Financial analyst - Citizendia

A financial analyst (or securities analyst, research analyst, equity analyst, investment analyst) is a person who works with financial analysis. Financial analysis refers to an assessment of the viability stability and profitability of a Business, sub-business or Project.

1 Job
2 Qualification
3 Skill
4 Controversies about financing
5 See also
6 Further reading

Job

An analyst will write reports on the companies they are supposed to cover, trying to describe the businesses and their opinion of the company's investment potential, usually from a fundamental analysis standpoint. Fundamental analysis of a business involves analyzing its Financial statements and health its management and competitive advantages and its Competitors and They also summarize that report with a rating, such as "buy", "sell", "market perform", "overweight", "hold", etc.

The analysts get their information by studying public records of the company and by participating in public conference calls where they can ask direct questions to the management. A Conference call is a Telephone call in which the Calling party wishes to have more than one Called party listen in to the audio portion Previously, analysts were said to obtain lots of information (especially from clients of their investment bank), via exclusive meetings with upper management. Regulation FD (Fair Disclosure), is said to prevent most of this from happening at present. The US Securities and Exchange Commission 's (SEC's Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD was an SEC ruling

Financial analysts, also called securities analysts and investment analysts, work for banks, insurance companies, mutual and pension funds, securities firms, and other businesses, helping these companies or their clients make investment decisions. Financial analysts employed in Commercial lending perform "balance sheet analysis," examining the audited financial statements and corollary data in order to assess lending risks. In Financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances Financial statements (or financial reports) are formal records of a business' financial In a stock brokerage house or in an investment bank, they read company financial statements and analyze commodity prices, sales, costs, expenses, and tax rates in order to determine a company's value and project future earnings. In any of these various institutions, the analyst often meets with company officials to gain a better insight into a company's prospects and to determine the company's managerial effectiveness. Usually, financial analysts study an entire industry, assessing current trends in business practices, products, and industry competition. They 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.

Financial analysts use spreadsheet and statistical software packages to analyze financial data, spot trends, and develop forecasts. On the basis of their results, they write reports and make presentations, usually making recommendations to buy or sell a particular investment or 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 analysts use the data to measure the financial risks associated with making a particular investment decision.

Financial analysts in investment banking departments of securities or banking firms often work in teams, analyzing the future prospects of companies that want to sell shares to the public for the first time. They also ensure that the forms and written materials necessary for compliance with Securities and Exchange Commission regulations are accurate and complete. They may make presentations to prospective investors about the merits of investing in the new company. Financial analysts also work in mergers and acquisitions departments, preparing analyses on the costs and benefits of a proposed merger or takeover. There are buy-side analysts and sell-side analysts. Buy-side analysts ("buy-siders" work for money management firms such as Mutual funds, pension funds, trusts, and Hedge funds. A sell-side analyst works for a Brokerage firm and evaluates companies for future earnings growth and other investment criteria

Some financial analysts, called ratings analysts (who are often employees of ratings agencies), evaluate the ability of companies or governments that issue bonds to repay their debt. A credit rating agency ( CRA) is a company that assigns Credit ratings for Issuers of certain types of Debt obligations as well as the debt instruments On the basis of their evaluation, a management team assigns a rating to a company's or government's bonds. Other financial analysts perform budget, cost, and credit analysis as part of their responsibilities.

Qualification

Although there are no formal qualification criteria, analysts usually have graduate level training in finance such as MSF or MBA degrees, or are qualified accountants. Master of Science in Finance ( MSF) is a Master's degree designed to prepare graduates for Careers in financial analysis, Investment management The Master of Business Administration ( MBA) is a Master's degree in Business administration, which attracts people from a wide range of academic disciplines An accountant is a practitioner of Accountancy, which is the measurement disclosure or provision of assurance about financial information that helps managers investors "Industry experience" is often a pre-requisite and so analysts often have undergraduate degrees in engineering and the sciences. Engineering is the Discipline and Profession of applying technical and scientific Knowledge and Also, many analysts originally enter this domain through their practice as consultants or accountants and so a very wide range of qualifications is common.

Increasingly, it is (additionally) required that analysts earn a professional certification such as the Chartered Financial Analyst (CFA) designation , or the Certified International Investment Analyst (CIIA) designation, particularly if they wish to advance beyond a certain level within a firm. Chartered Financial Analyst ( CFA) is an international professional designation offered by the CFA Institute of USA (formerly known as AIMR to Financial Certified International Investment Analyst ( CIIA) is a designation offered by the Association of Certified International Investment Analysts (ACIIA to financial professionals

There are also often regulatory requirements relating to the profession. For example, in the United States, sell-side or Wall Street research analysts must register with FINRA, the Financial Industry Regulatory Authority. In the United States, the Financial Industry Regulatory Authority (FINRA is a Self-regulatory organization (SRO under the Securities Exchange Act In addition to passing the General Securities Representative Exam, candidates must pass the Research Analyst Examination (series 86/series87) in order to publish research for the purpose of selling or promoting publicly traded securities. The General Securities Representative Exam, commonly referred to as the Series 7 Exam, is a required exam to become a Registered Representative of a Broker-dealer

Skill

Most analysts will require basic analytical skills, and very good numerical skills. Analytical skill is the ability to visualize articulate and solve complex problems and concepts and make decisions that make sense based on available information Importantly, communication skills are necessary to explain complex concepts to management or clients.

Controversies about financing

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 a unit of an investment, investment brokerage, or investment advisory firm. Investment or investing is a term with several closely-related meanings in Business management, Finance and Economics, related to saving Investment advisory, in financial/investment organizations is the unit linking the investment professionals in the central asset management unit (Investment Research Portfolio Management

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). A conflict of interest is a situation in which someone in a position of trust such as a Lawyer, Insurance adjuster, a Politician, executive or director Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives For example, research firms are sometimes separated into two categories, "brokerage" and "independent"; the independent researchers are not part of an investment firm and don't have the same incentive to issue overly favorable views on companies.

But that might not be sufficient to avoid all conflicts of interest. The debate is still 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 financial research separately and directly to fully independent research firms.

Dan Reingold, a former securities analyst, gives examples of these and related controversies in his autobiographical book "Confessions of a Wall Street Analyst".

Contents

Job

Qualification

Skill

Controversies about financing

See also

Further reading