How to Become a Financial Analyst

The role of securities markets and investment banking is drastically becoming more dynamic and important, with each passing fiscal year. Apart from increasing stock and securities trading, compliance and risk management are two factors that play a significant role in the financial markets. The need for more financial analysts and financial advisers is being felt.

Financial Analyst Information

Any aspiring individual to wants to know how to become a financial analyst will benefit from understanding the following three facets of a financial analysts’ profession. Here, a financial analysts’ role in the business world, the educational requirements, and his/her potential career path, has been discussed briefly.

Job Description
The financial analyst job description, is quite broad and you will notice that there are several variable and conflicting definitions.

To put it in simple worlds, financial analysts principally advise entrepreneurs, investors, and businessmen when to buy/sell, why to buy/sell, what to buy/sell, and, overall, anything that relates to financial management and transactions. It does not mean that financial analysts give out such advice on the basis of sheer instinct; mammoth research is conducted to back it up. It is a common myth that analysts deal only with securities and fiscal markets. Such analysts can potentially advise any entrepreneur. Practically, analysts also advise production industries, service and software industries, banks, media and entertainment industries, and, potentially, any business or non-business organization.

To sum up the total potential duties of a financial analyst, we put it into the following points.

– Research and advise upon stock market and securities market orations (the foremost duties of a financial analyst)
– Advise upon taxation and compliance
– Advise about national and international economy
– Keep up with the inventory and production
– Study and analyze all incomes and expenditures of the company, and also execute related financial planning
– Manage all financial transactions of the company including credit, debt, and insurance
– Advise about new potential revenue options
– Raise adhered capital requirements for businesses and companies
– These analysts have the responsibility of purchase and sale of securities, debts, and instruments

Thus an analyst is any person who possesses a good command over the financial and economic matters of the business world.

The analyst requirements are not that difficult and basic qualifications include knowledge about accountancy, taxation, economics, and statistics. The qualification for a financial analyst is the Chartered Financial Analyst charter holding, which is offered by the CFA institute. Apart from this charter MSF (Master of Finance) or MBA (Master of Business Administration) can also do good. Some other qualifications also include, CPA (Certified Public Accountants), CIA (Certified Internal Auditors), CMA (Certified Management Accountants) and ABA (Accredited Business Accountants).

Career Prospects
There are a wide number of career opportunities for financial analysts due to the fact that there is always a need for good and reliable analysts. Financial analysts are usually employed by different companies in their finance departments. Financial institutions and banks are the largest employers of financial analysts. Analysts employed or contracted by financial organizations are divided into two types, namely buy side and sell side analysts, who decide the purchase and sale of financial securities. Financial analysts also, often, work freelance and as consultants. Some of them are also personally hired by investors and businessmen.

A financial analyst has to enjoy number crunching and interpreting from figures and large numerical data. Also he/she should be well-informed about the economy and the markets in order to be abreast of all the financial developments around the world.

Duties of a Financial Advisor

A personal financial advisor is entrusted with the job of evaluating the performance of companies or that of a portfolio of securities and providing valuable guidance to individuals regarding the suitability of investments.

Responsibilities of a Financial Advisor

Advising Investments
A financial advisor is responsible for assessing market conditions, compiling and analyzing socioeconomic data, and advising clients on the best investment opportunity. He is expected to be comfortable with tax laws and insurance and suggest suitable investment alternatives. Working with detailed financial records and charts are all a part of the game. The advisor is also expected to forge relationships with clients by focusing on need-based sales of investment products. The advisor is required to have the knowledge of legal and regulatory requirements and the guidelines laid down by the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC). Suggesting investments such as mutual funds, stocks and bonds; suggesting contributions to Individual Retirement Accounts (IRAs), retirement planning, real estate investment advice and many other services, come under the purview of his/her responsibilities.

Clarifying Risk and Reward
A financial advisor cannot ignore the client’s ability and the willingness to assume risks. The ability and the willingness to undertake risks coupled with the appropriate investment decision-making prowess will influence the return on investment. This is because risk and reward are directly proportional. Clients, who have a great deal of money and a long term investment horizon, may be better-off investing in more risky assets. People with a short term investment horizon need to have enough liquidity to meet their financial obligations. Hence, in such cases one of the duties of a financial advisor is to suggest investments that have a short maturity. Despite having the capacity for wealth generation, a person may choose not to invest in what he/she feels is a risky proposition. In this situation, the financial advisor should explain to the reluctant investor the concept of risk and reward, clarify the need for liquidity and make sure that time horizon of the investor matches the need for liquidity. A person, who is in his/her late 40s and has two children will generally have 3 time horizons. One coinciding with his/her retirement and the other two with the children’s college education. A good advisor will ensure that the return from investment coincides with the aforementioned time horizons when the need for liquidity is predominant.

Finding and Maintaining Relationships with Clients
Financial advisors essentially have the job of creating and maintaining their own client base. Client relationships have to be forged by suggesting superior management and wealth creation strategies. Meeting with clients on a regular basis, preparing and delivering presentations and seminars to clients are also important since they may enable the advisor to communicate the benefits of certain investments and the prudence of avoiding a few others.

A financial advisor should have one of the following qualifications: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) or Chartered Financial Consultant (ChFC). Although, people with Series 6, 7, and 63 may also be qualified to advise one regarding investments, it’s preferable if such advisors have at least 3-5 years of experience. Given that these advisors occupy a position of trust and confidence, advisors with significant assets register with the Securities and Exchange Commission (SEC). The Investment Advisors Act of 1940, a federal law that is enforced and interpreted by the Securities and Exchange Commission (SEC), applies to them.

Hopefully, the above article would have given one an idea about the responsibilities and the duties of a financial advisor. Choosing a financial advisor is a job that requires a great deal of thought and contemplation, since the advice that is dispensed may secure or ruin one’s financial position.

How to Become a Registered Investment Advisor

Registering an Advice Body
The advisor manages the assets of individuals and institutional investors, and performs the fiduciary duty to their clients of choosing the best possible investments for them, and providing full disclosure of transactions and ensuing fees. The investments may be in the form of stocks, mutual funds, hedge funds, or a combination of one or more forms of investment.

Registration of an investment advice body can be done in three ways, depending upon the sum of market value of assets being managed by that firm. This sum, commonly known as Assets Under Management (AUM), forms the basic registration criteria for the process of registration. While the exact definition of AUM is not clear, for registration purposes, the definition given under Form ADV Part 1, of the SEC, is used.

To register your investment advice firm with the SEC, you have to first determine the amount of AUM that your firm is managing. The amounts can be divided into 3 categories:

1. Up to $25 million
2. between $25 million and $30 million
3. above $30 million

Up to $25 Million
If your investment advice firm is not currently managing a sum of $25 million and does not anticipate managing $25 million within 120 days of registration, the firm has to register itself with the state in which it is operating.

$25 to $30 Million
If your AUM ranges between $25 and $30 million, you have the choice of either registering with the SEC, or with the state in which your firm is operating.

Above $30 Million
If your AUM is over $30 million, then the registration has to be done with the SEC.

Becoming an Investment Advisor
The first step is to figure out your AUM and the jurisdiction under which your investment advice firm falls. The firm has to pay the service provider fees to either the SEC or the state. If registered with the state, the fee comes to between $2,500 and $3,500, while for registering with the SEC, your firm might have to shell out anything between $4,000 to $8,000, depending upon the size and diversity of your portfolios.

As the firm is being registered, the registration bodies would feel compelled to test the knowledge of the investment managers and advisors, to ensure their accountability and investors’ safety. No test needs to be given if the advisor/manager is already qualified as a Chartered Financial Planner (CFP) or a Chartered Financial Analyst (CFA). But in case thy are not equipped with the above qualifications, they are required to give the Series 65 exam two years prior to registration, although many states allow registration on the basis of having given the Series 7 and Series 66 examinations.

Along with the examinations, you have to fill various forms such as the Registration Depository Form (IARD); Form ADV, which is mandatory for all investment advisors; Form ADV Part II, which covers all the information on activities of a registered investment advisor; and Form U4 which has to be filled by those people who represent the advisor.

Actually, a very small amount of advisory firms get themselves registered. A registration does not necessarily mean that the firm or individual is recommended by the SEC or any such body. However, it is considered safer to ‘bank’ upon registered advisors, as they are under the control and supervision of the SEC.

Questions to Ask a Financial Planner

A financial planner is a practicing professional who helps people deal with personal financial issues in areas like cash flow management, retirement planning, investment planning, risk management, tax planning, estate planning, and even business succession planning. Basically he/she is a person who will help you, if you have no clue on how to go about handling and managing your finances. In case you are hiring the services of a planner, there are certain things that you should be clear.

Important Questions to Ask

What are your areas of specialization (if any)?
It is always better to have a person who specializes in an area that you need help with – be it taxes, investments, or insurance. A specialized person can definitely help you better than someone who is a jack of all trades.

For how many years have you been in this profession?
This question helps to build credibility since you don’t want a dabbler to handle all your finances. It is also better to have references from credible clients. Do not hesitate to confirm the credibility, after all, you need to establish trust to hand him/her the rights to plan your financial matters.

How exactly can you help me manage my expenses?
This question will help you fathom, how exactly your relationship will work. This is an important question which will define the terms and conditions of the contract, and the responsibilities of your planner.

Do you have clients with similar needs?
This will guarantee whether the planner has experience in providing advice on similar products or a specific product that you are looking for. It would help if you can contact these clients and get their feedback on his/her services.

What is the remuneration that you are looking for?
Be very clear and specific while discussing the remuneration, since money matters are to be handled very carefully. Make sure you have a documented record or contract to define your agreement on the remuneration.

Do you have any questions for me?
It’s fairly obvious that there’s a correlation between how well an adviser understands your needs and the quality of the advice you get. That said, it’s important that your planner asks the kinds of questions to help you meet your goals, even the ones you haven’t thought to identify.

Remember, there are three important things that you should seek in a financial planner – his ability to guide you in matters of finance, to help you grow financially, and most importantly to ensure security of your investments.

What are the Duties of a Financial Planner

A financial planner is a professional who helps us with our financial issues. He is of great help in areas such as personal financial planning, investment planning, risk management, and insurance, as also in cash flow management. Here we take a look at the duties of financial planners and their job responsibilities.


He provides his clients with valuable guidance in taking major financial decisions and informs them about the short-term and long-term consequences of the same.

He helps the clients assess their financial assets, determine their financial goals, and weigh their economic resources to take investment decisions.

The duties of a financial planner also include the setting of financial goals with the client, gathering the client’s financial information, analyzing it, and designing a financial plan for him. It is a financial planner’s duty to implement the planned financial strategies and monitor the client’s financial decisions.

A financial planner helps the clients in risk management by assisting them in choosing suitable insurance schemes. He helps them plan for the future by providing them with well-suited investment options. He helps the client ensure financial independence on retirement, by helping him choose the proper retirement investment plan. He advises the client on how to reduce his tax liabilities and enhance cash flow. A financial planner also deals with the conservation and distribution of the financial assets of his client.

Job Description

A financial planner studies the different aspects of the financial status of his client and provides a suitable solution for existing and potential financial problems, if any. Some financial planners deal with the various facets of personal finance, while others specialize in fields like risk management or retirement planning.

The job of a financial planner can be described by means of a 6-step process given by the ISO.

– The first step is of setting financial goals with the client.
– The second step includes gathering relevant financial information from the client.
– The third step is of analyzing the gathered information.
– This is followed by the creation of a financial plan.
– The last two steps include tasks such as implementing the plan’s strategies and monitoring the implementation of that plan.

Financial planning is one of the most speedily growing industries as it deals with managing the most important means of living – money.

Choosing an Investment Advisor

Investment advisors provide advice to their clients on securities. In other words, they are individuals who specialize in advising people on investing in mutual funds, bonds, stocks, commodities, or real estate. Some advisors also manage their client’s portfolio of securities.

How are They Different from a Financial Planner?

While most financial planners are also investment advisors, all investment advisors may not be financial planners. Financial planners generally assess all aspects of a client’s financial needs such as estate planning, retirement, taxes, insurance, investments, and savings, and help in developing a financial plan or strategy for meeting his or her financial goals. On the other hand, investment advisors restrict themselves to providing advice on investing in an asset that is likely to generate good returns, or give regular income and/or dividends.

Why do People Need an Investment Advisor?

While most ordinary investors are intelligent people, with many of them being quite well-versed with the market, yet, they are often not very successful with their stint in the market. And that is quite understandable. After all, they make their living doing something else, hence, they do not have the expert knowledge that a professional would have. For example, if you were to fall ill, you would seek the expert help of a medical professional, even though you may be knowledgeable about various health related matters, or you would go to an auto-mechanic if your car had a break down, even though you may have a pretty good idea about cars.

Most ordinary people have a tendency of being ‘off’ in the timing of their investment. For instance, they buy when the market is high and not during the low periods. But to get the best returns on investment, it should be the other way round. The trouble is that most ordinary investors are influenced by factors like media hype, fear, and greed.

It’s here that a professional financial advisor can provide them the correct advice on how, when, and where to invest their money. However, make sure to hire a registered professional, who has a proven track record of successfully investing in securities or other assets.

What Services do They Provide?

Basically, they do all the legwork such as the research and analysis. Also, more importantly, their primary focus is kept on the market, particularly in the area of their specialization.

Since most of their energy and time is spent in researching, deliberating, and analyzing, it is natural for them to have a better sense of the market, along with its movements, compared to ordinary investors who cannot expend this kind of time and attention to it. They usually recommend the best products in the market, and those which suit the client’s needs and financial capacity.

Before hiring any financial professional, it is important for you to be cognizant about what kind of services you require, what he or she will deliver, if they have any kind of restrictions on what they can recommend, what services will you be paying for, their cost, and how they get paid.

How are They Paid?

Let’s look at some of the ways in which the advisors are usually paid:

– A fixed amount that both you and the advisor agree to.
– A commission based on the securities that they sell.
– A percentage of value of the financial assets that they handle for you.
– A combination of any of the above.

Each of these payment methods has its pros and cons. Find out from them about the nuances of each, and which would be most suitable for your needs. Lastly, check if the fees are negotiable.

Making that Decision

If you make a cursory search on the Internet, you would discover that there are innumerable registered advisors in the United States. However, not all of them maybe good, so how would you ensure choosing the right one? Well, most large-sized brokerage agencies maintain a list of investment advisors that they work with, including information about their past performance. However, this resource is not foolproof, since they have a tendency of recommending people who do their business through the agency, or buy products of their firm. Hence, you will have to be careful about conflict of interest issues.

Another way is to subscribe to any of the database services, which provide information as well as rankings, too, on such professionals. However, these services can be quite expensive.

Provided below are few of the factors that need to be kept in mind when hiring one:

– Make a verification of their record, taking into consideration their past performance.
– Check out their strategy to see if it will work in different market conditions.
– As much as possible, find out about their business operation.
– Check if the agency has any regulatory problems.

Apart from the above, you should also make sure that you can trust the advisor with your investment choices, and build a good rapport with him or her.