionals, which can lead to new opportunities.
Completing this program can make you a competitive candidate for all kinds of jobs in finance, including financial analyst. Your courses will be taught by award-winning industry experts who understand what it takes to go from working entry-level jobs to becoming a CFO.
You can learn more about Northeastern University’s Online MSF program by speaking with an enrollment advisor.