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.

Requirements
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.

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.