Download - Financial analysts and personal financial advisors

24 Occupational Outlook Quarterly ● Summer 2000

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Occupational Outlook Quarterly ● Summer 2000 25

hese are exciting times for investors—and for those helpingthem with their investment decisions. With record numbersof people investing in the stock market, financial analysts

and personal financial advisors are busy. They are the money mas-ters who provide investment analysis and guidance to businessesand individuals.

Financial analysts research and assess companies’ financial condition andprepare reports recommending investment in a company’s stocks or bonds.Personal financial advisors help people achieve financial goals throughmanagement of their financial resources; they offer advice on many types

Financial analystsand personal financial advisors

by Hall Dillon

Hall Dillon is an economist in the Office ofEmployment Projections, BLS, (202) 691-5704.

T



of finance, including investment selec-tion, portfolio management, and retire-ment planning.

Both financial analysts and advisorsgather information, analyze investments,and make investment recommendations.However, their job duties differ becauseof the types of services they provide. Thisarticle describes the occupations of finan-cial analyst and personal financial advi-sor, including what these workers do,what their employment outlook is, howmuch they earn, and how they train to en-ter these careers.

Nature of the workAlthough both financial analysts and per-sonal financial advisors make recommen-dations, they work with investment infor-mation in different ways. For financialanalysts working in firms, the focus is ongathering and analyzing informationabout companies or stock; for personal fi-nancial advisors helping individuals, it ison presenting information about invest-ment options.

Financial analysts. Financial analystsperform a variety of duties, includingstudying and reporting on businesses and

stock offerings, arranging mergers and ac-quisitions, evaluating a company’s finan-cial soundness, and making presentations.

In conducting research about compa-nies, financial analysts gather annual andother financial reports. They must learnabout each company’s history, manage-ment, products, markets, financing, pastearnings, and future earnings potential.Analysts also may make site visits to

talk with management about companyprospects.

The analysts then organize the infor-mation they’ve gathered and write reportsfor their firm. A report presents theiranalysis of companies’ prospects andtheir recommendation for the firm’s bro-kers or customers, whether it be to buy,hold, or sell stocks. More experienced fi-nancial analysts contact companies tomake investment deals.

Financial analysts also analyze stockofferings—both new, called initial publicofferings (IPO’s), and existing ones—forcompanies trying to raise funds for busi-ness expansion or to pay off debt. Ana-lysts usually work as part of a team tohelp prepare registration statements, de-tailed reports about a company’s financialoperations. These statements must befiled with and approved by the Securitiesand Exchange Commission before a com-pany can sell stock to the public.

Other analysts work on mergers andacquisitions, helping to set up deals inwhich one company buys another. Thesedeals, too, require financial analysts to writea report about the current and projectedvalue of the company to be purchased.

Some financial analysts, called ratingsanalysts, evaluate companies’ financialsoundness. Based on this evaluation, amanagement team assigns a rating to com-panies’ financial and corporate bonds. As aresult, ratings analysts must be expertson particular stocks—and their informa-tion and advice must be timely, becauseother investment professionals dependon the analyses in making investmentdecisions.

Financial analysts spend a lot of timeprocessing numbers, often using a com-puter. They may use a computer to helpforecast a company’s future earnings, forexample, or to analyze balance sheetsthat compare companies’ earnings withexpenses. Computer programs also iden-tify undervalued securities—stocks that

One part of financial analysts’ job is to evaluate a company’s financial stability.

Financial analysts and advisors

gather information, analyze

investments, and make invest-

ment recommendations. But

their job duties differ because of

the types of services they

provide.


may be worth more than their currentmarket value.

Many persons designated as financialanalysts have additional responsibilities,including budget, cost, and credit analy-sis. Financial analysts also may give pre-sentations touting the merits of new com-panies whose shares are being sold tomanagers of mutual funds.

Some analysts are industry specialistsfor one or a few industries; those whostudy a large number of industries areknown as generalists. Analysts also mayspecialize in a type of investment, such asbonds, foreign currency trading, or port-folio management. The size or characterof the firm at which they work usually de-termines whether analysts are specialistsor generalists.

Personal financial advisors. Personal fi-nancial advisors provide investment guid-ance, using their knowledge of tax and in-vestment strategies involving securities,insurance, pension plans, and real estate.Their advice depends on each client’s fi-nancial needs and resources.

An advisor’s work with clients beginswith a consultation. At this meeting, theadvisor helps clients to analyze their fi-nances and financial goals. After gather-ing this and other financial information,the advisor helps clients select invest-ments based on their goals, including ex-pectations or needs for a return on the in-vestment. For example, individualsinvesting for retirement would considertax-sheltered, long-term investments,while those with short-term goals—suchas having money available for a weddingor for a downpayment on a home—wouldbe interested in a more conservative ap-proach to provide returns for several years.

Dennis Gurtz, a financial advisor inBethesda, Maryland, says there is no suchthing as a typical client in a typical situa-tion. And, he says, demand for financialplanning services—including life insur-ance, college savings plans, or estate

planning—is often triggered by lifechanges such as marriage, disability, orretirement.

Finding clients and building a cus-tomer base is one of the most importantparts of a financial advisor’s job. Manyadvisors contact potential clients by giv-ing seminars or lectures or meeting cli-ents through business and social contacts.Periodically, financial advisors must meetwith established clients to evaluate theirinvestment strategy and performance,taking into account changing economicconditions, family income, and financialneeds.

Sometimes, financial advisors developa comprehensive financial plan for indi-viduals. Most of these plans involve sev-eral steps. First, the advisor interviews aclient and obtains a statement of theclient’s assets and liabilities (property anddebts). The advisor then reviews theclient’s financial information, identifyingproblems and developing recommenda-tions for improvement. After discussingoptions with the client, the advisor sug-

gests a plan suited to the client’s re-sources, financial objectives, and atti-tudes toward investment risk. Finally, theadvisor presents the plan to the client,collaborates with him or her to ensure thatit meets his or her goals, and makes revi-sions, if necessary.

In addition to developing comprehen-sive plans, financial planners offer adviceon financial questions or concerns.Among these are the financial conse-quences of changing careers or receivingan employee benefits package, an earlyretirement package, or a lump-sum pay-ment from a pension plan. Advisors alsomay buy and sell financial products, suchas mutual funds and insurance, or referclients to other companies for productsand services such as preparation of taxesor wills.

Personal financial advisors often haveother titles, such as financial planner andfinancial consultant. Some choose to spe-cialize in one area, such as asset manage-ment, retirement, or risk management. Inmost small or self-owned firms, advisors

Personal financial advisors provide individualized investment guidance based on clients’financial needs and resources.


are usually generalists who offer adviceon a wide range of financial products andservices.

Employment and outlookFinancial analysts held nearly 45,000jobs in 1998. The Bureau of Labor Statis-tics (BLS) currently has no data on em-ployment of personal financial advisors;however, according to the College of Fi-nancial Planning, there were 32,000 li-censed certified financial planners in 1998.

Most financial analysts work for broker-age firms, investment banks, and invest-ment advisory firms that publish investmentrecommendations. A small number of largefirms have offices in New York, which hasthe highest concentration of brokeragefirms in the Nation. Insurance companiesalso hire analysts for advice about investingthe money they collect as premiums frompolicyholders. Some analysts work for largecommercial banks and make investmentrecommendations to institutional clientsand individuals.

A large number of personal financialadvisors are self-employed. Many workfor financial planning firms across thecountry. These firms are often small, em-

ploying 2 to 15 people, and most are lo-cated in urban areas. Some large firmsprefer candidates with specialized train-ing in law or accounting; other employersprefer to hire people with experience sell-ing financial products and services for acommission. A smaller but growing num-ber of advisors work for corporations,banks, mutual fund companies, collegesand universities, credit counseling organi-zations, and brokerage firms.

Employment of financial analysts and

personal financial advisors is expected togrow rapidly. Investment funds shouldgrow along with the economy, personalincomes, savings for retirement plans,and inherited wealth. Large numbers of“baby boomers,” people born from 1946to 1964, will fuel investment during theirpeak savings years and with retirement-related investments. In addition, peopleare living longer and must plan to financemore years of retirement. As these factorsincrease demand for investments, de-mand for the services of financial ana-lysts and personal financial advisors willgrow as well.

Benefits and drawbacksFinancial analysts earned an average of$54,000 a year in 1998, according toBLS. Based on limited information fromother sources, starting salaries for finan-cial analysts with a bachelor’s degreeranged from $25,000 to $35,000 in 1999.Starting salaries for people with amaster’s degree in business administra-tion range from $30,000 to $70,000. Fi-nancial analysts who work for investmentbanks may start at $30,000 a year, withbonuses raising that to $50,000 by theend of the second year.

BLS has no earnings data for personalfinancial advisors, but other sources showtheir earnings vary widely. Income rangesfrom about $20,000 for beginners to over$100,000 for advisors with experience.Most financial advisors receive commis-sions on the sale of insurance products orsecurities, in addition to assessing a feecharged by the hour or by the complexityof the plan. Earnings for some financialadvisors are completely fee-based.

Good earnings and opportunity for ad-vancement are not the only things that at-tract people to these occupations. Finan-cial analysts and personal financialadvisors usually work indoors in safe andcomfortable environments. People arealso drawn to become financial analysts

and advisors because they enjoy the chal-lenges of the work and the satisfaction ofhelping firms or people make financialdecisions. They also like interacting withother people.

However, there are some disadvan-tages to working in these occupations.The investment field is competitive andhigh-pressured. No fees or commissionsearned often means no money earned forpersonal living expenses, and errors ofjudgment about investment options canresult in huge losses—in investment,earnings, or even a job. Long, irregularhours, sometimes including weekends,are common. For example, financial ad-visors work irregular hours visiting cli-ents; teaching classes, traveling awayfrom home, or giving seminars in theevenings; and socializing on weekendsto meet clients.

Qualifications, training, andcertificationFinancial analysts and personal financialadvisors have some skills in common buthave different educational requirements.Both may have professional certification,although it is not required.

Qualifications. The job duties involvedin both financial analysis and advising re-quire mathematical, problemsolving,computer, and analytical skills. Financialanalysts and advisors must also have ex-cellent communication skills to presentcomplex financial concepts and strate-gies in easy-to-understand language,both orally and in writing. Self-confi-dence, maturity, and the ability to work

Employment of financial analysts

and personal financial advisors

is expected to grow rapidly.

People are drawn to these

occupations because they enjoy

helping firms or people make

financial decisions.


independently are important as well.Financial analysts need in-depth

knowledge of accounting principles andfinancial analysis because their work ishighly technical. They also must have abroad perspective of financial and busi-ness markets and knowledge of invest-ment analysis, financial modeling, andcompany and industry trends, along withmarket judgment and a sense of markettiming. Analysts should be detail- andcustomer-oriented.

For financial advisors, many employ-ers consider interpersonal skills and salesability more important than academictraining. Employers seek applicants who

have good interpersonal and communica-tions skills and a strong desire to succeed;considerable sales experience often is

preferred. One of an advisor’s most valu-able skills is the ability to ask good ques-tions and listen to the answers. Self-confi-

dence and an ability to handle client re-jection are also important.

Training. College-level knowledge isimportant to both financial analysts andpersonal financial advisors, but financialanalysts have stricter educational require-ments.

Most companies require financial ana-lysts to have at least a bachelor’s degreein business administration, accounting,statistics, or finance. Coursework in sta-tistics, economics, and business is re-quired, and knowledge of accountingpolicies and procedures, corporate bud-geting, and financial analysis methodsis recommended. A master of business

Good communication and interpersonal skills are essential for financial analysts and advisors.

The job duties involved in

financial analysis and advising

require mathematical,

problemsolving, computer,

and analytical skills.


There are no certification or

licensure requirements for

either financial analysts or

personal financial advisors.

However, professional designa-

tion is encouraged.

administration degree is desirable. Ad-vanced courses in options pricing or bondvaluation and knowledge of risk manage-ment are also suggested.

Personal financial advisors have noformal educational requirements. But be-cause financial advisors must understandeconomic theory, conditions, and trends,college is recommended. Suggested ma-jors include business administration witha concentration in financial planning orliberal arts, with courses such as account-ing, economics, marketing, and humanbehavior.

Financial analysts and advisors canfind these courses and programs in col-leges and universities nationwide. Stu-dents may also receive training in finan-cial planning through independent studyprograms, including those administeredby the College for Financial Planningnear Denver and the American College inBryn Mawr, Pennsylvania. (See the addi-tional sources of information at the end ofthis article for contact details.)

Certification and licensure. There are nocertification or licensure requirements foreither financial analysts or personal fi-nancial advisors. However, professionaldesignation is encouraged.

Financial analysts who successfullycomplete a series of three examinationsreceive the title of Chartered FinancialAnalyst. The essay exams, administeredby the Association for Investment Man-agement and Research, cover subjectssuch as accounting, economics, and secu-rities. Applicants may take only one exameach year, in sequence, so the programtakes a minimum of 3 years to complete.

Personal financial advisors may pur-sue a Certified Financial Planner or Char-tered Financial Consultant designation.The certified planner designation requires

relevant experience, completion of educa-tion requirements, passage of an exami-nation, and adherence to a code of ethics.The chartered consultant designation re-quires experience and completion of a 10-course study program. Both require con-tinuing education. And although use of

the occupational title is not regulated, fi-nancial advisors may need licenses forsome services—such as providing legaladvice or selling stocks and bonds, insur-ance, or real estate.

Related occupationsFinancial analysts must thoroughly ana-lyze one or more areas of finance. Otheroccupations requiring that skill includebudget analyst, credit analyst, financialmanager, loan officer, portfolio manager,and pension consultant.

In addition to personal financial advi-sor, occupations that provide financialadvice to individuals include accountant,insurance sales agent, lawyer, loan coun-selor, and securities, commodities, andfinancial services sales representative.

Additional sources of informationFor general information about financialanalysts and the Chartered Financial Ana-lyst designation, contact:Association for Investment Management

and Research

P.O. Box 3668560 Ray C. Hunt DriveCharlottesville, VA 22903-06681 (800) 247-8132(804) 951-5499http://www.aimr.org

For general information about per-sonal financial advisors, contact:The Financial Planning AssociationAttention: Career Development Coordi-

nator3801 E. Florida Ave., #708Denver, CO 802101 (800) 322-4237http://www.fpanet.org

For information about the Certified Fi-nancial Planner designation or to requesta financial planning resource kit, contact:The Certified Financial Planner Board of

Standards1700 Broadway, Suite 2100Denver, CO 80290-21011 (888) CFP-MARK (237-6275)(303) 830-7500http://www.cfp-board.org

For information about financial plan-ning study programs, contact:The College for Financial Planning6161 South Syracuse WayGreenwood Village, CO 80111-47071 (800) 237-1990(303) 220-1200http://www.fp.edu

For information about a financial plan-ning study program and the Chartered Fi-nancial Consultant designation, contact:The American College270 South Bryn Mawr Ave.Bryn Mawr, PA 19010-21961 (888) AMERCOL (263-7265)(610) 526-1490http://www.amercoll.edu

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