In the unsettling times that we live in, viability and profitability of a business has assumed greater importance than ever before. With stock markets in the red, investment banks filling for bankruptcy and the global credit crunch grabbing international headlines, the need for financial analysts who can analyse and interpret data, monitor the financial health of an organisation and frame financial models is on the rise.
Explains education consultant Karan Gupta, “Financial analysts essentially study the feasibility and productivity of a business.” This study of business requires a complex understanding of the general economic conditions, policies and business practices among others. The profession of financial analysis requires a candidate to be proficient in mathematics and possess acute quantitative and analytical skills. The demanding nature of the job makes it a high paying one as well. Ashvin P Vibhakar, PhD, CFA, Managing Director, Asia-Pacific Operations, CFA Institute elaborates on the opportunities available to CFAs, “CFA charter holders work for a variety of employers—30 per cent for investment companies/ mutual funds; 16 per cent for investment banks/ broker dealers; nine per cent as private client wealth managers/ advisers; six per cent for commercial retail or mortgage banks; five per cent for hedge funds/ funds of hedge funds; four per cent for insurance companies; two per cent for pensions and foundations; and the remainder for other organisations, such as consultancy, government, regulatory, academic or research firms."
On the job
According to Kishore Gandhi, Managing Director, IB research, JP Morgan, the job of a junior analyst primarily involves:
- Gathering and analysing data from a variety of sources, including company reports, the internet, online databases, etc
- Building, maintaining and analysing financial models of companies and industries
- Generating regular as well as one-off reports. Graphs and datasets from these models too are a crucial part of a junior analyst’s job.
He goes on to add that apart from these, an analyst at this level would also be required to write content (text, tables and charts) for the company and industry reports as well. He will also need to provide content for presentations to be used internally and published externally by his/ her colleagues in parts of the global research the company may be conducting. Also, a financial analyst needs to maintain regular contact with colleagues from various sectors in different parts of the world, take part in conference calls and also respond to project requests.
How to begin?
There are several ways of entering the world of finance for those who find the prospect of working with complex data, investments and market performance exciting. "A basic degree in engineering, MBA or economics/ statistics is required for certain specialist roles," elaborates Gandhi. However, a Master's in Financial Engineering, Computational Finance or Mathematical Finance is the best bet for students who wish to work in this field. Furthermore, a Chartered Financial Analyst (CFA) qualification can prove to be beneficial for entering the field of financial analysis. Says Gupta, "Though people can work as financial analysts even without a CFA certificate, it is eventually good tp complete the CFA course after getting a degree in a finance related field."
Making an informed choice
Under the present circumstances of the global financial meltdown, it is natural to think twice before choosing a career as a financial analyst. Vibhakar admits that though the early registration numbers for the upcoming June exam are below the CFA’s projection, it's too early to draw any conclusion as the registration window is still open until next March.
All about CFA certification
Says Vibhakar, “The CFA designation is a mark of distinction which is globally recognised by employers, investment professionals and investors as the definitive standard by which to measure serious investment professionals. No matter the economic conditions, there's always a place for such a mark of distinction.
The CFA programme is a self-study graduate level programme for investment professionals. "Most CFA candidates are either current or aspiring investment professionals. Anyone who holds a bachelor's degree and meets the professional conduct admission criteria may enroll for the CFA programme and register for the CFA exam.,” adds VIbhakar.
The CFA designation is awarded to candidates who have:
·Passed all three levels of the CFA examination,
·Accumulated more than four years of professional work experience in the field of investment decision-making
·Abides by the CFA Institute Code of Ethics and Standards of Professional Conduct
·Maintain their CFA institute membership and file annual Professional Conduct Statements.
About the exam
The CFA examination is conducted in three levels. The Level I examination is conducted twice a year, that is, in June and December. Levels II and III take place once a year, in June. This year the level I exam is scheduled for December 6 worldwide and December 7 for Eastern Asia and Oceania.
"The Level I questions are all multiple choice questions. The Level II questions are all item set (or "mini case") questions. The Level III exam consists of essay type questions and item set questions. Though the CFA Institute recommends candidates to spend at least 250 hours preparing for each exam level, this recommendation may substantially underestimate the actual hours that one needs to put in depending on one’s individual circumstances and academic background," points Vibhakar.
CFA curriculum and examinations cover 10 topics including ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments as well as portfolio management and wealth planning.