So you want to be a financial analyst?
Welcome to the sixth installment of College Transitions’ “So you want to be a…” series. Designed to help career-minded high school students think intelligently about their postsecondary journeys, these blogs will look at the financial, academic, and personal factors one should consider when exploring various professions.
What exactly does being a financial analyst entail?
Most analysts work for brokerage houses, banking or credit institutions, or insurance brokerages. In general, the daily work of a financial analyst includes carefully studying global financial trends for the purpose of accurately predicting future value of stocks, bonds, and companies. This is accomplished, in part, through reading voluminous amounts of research and news material as well as through financial modeling and analysis.
Do I need to attend a prestigious undergraduate school?
If you are looking to land a job at a top investment bank or hedge fund, attending an elite undergraduate institution is pretty close to a prerequisite. Ultra-competitive institutions with large alumni bases located in the Northeastern United States provide students with a particular edge.
The ten most represented U.S. schools at high-powered firms like Goldman Sachs, JP Morgan Chase, or Morgan Stanley includes Ivies UPenn, Columbia, Cornell, Harvard and Princeton as well as NYU, Villanova, and Boston College.
Other strong but not hyper-selective schools such as Rutgers University are also well-represented in the industry, in part due to sheer proximity to Wall Street.
Which college major should I choose?
You don’t need to earn a degree in Finance to land a job as a financial analyst. Investment banks and other Wall Street firms are looking for evidence of accomplishment in a difficult course of study, not a credential from one specific major. Much of the knowledge and skills required to succeed as a financial analyst will be acquired through on-the-job training. Therefore, potential employers will be assessing your ability to learn, rather than your ability to memorize Excel functions. Of course, majoring in Finance will not hurt you, but there are a number of other majors that could prove equally appealing. For example, Economics, Math, Engineering and most science-related majors will endow you with the analytic and quantitative skills need to impress any Wall Street firm.
Be prepared for long hours
Seventy to eighty hour weeks are commonplace, especially for those in their first few years in the field. In addition to your work hours, it benefits young analysts to network with potential clients as well as others in the field during their limited free time. Do the math, and it’s easy to see why work/life balance can be a great challenge in this field. Similar to those starting in the legal field, young financial professionals report a higher level of stress and fatigue than peers in less all-consuming lines of work. Symptoms such as depression, anxiety, weight gain, and other health issues are common.
Fortunately your long hours do not go uncompensated. Salary expectations for financial analysts are quite high, especially when considering that base salary doesn’t tell the whole picture. In fact, analysts at many private firms can more than double their base salary through performance bonuses.
The average salary for financial analysts nationwide is $87,000 yet this figure somewhat misleading as it includes relatively “lower” paid workers in the insurance field whose average salary is just under $50,000. Entry level jobs at top Wall Street hedge funds pay an average salary in excess of $300,000.
Financial analysts can also be promoted to portfolio or fund managerial positions where top performers have the opportunity to bring home annual salary figures with six zeroes.
Financial analyst positions are expected to grow at 16%, faster than the average occupation, through 2022. However, competition for these job openings is sure to remain fierce. The industry is so cutthroat that many Wall Street banks and private equity firms begin recruiting top-level prospective candidates 18 months before a position even becomes available.
Unlike many other fields, lucrative entry-level employment is a realistic possibility in the financial industry. Still, nearly half of financial analysts move on to pursue MBAs within their first five years of employment. Others pursue professional certifications and licenses through less formal educational means.
Many entry-level financial analysts spend their evenings and weekends studying to become Chartered Financial Analyst (CFA) a designation awarded to qualified individuals by non-profit organization called the CFA Institute. To earn the charter, you must have four years of work experience in the financial industry, hold a bachelor’s degree, and pass a level one, two, and three exam. Each exam takes an estimated 250 hours to prepare for and pass rates are low with only 30% of those sitting for the level one exam continuing on to pass all three. Those who preserve emerge with an impressive credential that can lead to promotions, raises, and increased desirability for job-seekers on the open market.
Analysts interested in entering certain specialty fields will first have to earn licensure in those areas. For example, anyone wishing to buy or sell securities must first demonstrate proficiency on the Series 7 exam administered by the Financial Industry Regulatory Authority. The vast majority of states will also require would-be securities agents to also pass the Series 63, which covers state laws and regulations.
CT’s bottom line
Entering this field at the top level is greatly aided by attending a highly-selective undergraduate school and pursuing a rigorous major. Your work as a financial analyst will entail long hours in a highly competitive environment. Those with the right personality and work-ethic may end up “occupying” Wall Street for many years as part of this fast-paced, high-stakes, and lucrative profession.
To read previous installments of the “So you want to be a…” series, click the links below:
So you want to be a lawyer…
So you want to be a doctor…
So you want to be a teacher…
So you want to be an engineer…
So you want to be a software developer/engineer/programmer?
Dave has over a decade of professional experience that includes work as a teacher, high school administrator, college professor, and independent educational consultant. He is a co-author of the books The Enlightened College Applicant (Rowman & Littlefield, 2016) and Colleges Worth Your Money (Rowman & Littlefield, 2020).