Committing to becoming a chartered financial analyst is a serious professional decision that requires dedicating substantial time into your education before realizing success. Completing the process of becoming a CFA, however, can yield high compensation, professional respect, and secure employment. To learn whether becoming a CFA is the right strategy for taking your career to the next level, you should start by researching the best path forward.
Financial Analyst Job Description
Individuals who become financial analysts enjoy unlimited career options, but most CFAs choose to work in the corporate environment. Banks and financial institutions are the most common employers for CFAs. In general, financial analysts help to guide investment decisions for both corporations and individuals. The trading of public securities is usually the focus of a CFA’s job function. An advanced aptitude for mathematical calculations is the cornerstone of a financial analyst’s effectiveness, and skills in rapid data analytics enable practitioners to execute profitable trades in the real trading environment.
Although large financial institutions are the primary employers of CFAs, you are not limited to work in the corporate environment when you become a financial analyst. Individuals who work for private practices in related fields, such as attorneys or accountants, often become CFAs so that they can add more value for their clients. Becoming a CFA is a requirement in any field if you want to buy or sell securities on behalf of another party. An attorney who works as an estate planner, for example, would be able to manage an investment portfolio throughout the succession process by becoming a CFA.
Many CFAs also use their skills to become self-employed professionals once they get their careers established. CFAs tend to make an above-average salary, so they are able to save for financial independence. Once you have accumulated sufficient capital, you can work on your own as a day trader to profit from your expertise. You can open a small office to practice as an independent CFA in your community, or you can find employers online to maximize your freedom. Successful CFAs can even become partners in their firm, and they can found their own financial institution.
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Job Titles for Financial Analysts
Financial analysts are not limited to specific roles, but there are job positions that require practitioners to become CFAs. In the corporate environment, common job titles for financial analysts include:
Corporate financial analyst
According to a report published in 2016 by the CFA Institute, $278,937 was the median salary for a financial analyst with at least 20 years of experience. Additionally, 3.5 percent of CFAs are chief financial officers. You can, therefore, expect to earn high compensation in the long run if you dedicate the time and effort necessary for mastering financial analysis after graduation.
What Does A Financial Analyst Do
Professional roles that require CFAs involve the buying and selling of securities. In practice, however, most CFAs focus on duties where trading is of secondary importance. Large financial institutions often have dedicated traders who manage the actual execution of trades using strategic information provided by CFAs. In former times, CFAs would compile trade data in spreadsheets for traders and decision makers. Modern software, however, has automated the organization and transfer of data so that CFAs can focus on more advanced roles.
It is important to recognize that the emergence of advanced software tools is only increasing the value of CFAs in the workforce. Although the roles of CFAs are evolving, human input is still necessary for making trading decisions at the strategic level. Competitive firms task CFAs with using modern software to apply subjective factors to data-driven decisions. The actual execution of trades is done by a computer in most cases due to limitations in human reaction time.
CFAs also fill a wide range of roles that do not directly involve the trading of securities. Financial institutions, for example, often assign experienced CFAs to roles where they interact with internal or external stakeholders. Finance is a complex field, so experienced individuals are needed to explain the specifics of an investment strategy to clients or even account managers. Since CFAs work at a high level, they are usually the first candidates for promotion to managerial roles within the hierarchy of a financial institution.
Day in the Life of a Financial Analyst
If you decide to get a job in the corporate environment after becoming a CFA, you can expect to be immersed in a fast and competitive workplace. CFAs can earn sizable bonuses for high performance, so the most successful practitioners are usually driven individuals who are looking for rapid advancement. Networking is a key driver of career success for CFAs since connections can yield specialized knowledge about the latest trading strategies or upcoming market trends.
Financial analysts spend most of their day working with advanced financial software to make trading decisions. Profitable trades have to be executed in a fraction of a second in the modern world, so most of a CFA’s work involves preparing automated trading software for future contingencies. Computers tend to do most of the complex calculations, but an understanding of the algorithms that are applied is still necessary for effective performance. Financial analysts also spend a substantial portion of their day meeting with account managers, traders, and other stakeholders who depend on their work.
Education Requirements for Financial Analysts
The financial services industry is heavily regulated, so you should expect to complete extensive education requirements before getting your first job. As a prerequisite for initiating the licensing process, you will first need to obtain an undergraduate degree. You can legally obtain a license with a degree in any field, but you should strive to complete your formal studies in a field related to business or finance so that you can add maximum value in future roles. Many people who aim to become financial analysts major in a field related to finance, such as statistics, math, or economics.
Earning a degree in a field related to finance gives you better chances of finding a high-paying job as a financial analyst after graduation. Leading firms look for candidates who possess knowledge that will compound their ability to add value in the practical work environment. Mathematical computations are a major part of a financial analyst's work, so training that demonstrates exceptional abilities in mathematics is a strong differentiator when you first enter the workforce.
You should keep in mind that financial analysts often obtain multiple licenses to show additional value to potential employers. Accounting is closely related to finance, so many CFAs also become certified public accountants or certified management accountants. If you are highly ambitious, you may even want to consider the possibility of earning your law degree or MBA after graduation. Financial analysts who are licensed to practice law can do many of the high-level tasks that banks and other financial institutions need to complete on behalf of their clients, and an MBA positions a CFA for rapid advancement into managerial roles.
The key to realizing maximum return on investment from your education is to conduct sufficient research before you begin. You should develop a clear career path so that you will be able to recognize relevant opportunities that will boost your credentials before graduation. For example, reputable business schools work closely with financial institutions to offer mentorships and internships, and these extracurricular pursuits can simplify the process of finding a good job when they match your career goals.
Degree Options for Becoming a Financial Analyst
When you start your journey to becoming a financial analyst, you can meet the legal requirement of earning an undergraduate degree through a broad range of conventional and unconventional channels. Most students choose the customary approach of taking courses in a classroom setting. If you live in a major U.S. city, there are likely dozens of schools that you can choose from for earning a business degree without relocating. You also have the option of applying to leading universities throughout the country to earn your degree from a revered institution but doing so can be expensive if you do not qualify for scholarships or financial aid.
The digital revolution has transformed the process of earning a degree for students who are willing to study in an unconventional way. A majority of reputable universities now offer classes online that you can take from anywhere in the world. Students can take classes at the university of their choice without being physically tied down to their school's campus. You can, therefore, work in a city where you can find a job while earning a degree at your ideal university.
Online classes can be less expensive that studying in a classroom setting since many of the overhead costs associated with classrooms are eliminated when studying online. Employers are also willing to pay for online classes in many cases when your studies are related to your current work. Schools that offer online classes recognize the importance of maximizing flexibility for students who study in different time zones or on a part-time basis. You can, therefore, expect online universities to give you the option of watching lectures at your own convenience or extending deadlines when you can document a busy schedule.
The flexibility associated with the modern education system makes it practical to pursue graduate-level studies after completing your bachelor's degree. Financial analysts can earn a master's degree in finance, accounting, statistics, or other related fields to maximize their income potential. Leading employers are usually happy to pay for a master's degree as long as you agree to continue working for your employer after graduation. Some employers will even pay for you to study on a full-time basis when you can demonstrate an exceptional aptitude for financial analysis.
Earning Your Certification and Getting a License
Upon completing your undergraduate degree, your next step before starting your career is to get certified. The CFA Institute is an international organization that administers the certification exam for financial analysts around the world. You will not, therefore, need to obtain multiple certifications to practice across state lines or in foreign countries.
The CFA Exam
The CFA exam is broken into three levels, and you will have to pass every level to practice as a financial analyst. You can take the CFA exam in a single day by visiting a testing center authorized by the CFA Institute. Degree programs ordinarily organize curricula around preparing students for passing the CFA exam immediately after graduation, but the reality is that most students will need to spend at least a month preparing for the exam. Employers often ask for your test scores before agreeing to hire you, so it is important to earn the highest score possible.
Once you pass the CFA exam, you can go through the final step of obtaining your license, which is officially referred to as a charter. You will need to gather together a substantial amount of paperwork to prove your eligibility, such as proof of graduation and certified test scores. Candidates for the CFA exam must be members of their local chapter of the CFA Institute. You will also need at least 48 months of professional work experience, but this experience can be earned in any field. Many students succeed at meeting the work experience requirement by getting a job in the finance department of a business while in college. You do not have to work in the capacity of a financial analyst to meet the work requirement, but employers give new financial analysts more consideration when they have experience in a relevant field.
Planning Your Path Forward
Becoming a chartered CFA will give your career a significant boost since you can, then, put the CFA designation next to your name on resumes and business cards. Professionals in the financial services industry know the difficulties associated with passing the CFA exam, so you can expect leaders in your organization to look up to you for your new credentials. The journey toward becoming a CFA requires substantial personal investment, so it is critical to plan your path forward in advance to ensure that you get optimal results. The key to starting your career from an optimal position as a CFA is to conduct sufficient research from the beginning. Aspiring financial analysts who know exactly what they need for success are able to make effective decisions that will yield high compensation and rapid advancement.
Financial Analyst Salary by States and Major Cities