What Does a Financial Analyst Do

Financial analysts analyze data to guide financial decisions, inform investments, and optimize performance

Author: Kevin Henderson
Kevin Henderson
Kevin Henderson
Private Equity | Corporate Finance

Kevin is currently the Head of Execution and a Vice President at Ion Pacific, a merchant bank and asset manager based Hong Kong that invests in the technology sector globally. Prior to joining Ion Pacific, Kevin was a Vice President at Accordion Partners, a consulting firm that works with management teams at portfolio companies of leading private equity firms.

Previously, he was an Associate in the Power, Energy, and Infrastructure Investment Banking group at Lazard in New York where he completed numerous M&A transactions and advised corporate clients on a range of financial and strategic issues. Kevin began his career in corporate finance roles at Enbridge Inc. in Canada. During his time at Enbridge Kevin worked across the finance function gaining experience in treasury, corporate planning, and investor relations.

Kevin holds an MBA from Harvard Business School, a Bachelor of Commerce Degree from Queen's University and is a CFA Charterholder.

Reviewed By: Patrick Curtis
Patrick Curtis
Patrick Curtis
Private Equity | Investment Banking

Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity Associate for Tailwind Capital in New York and two years as an Investment Banking Analyst at Rothschild.

Patrick has an MBA in Entrepreneurial Management from The Wharton School and a BA in Economics from Williams College.

Last Updated:January 11, 2024

What Does A Financial Analyst Do?

Simply put, an analyst is in love with data. They love condensing mountains of data into tiny chunks of interesting information. This information is pertinent to internal and external stakeholders, who interpret it differently. 

Analysts are like "the company's GPS." They are like the parent that gauges the heat of the milk before feeding the infant, so the infant does not burn its tongue.

These analysts are constantly in touch with the market. They can feel the market's pulse and predict its ebb and flow. Using these indicators, analysts make recommendations that help capitalize on opportunities or brace for threats.

Remember that no two analysts have the same role. Analysts primarily use Microsoft Excel and ERP software to build financial models and forecasts. But the nature of these models differs with the industry the analyst handles.

The Investment Banking Division (IBD) handles client advisory services in an investment bank. In addition, The company assigns analysts in an investment banking (IB) division to various business sectors.

The industry outlook and individual business requirements of each sector are vastly different. Though financial analysts use similar tools in their profession, they learn to look at their responsibilities through the spectrum of their clientele.

Key Takeaways

  • Financial analysts on the sell-side assist businesses in raising capital by issuing securities, while buy-side analysts help investors grow their wealth by investing in promising ventures.
  • Sell-side opportunities encompass investment banking, sales, trading, and equity research. In contrast, buy-side opportunities include private equity, investment management, venture capital, and hedge funds.
  • Responsibilities include assisting clients in raising capital through debt or equity issuance and providing advisory services for mergers, acquisitions, and corporate restructuring.

Who are sell-side and buy-side financial analysts?

You established a business a year ago that is now growing at a rapid pace. You wish to raise capital to finance the expansion of your enterprise. Whom would you approach?

You would approach sell-side firms. These firms will help create securities and build an ideal mix of debt and equity. Then, they sell company securities to generate the corpus necessary to finance business operations.

Every coin has two sides. For every entity that wants to raise money, there is another entity with cash to invest. By investing in promising ventures, these entities wish to grow their wealth. This group would approach buy-side firms.

Buy-side firms are wealth generators. They scrutinize sell-side firms and shortlist those ventures that appear to maximize returns. 

To meet the expenses of managing the client's portfolio, buy-side firms levy a fee, usually as a percentage of the investment made by the client.

There are a few differences between sell-side and buy-side analysts.


Sell-side Analysts Buy-side Analysts
Sell-side analyst programs have more entry-level positions and are designed for fresh graduates. Many sell-side analysts move to the buy-side after a few years. This is because the buy-side market requires more experience.
The opportunities you would have on the sell-side are investment banking, sales and trading, and equity research. Buy-side opportunities include private equity, investment management, venture capital, and hedge funds.
Individual and institutional investors use sell-side reports for financing decisions. These reports are public. Buy-side reports are confidential as these companies have unique strategies to generate wealth for their clients.
As a sell-side analyst, you would receive remuneration based on the information you generate.  Buy-side firms reward their analysts for their investment recommendations. 

Types of financial analysts based on functionality

We looked at the differences between buy-side and sell-side analysts. However, these analysts can also be differentiated based on their unique functions. 

There are many kinds of analysts, but we will be looking at three examples in this article:

1. Investment banking analyst

A firm's investment banking division helps its clients raise capital by issuing debt or equity. They also provide advisory services when it comes to mergers and acquisitions as well as corporate restructuring.

As an investment banking analyst, you are a support system to your superiors. First, they bring in the clients. Then, you help them seal the deal. 

You might spend more time on menial tasks such as reviewing reports and keeping track of the market and less time creating that financial model. However, the working hours are long, and you will be at a client's beck and call.

Investment banking offers you the best exit opportunities, and you can pursue more lucrative private equity (PE) positions or venture capital. It's all about the experience.

2. Equity research analyst

Sell-side analysts prepare reports accessible to individual and institutional investors. Equity research reports are one such class of reports. Simply put, they advertise a company's stock.

Unlike an investment banking analyst, an equity research analyst has a more prominent role. They are a liaison between the investor and the company whose report the sell-side firm covers.

A report can only cover so much. The analyst interacts with the investor to give him fresh and unique insights into the report. They are in action, constantly in touch with clients and addressing their queries.

3. Private equity analyst

Previously, a "private equity analyst" position did not exist. Investment banking analysts moved on to private equity firms after a while. This role was born ever since the private equity profession gained prominence.

Private equity firms are concerned with pooling funds. With the funds pooled, they purchase companies, restructure or improve them, amp up the value of these companies, and sell them at a profit.

A private equity analyst is a facilitator. Most of his work is concerned with reducing the burden on his superiors. They ensure that the deal goes through uninterrupted and keeps track of the target firm's activities.

How does one become a financial analyst?

You're now willing to take up the role of an analyst. How do you go about it? Is there competition? You bet there is. These analysts thrive in demanding environments, and you can expect no less from your peers.

Any job comes with its technical and soft skills requirements. Let us look at some skills necessary for you to be an attractive prospect to companies.  This list is not definitive and was created based on the career trajectories of aspiring analysts.

Many investment banking, private equity, and consultancy firms require candidates to undergo a personality assessment aside from quantitative and aptitude tests. This is what they look for:

  1. Flexibility: You might not be handed dream projects in the initial months. You would be working long hours and performing routine work. Take it as a learning curve; never say no to an opportunity.
  2. Networking: Use your time as an analyst to catch up with your colleagues and superiors. Prove your hunger. If your supervisors have a project to be assigned, you must be the first name that comes to mind.
  3. Be persuasive and communicative: Investment banking, private equity, and consultancy are professions that emphasize communication skills like no other. You will constantly have to be in touch with clients and management. 
  4. A highly calculative and analytical brain: If you feel you are more suited to routine clerical work, do not consider entering an IB or a PE firm, as they require you to think on your feet. If you are looking to secure an entry-level position, you will most likely come across aptitude or numerical tests. These look to measure your technical knowledge. 

You would most likely be required to possess the following skills and qualifications for an analyst role. 

  1. A bachelor's degree: Either in finance, economics, business administration, or accounting. Yes, some candidates enter without a relevant degree, but they are the exception, not the norm.
  2. Keep yourself updated with market happenings: Industry or sector knowledge goes a long way in improving your chances of candidacy. You can use the following tools to hone your understanding of the market.
  3. A professional qualification is not mandatory but a valuable addition to your profile. The CFA qualification is probably the best option today. Alternatively, you can pursue the certifications offered by FINRA

Career Outlook and progression

"Financial analyst" is a broad concept and stretches across many markets. To recap, some of the significant markets an analyst can venture into are:

  • Investment banking
  • Private Equity
  • Equity research
  • Financial planning and analysis
  • Treasury management
  • Corporate development

This section will detail the career progression of an analyst working in any of these sectors. 

Surprisingly enough, not all analysts start their careers as an analyst. Instead, they usually begin with an internship/industrial placement and gain relevant corporate experience. 

Put yourself out there. Expose yourself to different markets. This exposure will make you an invaluable candidate for an analyst position. 

Companies are looking for people who can adapt to changing environments and apply their existing knowledge to the task. 

Many analysts kick start their careers with graduate schemes. Some of these schemes would allow you to pursue a professional qualification such as CFA or CAIA. In addition, the company would usually sponsor your training.

After completing your stint as a financial analyst, you would become a senior financial analyst. This position necessitates more commitment as it comes with greater responsibilities. 

As a senior analyst, you would more or less play the following roles:

  • Providing junior analysts with timely feedback to improve performance
  • Ensuring that the team meets deadlines effectively
  • Drafting performance reports for the management
  • Taking part in client meetings and sometimes even heading these meetings

Next, you would progress to the position of associate. You would play a more active role in guiding juniors. In this stage, you would begin to delegate tasks to your juniors. Technical competence is an absolute must.

After a few years as an associate, you become a senior manager. As a senior manager, your accountability increases, and you are answerable for output. You would guide the team while ensuring that the project progresses smoothly.

Often, you will be responsible for the talent pool in your team. You would have to notice gaps in the team structure and fill them as soon as possible. You will play an active role in the recruitment process.

Coming to the clients, they will view you as the primary point of contact for the projects being undertaken. Therefore, establishing and maintaining healthy client relationships would go a long way in the success of your projects.

Depending on the company, the final stage would be a partner, director, Chief Executive Officer (CEO), or Chief Financial Officer (CFO). In this stage, you would head the overall finance department and oversee the company's operations.

Financial Analyst FAQs

Researched and authored by Sathyanarayana Sairam | LinkedIn

Reviewed & Edited by Ankit Sinha and Abhijeet Avhale LinkedIn

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