Financial Analyst Guide
The Analyst Trifecta™
How to be a world class financial analyst.
The Analyst Trifecta™
How to be a world class financial analyst.
Do you want to be a world class financial analyst? Are you looking to follow industry leading best practices and stand out from the crowd? If so, then this is the ultimate guide for you on how to become the best analyst you can be.
This guide is broken down into three main sections:
All three of these are required to rise to the top, and will henceforth be referred to as:
The Analyst Trifecta™. This guide applies to most of the jobs on our Career Map.
A world class analyst lives and breathes numbers, calculations, and interpretations. They know how to distill vast amounts of data into a simple and easily digestible format. They have unwavering attention to detail, and dream in numbers.
In the following sections, we will talk about what an analyst can specifically do to be world class and rise to the top.
The best analysts know how to collect, organize, analyze, and interpret data. Each of these four steps are equally important, and form the bedrock on which their career is built.
Collecting data is the logical first step. It may sound simple, but it’s important to know WHERE to go for information, and HOW to get it. Sure there are obvious financial data sources, which we’ve provided on our site, but it’s the specific reports, and areas of those reports that really matter. For example, a basic analyst knows how to pull a company’s 10-k report from Bloomberg, but an advanced analyst knows exactly which notes to quickly flip to, and what parts of the MD&A (Management Discussion & Analysis) can be most juicy.
Organizing data in a clean structure is critical. You may have hit the “jackpot” with a large data dump, but if it’s not well organized the analysis that’s build on top of it will be a disaster to audit, and confidence in the results will be diminished. It’s important to plan our your financial modeling with a logical framework, and structure the data with a long term view of what the final product will look like. This is particularly important in financial modeling, where best practices on structuring are what separate the good and great. Check out our complete financial modeling guide to learn more.
Analyzing the data is what we typically think of as the main job of an analyst (and hence the name). At this stage, it’s time to start calculating metrics and ratios (like EV/EBITDA), rates of return (like ROA), risks, accretion/dilution, and IRR. This is where sharp accounting and finance skills come in handy and many analysts take the opportunity to showcase their skills by slicing and dicing information in the most insightful way. It’s also where the analyst can start to have some direct impact over the story that’s being told with the data, whether that’s confirming a thesis, supporting a client’s agenda, or getting to the “truth”.
Interpretation is where great analysis shine, and show off their skills at making recommendations. This is where we reach the “so what?” part of the analysis, and it’s time to suggest some specific action items. A great analyst knows they have to be careful here – this is the bridge between where their job ends and executives take over. It’s important to provide insightful suggestions, but typically not wise to push an agenda, or an extreme view. With that said, objective advice will hopefully prevail in the long run. In order to help you reach this level, we’ve designed an extensive online training program.
This is much less talked about than analytics, but is still incredibly important. A significant portion of an analyst’s work is creating compelling presentations (like an investment banking pitch book), documents, memos (like a greensheet) and other forms of internal or external communication. It’s absolutely critical that these documents be well written, visually appealing, and persuasive.
The two main aspects of communication that we will build on in this guide include written and visual.
Written communication skills can make or break an analyst. Even though most of your efforts (on a time basis) will be spent performing quantitative analysis, it’s really the expression of your findings with others that matters most. So, what constitutes good written communication for a financial analyst? It mostly comes down to structure, argument and supporting points. It’s important to isolate the central agreement, and hammer that point home with relevant supporting information. It takes practice, but there is a knack to writing persuasive business documents that an analyst should strive to develop over time. Examples include writing a letter of intent or a term sheet.
Visual representation of data is at the center of good financial analysis. It’s important to create charts and graphs that make the information easy to follow, with clear takeaways, and a feeling of confidence. This is an area where CFI can help, as we designed several courses that walk you through the process of building beautiful Excel outputs, step by step. Our advanced excel course includes lessons on building various types of charts for pitch books, research reports, or other documents.
This part of the trifecta is absolutely critical, but often receives the least training, development or focus. It’s easy just to focus on financial modeling training, but that won’t be enough to stand out. The areas of soft skills that analysts need to work on are: communication, politics, and personal brand.
Oral communication is probably the least practiced and leased focused-on subset of communication but it’s very important for financial analysts. To rise in the ranks, you have to be able to hold your own on a conference call with a client, or with an executive, and communicating your thoughts in an effective way. Good communication requires confidence, awareness, and the ability to read other people. If you can read them, there’s hope of adjusting your approach based on the non-verbal feedback they’re giving you.
Politics can be a dirty word, and many people prefer not to talk about it, or pretend it doesn’t exist at their organization. The fact is, as soon as you have two or more people working together, there is the potential to have politics. The suggestion here is not to become a highly political person, it’s simply to be aware of the politics in your organization, and have a plan for how to best manage them. Analysts frequently make decisions with no regard for the political implications, and that can backfire. Conversely, those who are able to navigate the system, seem to rise more quickly. At the end of the day, make sure that, (1) you understand the politics at your organization, (2) you make a strategy about how to successfully navigate them, and (3) you constantly check in with yourself
Managing your personal brand can mean a lot of different things. At its core, it means conducting yourself in a manner that causes colleagues and clients to enjoy working with you, respect you, and view you as a high achiever. This is easier said than done, as it takes a lifetime of good decisions to build a strong personal brand, and only one bad decision to destroy it. What we recommend for building the best personal brand is (1) always have a positive attitude, (2) work well with teammates and don’t create drama, and (3) always follow through on what you promise to do and operate with the highest level of integrity.
We have designed several more guides to help you become a world class financial analyst. Our most popular guides include: