RoleFinancial analysts are employed by mutual fund, mutual- and pension funds, hedge funds, securities firms, banks, investment banks, insurance companies, and other businesses, helping these companies or their clients make investment decisions. In corporate roles, financial analysts perform budget, revenue and cost modelling and analytics as part of their responsibilities; Credit analyst, credit analysis is likewise a distinct area. Credit Analysts
Securities firmsIn a stock brokerage house or investment bank (discussed below), the analyst will read company financial statements and analyze commodity prices, sales, costs, expenses, and tax rates in order to business valuation, determine a company's value and financial forecast, project future earnings. On the basis of their results, they research report, write reports and make presentations, usually making recommendations to buy or sell a particular investment or security. Typically, at the end of the assessment, an analyst would provide a rating recommending or investment action: to buy, sell, or hold the 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, "junior" analysts use the data to model and measure the financial risks associated with making a particular investment decision. See . Usually, financial analysts study a specific industry (Securities research#Analyst specialization, "sector specialist"), assessing current trends in business practices, products, and industry competition. Among the industries with the most analyst coverage are biotechnology, financial services, Energy industry, energy, mining / resources, and computer hardware, software and services. Analysts 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. A 1999 paper by Ezra Zuckerman found that, as equity analysts divide securities by discrete sectors, companies which fall outside or across multiple sectors are punished in the ratings of analysts Analysts may also specialize in fixed Income. Similar to Equity Analysts, ''Fixed Income Analysts'' bond valuation, assess the value and Corporate bond#Risk analysis, analyze the risks of various securities, here focusing on Interest rate derivative, interest rate- and fixed income security, fixed income securities, particularly bond (finance), bonds. They may further specialize, but here by issuer-type, i.e. municipal bonds, government bonds, and corporate bonds; the latter specialization is often decomposed into convertible bonds, high-yield debt, high yield bonds, and distressed securities, distressed bonds; some cover Syndicated_loan, syndicated bank loans. The reporting focuses on the ability of the issuer to make payments - similar to the credit analysis #Corporate_and_other, described below - but also on the Bond valuation#Relative price approach, relative value of the security in question, and in context of the overall market and yield curve. See Fixed income analysis. Analysts are generally divided into Sell-side analyst, 'sell-side' and Buy-side analyst, 'buy-side'. The buy-side is sometimes considered more prestigious, professional, and scholarly, while the sell-side may be higher-paid and more like a sales and marketing role. It is common to begin careers on the sell-side at large banks then move to the buy-side at a fund. *A sell-side analyst's work is not used by its employer to invest directly, rather it is sold either for money or for other benefits by the employer to buy-side organisations. Sell-side research is often used as 'soft money' rather than sold directly, for example provided to preferred clients in return for business. research report, Writing reports or notes expressing opinions is always a part of "sell-side" (brokerage) analyst job and is often not required for "buy-side" (investment firms) analysts. It is sometimes used to promote the companies being researched when the sell-side has some other interest in them, as a form of marketing, which can lead to conflicts of interest. *A buy-side analyst, such as a fund manager, works for a company which buys and holds stocks itself, on the analyst's recommendation. As they gain experience, analysts often move from buy-side research, concerning individual securities and sectors, into portfolio manager, portfolio management itself, selecting the asset allocation, mix of investments for a Investor#Institutional investor, company's portfolio. They may also become fund managers and manage large investment portfolios for Investor#Retail investor, individual investors. Typically, analysts use fundamental analysis principles, but technical analysis and tactical evaluation of the market environment are also routine. Analysts obtain information by studying public records and SEC filing, filings by the company, as well as by participating in public earnings calls where they can ask direct questions to the management. Additional information can be also received in small group or one-on-one meetings with senior members of management teams. However, in many markets such information gathering became difficult and potentially illegal due to legislative changes brought upon by corporate scandals in the early 2000s. One example is Regulation FD (Fair Disclosure) in the United States. Many other developed countries also adopted similar rules. Analyst performance is ranked by a range of services such as StarMine owned by Thomson Reuters or Institutional Investor magazine. Research by Numis found that small companies with the most analyst coverage outperformed peers by 2.5 per cent — while those with low coverage underperformed by 0.7 per cent.
Controversies about financingAnalyst recommendations on stocks owned by firms employing them may be seen as potentially biased. Debate still exists about the way sell-side analysts are paid. Usually brokerage fees pay for their research. But this creates a temptation for analysts to act as stock sellers and to lure investors into "overtrading". Some consider that it would be sounder if investors had to pay for financial research separately and directly to fully independent research firms. The research department sometimes doesn't have the ability to bring in enough money to be a self-sustaining research company. The research analysts' department is therefore sometimes part of the marketing department of an investment bank, brokerage, or investment advisory firm. Since 2002 there has been extra effort to overcome perceived conflicts of interest between the investment part of the firm and the public and client research part of the firm (see accounting scandals). For example, research firms are sometimes separated into two categories, brokerage and independent. Independent researchers are not part of an investment firm and so don't have the same incentive to issue overly favorable views on companies. But this might not be sufficient to avoid all conflicts of interest. In Europe, the Markets in Financial Instruments Directive 2004 and subsequent related legislation has in part been an attempt to clarify the exact remit of equity analysts. A recent development is the introduction of "MiFID 2" (Directive 2014/65/EU), a legal framework for securities markets, investment intermediaries, and trading venues. Particularly, here, the way that research may be sold is regulated; see Directive_2014/65/EU#Substance, § Substance there, and .
Investment BankingFinancial analysts in the investment banking departments of securities or banking firms often work in teams, analyzing the future prospects of companies, and selling shares to the public for the first time via an initial public offering (IPO), or Bond (finance)#Issuance, issuing bonds; this task is often identical to that of a securities analyst. On this basis, they will then make presentations to prospective investors re the merits of investing in the new company, presenting their "pitch books" on a “financial roadshows, roadshow;” see bookrunner and securities underwriting. An additional component of the IB role here: analysts ensure that all forms and written materials necessary for compliance with Securities and Exchange Commission regulations are accurate and complete. Many IB analysts work in mergers and acquisitions (M&A) departments, similarly preparing analyses on the costs and benefits of a proposed merger or takeover, and assisting with Securities regulation in the United States, regulatory submissions; here there are both buy-side analyst, buy-side- and sell-side analysts. See . The analysis is somewhat more specialized than for an IPO, as it must consider: (i) Mergers and acquisitions#Business valuation, valuation pre- and post-merger, a function of efficiencies, synergies, and / or increased market share, (ii) Mergers and acquisitions#Financing, financing employed, including M&A specific considerations such as the swap ratio, and (iii) tax implications. Compare Business valuation and Stock valuation. At more senior levels, Vice president#In financial services companies, "vice presidents" (VP, or SVP) will manage the workflow and deliverables (modelling performed by "associate" AVPs), but not be involved in the detail ''per se''. Corporate title#United States, Directors will be responsible for Rainmaker (business), "rainmaking" and maintaining existing client relationships. The latter role incorporates a significant advisory element - guiding the client re Relative valuation, their profile and exposure in the capital markets, and advising on M&A and other corporate activity (and liaising with sales and trading).
Middle officeWithin banking, there are other non-quant analyst roles (not necessarily titled "financial analyst"), mainly within the Investment banking#Middle office, "middle office"; these are generally linked, at least Solid line reporting#Dotted-line (indirect) reporting, by dotted line, to both the Finance and Risk Management areas. *Corporate treasury, Corporate Treasury is responsible for an investment bank's funding, capital structure management, and liquidity risk monitoring; see . It is then (co)responsible for the bank's funds transfer pricing (FTP) framework. *product control, Product Control is primarily responsible for P&L Explained, "explaining" the P&L; i.e.: attributing returns to Trading room#Organization, individual desks, PnL Explained#Sensitivities method, decomposing these into their Risk factor (finance)#Financial Risks for the Market, risk factors, and ensuring that traders' positions Mark-to-market accounting, are reflected at Fair value, their market values; the tools here are often built by a separate quant team, possibly Investment banking#Front office, front office, but maintained by Product Control. *Credit Risk monitors the bank's debt-clients on an ongoing basis, as #Corporate_and_other, described below; it is additionally responsible for tracking the risk capital and Risk-adjusted return on capital, risk adjusted returns on these clients, and reporting re concentration risk and risk appetite. These areas allow "Finance" to advise Senior Management re the firm's global risk exposure and the profitability and structure of the firm's various businesses. A comptroller (or financial controller) is a senior position, responsible for these analyses and internal control more generally, usually reporting to the bank's chief financial officer.
Corporate and otherFinancial_management#Role, Analysts in corporate rolesFinancial Analyst Job Description
GeneralIn general, a Business education#Undergraduate education, business-related bachelor's degree majoring Bachelor of Accountancy, in Accounting, Finance, Bachelor of Economics, or Economics is a minimum requirement for an entry or junior role (as well as proficiency in Microsoft Excel, Excel – see under Financial modeling#Accounting, Financial Modeling). Often, more senior analysts are expected to then earn an MBA, having gained 2–3 years experience in the junior role. Increasingly, it is preferred that, even to enter, analysts hold a Master of Finance, master's degree in finance. More specific qualifications may be required.Financial Managers
Securities and Investment bankingIn securities and IB roles, it is lately preferred that, similarly, even to enter, analysts earn a master's or the Chartered Financial Analyst, CFA designation (in Europe, the Certified International Investment Analyst, CIIA also), with the MBA still common at senior levels. There are also many regulatory requirements. For example, in the United States, sell-side or Wall Street research analysts must register with the Financial Industry Regulatory Authority (FINRA). In addition to passing the General Securities Representative Exam, candidates must pass the ''Research Analyst Examination'' (List of securities examinations#United States of America, series 86/87) in order to publish research for the purpose of selling or promoting publicly traded securities. For other jurisdictions, see List of securities examinations. For sector-specialists – with approximately five years industry experience – less weight is placed on finance qualifications, as a relevant advanced degree or qualification in the field is often necessary. Equity Research Recruiting: The Definitive Guide
See also*Accounting analyst *Budget analyst *Cost analyst *Credit analyst *Financial manager *Financial services *Quantitative analyst *Research report *Securities research *Structurer