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Financial Analysts and Personal Financial Advisors
Nature of the Work | Working Conditions | Employment | Training,
Other Qualifications, and Advancement | Job Outlook | Earnings
| Related Occupations | Sources of Additional Information
Significant Points
A college degree and good interpersonal skills are among the most
important qualifications for these workers.
Although both occupations will benefit from an increase in investing
by individuals, personal financial advisors will benefit more.
Financial analysts may face keen competition for jobs, especially
at top securities firms, where pay can be lucrative.
Nature of the Work [About this section] Back to Top
Financial analysts and personal financial advisors provide investment
analysis and guidance to businesses and individuals to help them
with their investment decisions. They gather financial information,
analyze it, and make recommendations. However, their job duties
differ because of the type of investment information they provide
and the clients they work for. Financial analysts assess the economic
performance of companies and industries for firms and institutions
with money to invest. Personal financial advisors generally assess
the financial needs of individuals, providing them a wide range
of options.
Financial analysts, also called security analysts and investment
analysts, work for banks, insurance companies, mutual and pension
funds, securities firms, and other businesses helping the company
or their clients make investment decisions. They read company
financial statements and analyze commodity prices, sales, costs,
expenses, and tax rates in order to determine a company's value
and project future earnings. They often meet with company officials
to get better insight into a company and determine managerial
effectiveness. Usually financial analysts study an entire industry,
assessing current trends in business practices, products, and
industry competition. They must keep abreast of new regulations
or policies that may affect the industry, as well as monitor the
economy to determine its effect on earnings.
Financial analysts use spreadsheet and statistical software packages
to analyze financial data, spot trends, and develop forecasts.
Based on their results, they write reports and make presentations,
usually making recommendations to buy or sell a particular investment
or security. Senior analysts may actually make the decision to
buy or sell for the company or client if they are the ones responsible
for managing the assets. Other analysts use the data to measure
the financial risks associated with making a particular investment
decision.
Financial analysts in investment banking departments of securities
or banking firms often work in teams analyzing the future prospects
of companies that want to sell shares to the public for the first
time. They also ensure that the forms and written materials necessary
for compliance with Securities and Exchange Commission regulations
are accurate and complete. They may make presentations to prospective
investors about the merits of investing in the new company. Financial
analysts also work in mergers and acquisitions departments, preparing
analyses on the costs and benefits of a proposed merger or takeover.
Some financial analysts, called ratings analysts, evaluate the
ability of companies or governments issuing bonds to repay their
debt. Based on their evaluation, a management team assigns a rating
to a company's or government's bonds. Other financial analysts
perform budget, cost, and credit analysis as part of their responsibilities.
Personal financial advisors, also called financial planners or
financial consultants, use their knowledge of investments, tax
laws, insurance, and real estate to recommend financial options
to individuals based on their short-term and long-term goals.
Some of the issues they address are retirement planning, estate
planning, tax issues, funding for college, and general investment
options. While most planners offer advice on a wide range of topics,
some specialize in areas such as estate planning or risk management.
An advisor's work begins with a consultation with the client,
where the advisor obtains information on the client's finances
and financial goals. The advisor then develops a comprehensive
financial plan that identifies problem areas, makes recommendations
for improvement, and selects appropriate investments based on
their goals, attitude toward risk, and expectations or needs for
a return on the investment. Often, this plan is written, but it
can be in the form of verbal advice. Financial advisors usually
meet with established clients at least once a year to update them
on potential investments and determine if there have been any
life changes—such as marriage, disability, or retirement—that
might affect the clients' financial goals. Financial advisors
also answer questions from clients regarding changes in benefit
plans or consequences of a job change. Some advisors buy and sell
financial products, such as mutual funds or insurance, or refer
clients to other companies for products and services such as preparation
of taxes or wills. A number of advisors take on the responsibility
of managing the client's investments for them.
Finding clients and building a customer base is one of the most
important parts of a financial advisor's job. Many advisors contact
potential clients by giving seminars or lectures or meeting clients
through business and social contacts.
Working Conditions [About this section] Back to Top
Financial analysts and personal financial advisors usually work
indoors in safe, comfortable offices or their own homes. Many
of these workers enjoy the challenge of helping firms or people
make financial decisions. However, financial analysts may face
long hours, frequent travel to visit companies and talk to potential
investors, and deadline pressure. Much of their research must
be done after office hours, because their day is filled with phone
calls and meetings. Personal financial advisors usually work standard
business hours, but they also schedule meetings with clients in
the evenings or on weekends. Many teach evening classes or put
on seminars in order to bring in more clients.
Employment [About this section] Back to Top
Financial analysts and personal financial advisors held 239,000
jobs in 2000; financial analysts accounted for about 6 in 10 of
the total. Many financial analysts work at the headquarters of
large financial companies, several of which are based in New York.
One-fourth of financial analysts work for security and commodity
brokers, exchanges, and investment services firms; and one-fifth
work for depository and nondepository institutions, including
banks, credit institutions, and mortgage bankers and brokers.
The remainder primarily work for insurance carriers, computer
and data processing services, and management and public relations
firms.
Approximately one fourth of personal financial advisors are self-employed,
operating small investment advisory firms, usually located in
urban areas. The majority of salaried advisors—nearly 6 in 10—work
for security and commodity brokers, exchanges, and investment
services firms. About 1 in 7 personal financial advisors work
for commercial banks, saving institutions, and credit unions.
A small number work for insurance carriers and insurance agents,
brokers, and services.
Training, Other Qualifications, and Advancement [About this section]
Back to Top
A college education is required for financial analysts and strongly
preferred for personal financial advisors. Most companies require
financial analysts to have at least a bachelor's degree in business
administration, accounting, statistics, or finance. Coursework
in statistics, economics, and business is required, and knowledge
of accounting policies and procedures, corporate budgeting, and
financial analysis methods is recommended. A master of business
administration is desirable. Advanced courses in options pricing
or bond valuation and knowledge of risk management are also suggested.
Employers usually do not require a specific field of study for
personal financial advisors, but a bachelor's degree in accounting,
finance, economics, business, mathematics, or law provides good
preparation for the occupation. Courses in investments, taxes,
estate planning, and risk management also are helpful. Programs
in financial planning are becoming more widely available in colleges
and universities. However, many financial planners enter the field
after working in a related occupation, such as securities and
financial services sales representative, insurance agent, accountant,
or lawyer.
Mathematical, computer, analytical, and problem-solving skills
are all essential qualifications for financial analysts and personal
financial advisors. Good communication skills also are necessary
because these workers must present complex financial concepts
and strategies in easy-to-understand language to clients and other
professionals. Self-confidence, maturity, and the ability to work
independently are important as well.
Financial analysts must be detail-oriented, motivated to seek
out obscure information, and familiar with the workings of the
economy, tax laws, and money markets. For financial advisors,
strong interpersonal skills and sales ability are crucial to success.
Certification, although not required for financial analysts or
personal financial advisors to practice, can enhance professional
standing and is strongly recommended by many financial companies.
Financial analysts may receive the title Chartered Financial Analyst
(CFA), sponsored by the Association of Investment Management and
Research. To qualify for CFA designation, applicants must have
a bachelor's degree, 3 years of work experience in a related field,
and pass a series of three examinations. The essay exams, administered
once a year for 3 years, cover subjects such as accounting, economics,
securities analysis, asset valuation, and portfolio management.
Personal financial advisors may obtain a Certified Financial
Planner (CFP) or Chartered Financial Consultant (ChFC) designation.
Both designations demonstrate to potential customers that a planner
has extensive training and competency in the area of financial
planning. The CFP designation, issued by the CFP Board of Standards,
requires relevant experience, completion of education requirements,
passage of a comprehensive examination, and adherence to an enforceable
code of ethics. The ChFC designation, issued by the American College
in Bryn Mawr, Pennsylvania, requires experience and completion
of an eight-course study program. Both programs have a continuing
education requirement.
A license is not required to work as a personal financial advisor,
but advisors who sell stocks, bonds, mutual funds, insurance,
or real estate, may need licenses to perform these additional
services. Also, if legal advice is provided, a license to practice
law may be required. Financial advisors that do not provide these
additional services often refer clients to those qualified to
provide them.
Financial analysts may advance by becoming portfolio managers
or financial managers, directing the investment policies of their
companies or those of clients. Personal financial advisors who
work in firms also may move into managerial positions, but most
advisors advance by accumulating clients and managing more assets.
Job Outlook [About this section] Back to Top
Increased investment by businesses and individuals is expected
to result in faster-than-average employment growth of financial
analysts and personal financial advisors through 2010. Both occupations
will benefit as baby boomers save for retirement and a generally
better educated and wealthier population requires investment advice.
In addition, people are living longer and must plan to finance
more years of retirement. The rapid expansion of self-directed
retirement plans, such as the 401(k) plans, is expected to continue.
Most of the money in these plans is invested in mutual funds.
As the number of mutual funds and the amount of assets invested
in the funds increases, mutual fund companies will need increased
numbers of financial analysts to recommend which financial products
the funds should buy or sell. Growth in retirement plans will
also increase demand for personal financial advisors to provide
advice on how to invest this money.
Deregulation of the financial services industry is also expected
to spur demand for financial analysts and personal financial advisors.
Since 1999, banks, insurance companies, and brokerage firms have
been allowed to broaden their financial services. Many firms are
adding investment advice to their list of services and are expected
to increase their hiring of personal financial advisors. Many
banks are now entering the securities brokerage and investment
banking fields and will increasingly need the skills of financial
analysts in these areas.
The globalization of the securities markets as well as the increased
complexity of many financial products also will increase the need
for analysts and advisors to help investors make financial choices.
In addition, business mergers and acquisitions seem likely to
continue, requiring the services of financial analysts. However,
in the field of investment banking, the demand for financial analysts
may fluctuate because investment banking is sensitive to changes
in the stock market. And further consolidation in the financial
services industry may eliminate some financial analyst positions,
somewhat dampening overall employment growth. Competition is expected
to be keen for these highly lucrative positions, with many more
applicants than jobs.
Earnings [About this section] Back to Top
Median annual earnings of financial analysts were $52,420 in 2000.
The middle half earned between $40,210 and $70,840. The lowest
10 percent earned less than $31,880, and the top 10 percent earned
more than $101,760.
Median annual earnings in the industries employing the largest
numbers of financial analysts in 2000 were:
Security and commodity services $65,920
Security brokers and dealers 54,650
Management and public relations 52,690
Computer and data processing services 51,680
Commercial banks 46,910
Median annual earnings of personal financial advisors were $55,320
in 2000. The middle half earned between $34,420 and $96,360. The
lowest 10 percent earned less than $25,110, and the top 10 percent
earned more than $145,600.
Median annual earnings in the industries employing the largest
number of personal financial advisors in 2000 were:
Security brokers and dealers $66,150
Security and commodity services 61,430
Commercial banks 49,880
Many financial analysts receive a bonus in addition to their
salary, which can add substantially to their earnings. The bonus
is usually based on how well their predictions compare to the
actual performance of a benchmark investment. Personal financial
advisors who work for financial services firms are generally paid
a salary plus bonus. Advisors who work for financial planning
firms or who are self-employed either charge hourly fees for their
services or charge one set fee for a comprehensive plan based
on its complexity. Advisors who manage a client's assets usually
charge a percentage of the assets under management. A majority
of advisors receive commissions for financial products they sell
in addition to a fee.
Related Occupations [About this section] Back to Top
Other jobs requiring expertise in finance and investments or
sales of financial products include accountants and auditors,
financial managers, insurance sales agents, real estate agents,
and securities, commodities and financial services sales representatives.
Sources of Additional Information [About this section] Back to
Top
Disclaimer:Links to non-BLS Internet sites are provided for your
convenience and do not constitute an endorsement.
For information on a career in financial planning, contact:
The Financial Planning Association, 3801 E. Florida Ave., Suite
708, Denver, CO 80210. Internet: http://www.fpanet.org
For information about the Certified Financial Planner certification,
contact:
The Certified Financial Planner Board of Standards, 1700 Broadway,
Suite 2100, Denver, CO 80290-2101. Internet: http://www.cfp-board.org
For information about the Chartered Financial Consultant designation,
contact:
The American College, 270 South Bryn Mawr Ave., Bryn Mawr, PA
19010. Internet: http://www.amercoll.edu
For information on about the Chartered Financial Analyst designation,
contact:
Association of Investment Management and Research, P.O. Box 3668,
560 Ray C. Hunt Drive, Charlottesville, VA 22903. Internet: http://www.aimr.org
Selected industries employing financial analysts and personal
financial advisors that appear in the 2002-03 Career Guide to
Industries:
Banking
Computer and data processing services
Insurance
Securities and commodities
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AAFM Licensed Financial Planner ™
AAFM Financial Analyst AFA Designation
RBA Registered Business Analyst
Certified in Corporate Finance CCF
Global & Registered Financial Analyst GFA/RFA
Chartered Company Analyst CCA AAFM Certified Analyst ACA
Master Financial Manager MFM
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CRA Certified Risk Analyst TM
RFS Registered Financial Specialist ™
AFS Accredited Financial Specialist ™
RFA Registered Financial Analyst ™
AFA Accredited Financial Analyst ™
AFM Accredited Financial Manager ™
RFM Registered Financial Manager ™
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CFD Certified and Licensed Financial Director ™
GFP Global Financial Planner ™
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Financial Planner Training Financial Analyst Books Finance Books
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Chartered Investment Banker Board Certification
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Certified in Investment Management
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Certified Legal Analyst CLA All Rights Reserved 1996
Certified or Chartered Coverage Consultant CCC
Certified or Chartered Hazard Analyst CHA
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