Meet the investment detectives

Financial analysts look for clues to judge where banks should put their money. It's a tough job, but with excellent rewards, says Caitlin Davies
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The Independent Online

This is the message of the above scenario, which forms part of an advertising campaign for the Chartered Financial Analysts (CFA) Institute. "Trust is an issue in this career because there are serious amounts of money concerned," explains Mark Tapley, chair of the continuing professional development committee at the UK Society of Investment Professionals (UKSIP).

Financial analysts help businesses to make financial decisions by assessing the economic performance of a particular firm or industry. In general, the job means collecting and analysing financial information, identifying trends and making economic forecasts, compiling reports and giving recommendations to clients and colleagues. It could mean working for investment banks (the major employers of financial analysts), pension funds or insurance companies.

In some ways, you act as a financial detective, digging out information tucked away in balance sheets and other financial reports. And what are the major perks of the job? "You get paid a six-figure salary!" laughs Tapley, a former analyst with JP Morgan. While that may be the case mid-career, those just starting out could expect around £45,000. But bonuses can provide up to four times this. "That's if you're good. If you're not good, then you're out," warns Christopher Nicholson, the director of Oraca, an independent research house.

Nicholson started off as a biochemist, and although he did decide that his future didn't lie in the lab, he liked the way detailed knowledge could be used to demonstrate ideas. He later studied economics and languages and got a position in the City on the buy side. There are two types of analyst - those on the sell side work for stockbrokers and investment banks, while those on the buy side work for investment management institutions, helping in-house fund managers make investment decisions. Nicholson set up a research firm specialising in telecommunications.

To work as a financial analyst in the UK, you normally need a first degree. Some employers prefer degrees in business, accounting, finance, economics or statistics. Oraca, however, looks for people with a science degree, as well as fluency in at least three languages. Another route is to take an MBA in finance and banking, which is favoured by many US-based firms.

Once you have a job, there should be on-site training, and you should also be encouraged towards further study - the exams administrated by the CFA Institute, for example. The majority of UK jobs are London based, but there are opportunities in other cities, especially Edinburgh and Glasgow.

According to the British Council, competition for entry-level positions is fierce. It advises those considering such a career to join a university finance society and get work-related experience, such as an internship with a financial institution.

The UKSIP says that you need versatility for the job, as you're going to be part-accountant, part-economist and part-politician. Ultimately, your role is about making judgements - whether predicting future prices or advising a bank whether it's a good idea to make a loan. And you may find yourself in a situation where there are conflicts of interest, or you're under pressure from a company that doesn't want to be adversely compared with a competitor.

Many analysts have experience of management behaving badly - threatening analysts who decide, for example, that their company is not a good investment. So you need to be well versed in business ethics and integrity - as well as thick-skinned.

Tapley adds that you need to be able to quickly absorb a lot of unstructured information. And then you need to be able to "come to a conclusion when faced with considerable uncertainty. You need to weigh up probabilities. The manager you report to doesn't want a two-handed financial analyst, they don't want someone saying, 'On the one hand... on the other hand...'."

If your brief is to weigh up whether Shell is a better investment than BP, you will need to be concise and argue your case well.

Finally, Tapley says that it's a very competitive job and, while the money can be excellent, there is also the "psychological income of winning. It's very satisfying, it's like playing a game at a higher level."