Investment portfolios are becoming more complex, new investment opportunities are emerging, and financial regulatory reform is becoming a major point of emphasis for government agencies and compliance boards in the United States and abroad. These changes are posing new challenges and opportunities for investment firms, money management companies, banks, and other organizations concerned with making money for themselves and/or their clients.
To address these challenges and capitalize on such opportunities, businesses need trusted insights, opinions, and strategies that can help them make timely and well informed financial decisions. That is why the financial analyst is one of the fastest growing and most in-demand positions in finance.
According to the Bureau of Labor Statistics, employment of financial analysts is projected to grow 12 percent through 2024. This translates to approximately 32,300 new financial analyst jobs being added over the next decade. Considering such high demand, a large number of finance professionals looking for advancement opportunities are preparing themselves to fill the growing number of financial analyst positions in the U.S. and overseas.
To help you better understand the opportunities for analysts and the overall health of the career itself, here is a look at three of the major factors driving demand for financial analysts.
The Growing Global Economy
In its annual Budget and Economic Outlook report, the Congressional Budget Office (CBO) stated that it expects the economy to grow more quickly in 2016 and 2017 than it did in 2015, when inflation-adjusted GDP grew by an estimated 2.0 percent. In the CBO’s estimation, real GDP in America should grow by 2.7 percent this calendar year and by 2.5 percent in 2017.
The CBO cites increases in consumer spending and fixed asset investments by businesses as major drivers of the country’s economic expansion in the coming years. The CBO estimates that business investments will contribute 0.6 percentage points to the GDP growth rate in 2016 and 0.5 percentage points the following year, both numbers up from a 0.2 percentage point contribution in 2015. Financial analysts help businesses make savvy investment decisions, so an increase in total business investment activities means more opportunities (and more demand) for finance professionals with the requisite training, skills, and experience.
The global economic outlook is just as bright. In the latest version of its World Economic Situation and Prospects (WESP) report, the United Nations estimates that the world economy is projected to grow by 2.9 percent in 2016 and 3.2 percent in 2017. Citing the currently less restrictive monetary stances worldwide, the UN expects businesses and money management firms to front-load investments in the coming years before normalization leads to higher borrowing costs and interest rates. Again, financial analysts will be called on to help businesses in the U.S. and abroad take advantage of international investment opportunities resulting from the growing global economy.
Focus on Improving Returns
Assuming current investment banking income remains static, Accenture Consulting reports that the largest investment banks will collectively need to reduce costs by as much as $20 billion to realize higher average returns on equity stakes and investments. They explain why, citing the fact that investment banks have experienced only modest improvements in their cost-to-income ratios despite significant transformation efforts over the past decade. Financial analysts play a major role in both sides of the cost-to-income equation, which also helps explain the rising demand for these positions by investment banks and money management firms seeking to drive income, reduce costs, and improve the average returns.
Global management and consulting firm McKinsey & Company has identified the following tactical strategies and responses firms have taken to remain profitable in light of current macroeconomic conditions and new compliance rules:
- Portfolio optimization and restructuring
- Balance sheet optimization
- Risk and capital model improvements
- Data quality enhancements
- Excess capital management
Financial analysts have a unique set of skills and aptitudes that can help firms in each of these areas, especially with financial data gathering and analysis.
Compliance and Risk Management Concerns
The rise in demand for financial analysts has also been driven by the introduction of stricter compliance measures and legislation aimed at increasing financial market stability, and not just here in the U.S.
According to data from lobby group TheCityUK, investment banking jobs in London reached an all-time high of 729,600 in 2015, with a significant portion of the growth attributed to positions in financial compliance and risk management. Interestingly, these are also areas where employers are noticing a shortage and where demand is increasing as a result. Nearly 60% of London-based investment firms that responded to the 2015 London Employment Survey indicated that they are experiencing a shortage of skilled staff in compliance and risk management—two areas financial analysts are trained to excel in.
The future is bright for practitioners who have skills in portfolio management, risk management, and financial data analysis. Creighton Master of Investment Management and Financial Analysis (MIMFA) can prepare you to excel as a financial analyst. Creighton’s MIMFA program is a Program Partner with the CFA Institute. Request more information today.