Every company has employees who analyze its financial data and enhance its decision support process ...

1. How to be a great financial analyst: it takes seven key skills
and a new way of thinking.
Every company has employees who analyze its financial data and enhance its decision support
process by providing their insights and analyses to management. In some companies the CFO See
Chief Financial Officer. , controller, or accounting staff performs this function in addition to their
regular responsibilities. In other companies the process is more formal, with financial analysts, cost
accountants, and even whole departments dedicated to this function. No matter which way it's done,
effective financial analysis is really more a way of thinking than a series of steps or processes.

2. Financial professionals who are effective at financial analysis can add value to their companies and
excel in their careers. Good analysts identify cost-savings ideas, revenue growth opportunities, and
strategies for productivity improvements. Even people who work with financial data but don't do
regular analysis (general ledger General Ledger
A company's accounting records. This formal ledger contains all the financial accounts and
statements of a business.
Notes:
The ledger uses two columns: one records debits, the other has offsetting credits. , accounts
payable, financial systems staff) can benefit by building an analytic an·a·lyt·ic or
an·a·lyt·i·cal
adj.
1. Of or relating to analysis or analytics.
2. Expert in or using analysis, especially one who thinks in a logical manner.
3. Psychoanalytic. Â approach into the way they perform their jobs.
People who are great financial analysts exhibit several key qualities--qualities we strive to develop in
WellPoint, Inc.'s Central Region. Billions of dollars in health insurance premiums and medical
expenses are realized every year in the Central Region, and it's my department's job to forecast and
analyze this financial data and other statistics. We work with the leadership of the Central Region to
help them meet their strategic objectives.
First, let's address what it takes to be a good financial analyst. Then we'll discuss what it takes to be
a great one.
GOOD FINANCIAL ANALYSTS
The seven qualities of a good financial analyst are listed below. Read through their descriptions and
think deeply about whether you possess them. Then fill out Table 1 to see where you stand.
1. Understand the concept of materiality MATERIALITY. That which is important; that which is not
merely of form but of substance.
    2. When a bill for discovery has been filed, for example, the defendant must answer every
material fact which is charged in the bill, and the test in these cases seems to . Good financial
analysts can draw conclusions with incomplete information and have a feel--an educated gut
gut (gut)
1. intestine.
2. the primordial digestive tube, consisting of the fore-, mid-, and hindgut.
3. surgical g.
blind gut cecum.  feel, perhaps--for when information is relevant and when it isn't. In some cases

3. the information is measurable, like the dollar magnitude of a transaction or the level of a variance
percentage to budget. In others it's more intangible, like knowing the amount of detail to present to
an accounting manager vs. the CFO. One of my financial analysts explained it as the concept of cost
vs. benefit: the concept of knowing when you have reached a point where spending more time on an
analysis won't provide enough benefit to continue.
Accountants and computer programmers sometimes have a hard time making the transition to
financial analysis jobs because of their focus on numbers and order. A standard question I ask
during a job interview is "What does materiality mean to you?" The applicants who tell me it means
doing whatever it takes to get something to tie to the penny usually don't get a second interview.
2. Are good at using spreadsheets and databases to analyze information. Good financial analysts
know how to apply the tools available in spreadsheets and databases to pull together disparate data,
solve problems, and present information to management. Experience with using all of the features of
these tools isn't as important as an awareness of them and knowing when to use them, though a
strong understanding of pivot tables and query design will go a long way. Further, it's important to
know the needs and personal style of the individual(s) for whom the work is being done. Some
managers prefer information in a visual format like graphs, while others like it all laid out for them
in detailed financial tables. Ultimately, it's all about turning data into conclusions.
In my department at WellPoint we developed a Technical Skills Assessment that each analyst uses to
assess their level of ability in Microsoft Excel (tool) Microsoft Excel - A spreadsheet program from
Microsoft, part of their Microsoft Office suite of productivity tools for Microsoft Windows and
Macintosh. Excel is probably the most widely used spreadsheet in the world.
Latest version: Excel 97, as of 1997-01-14. , Microsoft Access A database program for Windows,
available separately or included in the Microsoft Office suite. Access is programmable using Visual
Basic for Applications (VBA). Access can read Paradox, dBASE and Btrieve files, and using ODBC,
Microsoft SQL Server, SYBASE SQL Server and Oracle data. , and other tools. These Assessments
help me work with my staff to identify opportunities for their development and also give us a
reference tool for locating experts in the features of each tool.
3. Understand management accounting concepts and apply them to their business. We all learned
many valuable concepts in our undergraduate and MBA courses, but most financial analysts don't
utilize them fully in their jobs. Good financial analysts remember these concepts and are able to
apply them. For example, analysts responsible for departmental budgets are skilled at using
variance analyses and activity-based costing In a business organization, Activity-based costing (ABC)
is a method of allocating costs to products and services. It is generally used as a tool for planning
and control. This is a necessary tool for doing value chain analysis. Â (ABC) techniques. Those in
capital intensive industries are skilled at applying return on investment and breakeven analyses. And
those developing growth strategies will use contribution margin and incremental costing analyses.
Statistical methods are also often untapped, mostly because we tend to forget them after completing
our degrees. Good financial analysts find ways to use statistics to locate patterns in their data.
Obviously, a great way to develop these skills is to become a Certified Management Accountant
This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.
You can assist by [ editing it] now. Â (CMA CMA - Concert Multithread Architecture from DEC. )
and/or Certified See certification. Â Financial Manager (CFM (Cubic Feet per Minute) The

4. measurement of air flow. Cooling fans are rated in CFM. ). Preparing for the exams refreshes your
knowledge and lets you practice in areas where you may feel rusty rust·y Â
adj. rust·i·er, rust·i·est
1. Covered with rust; corroded.
2. Consisting of or produced by rust.
3. Of a yellowish-red or brownish-red color.
4. , and earning the actual certification demonstrates your excellence.
4. Navigate (1) "Surfing the Web." To move from page to page on the Web.
(2) To move through the menu structure in a software application. Â successfully through their
company's financial systems and informal people networks to get data and information. Good
financial analysts know their company's financial systems--General Ledger The principal book of
accounts of a business enterprise in which all the daily transactions are entered under appropriate
headings to reflect the debits and credits of each account. , Sales, Inventory, etc.--and the limitations
of the data they contain, and they can extract data from them for further analysis in spreadsheets
and databases.
Also, knowing whom to ask for help or for answers is just as important as the financial systems.
Informal people networks don't follow the corporate chain of command, so it may take several calls
at first to identify the people who can help, but these networks are very effective once they are
established.
It's hard to have both technical skills and people skills since they require very different talents, but
each can be developed with awareness, focus, and practice.
5. Possess a solid understanding of their company's products, markets, and processes. Good
financial analysts can add value by understanding how their analyses relate to the business.
Knowing the company's major revenue sources (products, customers), key computer systems,
workflow The automatic routing of documents to the users responsible for working on them.
Workflow is concerned with providing the information required to support each step of the business
cycle. Â processes, and geographic distribution will provide insights into the components of revenue
and expense that should be analyzed an·a·lyze Â
tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es
1. To examine methodically by separating into parts and studying their interrelations.
2. Chemistry To make a chemical analysis of.
3. . For example, an analyst who knows that 30% of a company's revenue is generated by one
product will monitor that product's sales very closely and be in constant contact with the product
manager when doing financial projections.
6. Take the initiative to improve in each of these areas and have a continuous-improvement
mentality men·tal·i·ty

5. n.
The sum of a person's intellectual capabilities or endowment. . Good financial analysts always look
for ways to be more effective in their work and pursue the training that will enhance their abilities,
such as learning to use analysis tools more effectively. Good analysts aren't satisfied with current
improvements and are always looking to enhance themselves and their business, so they seek advice
on how to improve existing processes. In my department, for example, a monthly task that once took
eight hours to complete manually is now automated au·to·mate Â
v. au·to·mat·ed, au·to·mat·ing, au·to·mates
v.tr.
1. To convert to automatic operation: automate a factory.
2. Â and takes only two hours.
7. Include insights and questions when distributing a report or analysis. Many analysts just want to
complete the report, check it off their list, and move on to the next task. Good financial analysts will
resist this urge. They will not only take the time to review the report for accuracy but to determine
what it says about the business. Then they pass on any observations and questions to management
when they deliver the analysis. This process works best if they set aside the analysis after it's
complete and then revisit re·vis·it Â
tr.v. re·vis·it·ed, re·vis·it·ing, re·vis·its
To visit again.
n.
A second or repeated visit.
re  it later with a fresh perspective. Good analysts consider their work to be analysis rather than
reporting. If you can do only one thing differently, work on this quality because it will make the most
impact.
FROM GOOD TO GREAT
How did you do in Table 1? Are you a good financial analyst? These are skills you should expect from
yourself and that any manager should expect from their staff.
At WellPoint, our financial analysts are working to become not just good, but great financial
analysts. Several key qualities exhibited by great financial analysts are shown in Table 2, and, as you
can see, they are enhanced versions of the skills good financial analysts possess. As you did with
Table 1, read the following descriptions and think deeply about whether you possess the qualities of
a great financial analyst. Then fill out Table 2.
1. Feel bothered when analyzing issues that aren't material. Great financial analysts understand the
importance and relevance of their work. They have a strong sense of priorities and of what is
important to their company, which results in the emotional reaction of "feeling bothered" when they
are working on issues that aren't material. This doesn't mean they neglect someone who needs help

6. researching a small issue, but, if their instinct instinct, term used generally to indicate an innate
tendency to action, or pattern of behavior, elicited by specific stimuli and fulfilling vital needs of an
organism. Â tells them they are wasting their time, they talk to the requestor--even a superior--about
what course of action would be best for the company.
2. Take a top-down approach to analysis and investigation. Great financial analysts don't get lost in
the detail but start from the highest level and work downward until they experience insights--those
a-ha! moments. They are always aware of the "big picture" reason for their analyses and are able to
come back to this high level after doing detailed work. They understand their company's mission and
objectives and how their role relates. They also delegate A person who is appointed, authorized,
delegated, or commissioned to act in the place of another. Transfer of authority from one to another.
A person to whom affairs are committed by another.
A person elected or appointed to be a member of a representative assembly. Â effectively if they are
in a manager or team leader position.
3. Think like an entrepreneur entrepreneur (än'tr?pr?nûr`) [Fr.,=one who undertakes], person
who assumes the organization, management, and risks of a business enterprise. . Great financial
analysts look at their company's key financial and performance measures and think about ways to
make more money, grow market share, etc. They are driven by the desire to find opportunities and
threats and to locate innovative ways to answer key questions. They actively offer their thoughts to
key decision makers and enjoy discussions about the business with management and their peers.
People come to them for ideas on how to solve problems, and they are often included on cross-
functional teams.
4. Understand concept over process. Remember the statement that effective financial analysis is
more a way of thinking than a series of steps or processes? Well, all financial professionals have
processes--like the monthly close process--that are part of their work routine. But some don't
understand the process and follow a set of steps while being oblivious as to whether they make
sense. Others understand the process and its intricacies and are able to adjust to any disturbances
or disruptions. But they still don't understand what value the process adds to their company or how
it fits in with other key processes. Great financial analysts understand the true concept of the
process and sniff out unnecessary processes to eliminate. They ask questions like "Can we close the
books one day sooner if we eliminate this step?" Or "Does anyone find value in this report that I
produce and distribute each month?" Some of the biggest opportunities for process improvement
occur when an analyst takes on new responsibilities since they are able to take a step back and
apply a fresh look to existing processes.
5. Understand how external factors affect their company. Great financial analysts can anticipate how
changes in the industry or economy will affect their business. They realize the impact of competitor
and government actions, and they understand the expectations of shareholders, stock analysts, and
rating agencies. They create models and scenarios based on possible outcomes of these factors and
share them with management.
6. Constantly seek customer feedback and interaction. First, great financial analysts understand who
their customers are: managers, peers, other departments. They ask them how they can provide
better service, sometimes even using questionnaires to collect this feedback. And they seek frequent
interaction with their customers to learn more about their needs. Great analysts also poll the people
on their distribution lists to find out whether they want to continue receiving the analyses they send
to them and whether they recommend any changes.

7. 7. Have the ability to tell the story behind the data. Great financial analysts are truly able to take a
piece of paper full of numbers and effectively communicate insightful conclusions about the key
points within the numbers--in a clear, concise manner. If a financial professional wants to be an
effective CFO, he or she needs this skill more than any other.
In my department, we developed an analyst test to use with potential job candidates. It shows a
series of financial results for a fictional insurance company and asks the interviewee to describe
what they see happening in the numbers (tell the story).We have found this to be one of the best
indicators in determining whether someone is well suited for our department and our team.
GO FOR THE GREAT!
Increasing global competition and the pace of change require companies to have a stronger ability to
analyze, predict, and improve their financial results. Financial managers can enhance the value of
their teams by coaching them to be great financial analysts, and individuals can set themselves apart
if they demonstrate superior financial analysis skills. Although these skills don't come naturally for
many people, they can be developed and enhanced over time.
Now take another look at your scores from Tables 1 and 2. Share your assessment with your
supervisor, and commit to working on the skills that need development. Keep Table 3 nearby as a
handy reference--it shows the transition from good to great. If you become a great financial analyst,
your department--and your company--will become great as well!
Table 1: Good Financial Analysts
2 points for the qualities in which you are very strong
1 point for the qualities you possess but could develop
further
0 points for those you don't have and need to develop
-- 1. Understand the concept of materiality.
-- 2. Are good at using spreadsheets and databases
to analyze information.
-- 3. Understand management accounting concepts
and apply them to their business.
-- 4. Navigate successfully through their company's
financial systems and informal people networks
to get data and information.
-- 5. Possess a solid understanding of their company's

8. products, markets, and processes.
-- 6. Take the initiative to improve in each of these
areas and have a continuous-improvement
mentality.
-- 7. Include insights and questions when distributing
a report or analysis.
-- Total Score
You are a GOOD FINANCIAL ANALYST if you score 10
or higher.
Table 2: Great Financial Analysts
4 points for the qualities in which you are very strong
2 points for the qualities you possess but could
develop further
0 points for those you don't have and need to develop
-- 1. Feel bothered when analyzing issues that are
not material.
-- 2. Take a top-down approach to analysis and
investigation.
-- 3. Think like an entrepreneur.
-- 4. Understand concept over process.
-- 5. Understand how external factors affect their
company.
-- 6. Constantly seek customer feedback and
interaction.
-- 7. Have the ability to tell the story behind the
data.

9. -- Subtotal
-- Score from Table 1--Good Financial Analysts
-- Total Score
You are a GREAT FINANCIAL ANALYST if you score 30
or higher.
Table 3: Making the Transition
Good Financial Analysts: Great Financial Analysts:
1. Understand the concept [right arrow] 1. Feel bothered when
of materiality. analyzing issues that
are not material.
2. Are good at using [right arrow] 2. Take a top-down
spreadsheets and approach to analysis
databases to analyze and investigation.
information.
3. Understand management [right arrow] 3. Think like an
accounting concepts and entrepreneur.
apply them to their
business.
4. Navigate successfully [right arrow] 4. Understand concept over
through their company's process.
financial systems and
informal people
networks to get data
and information.
5. Possess a solid [right arrow] 5. Understand how external
understanding of their factors affect their

10. company's products, company.
markets, and processes.
6. Take the initiative to [right arrow] 6. Constantly seek
improve in each of customer feedback
these areas and have a and interaction.
continuous improvement
mentality.
7. Include insights and [right arrow] 7. Have the ability to
questions when tell the story behind
distributing a report the data.
or analysis.
Note: Anthem anthem [ultimately from antiphon], short nonliturgical choral composition used in
Protestant services, usually accompanied and having an English text. The term is used in a broader
sense for "national anthems" and for the Latin motets still used occasionally in , Inc. acquired
WellPoint, Inc. in November 2004, retaining its headquarters in Indianapolis, Ind., but changing its
name to WellPoint, Inc. In addition to being the largest healthcare company in the U.S., WellPoint,
Inc. is also the largest Blue Cross and Blue Shield licensee licensee n. a person given a license by
government or under private agreement. (See: license, licensor)
LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. , with health plans stretching
from California to Maine.
Steve Spiech, CMA, CFM, is a director of financial analysis for WellPoint, Inc.'s Central Region in
Indianapolis, Ind., where he has enjoyed being a part of his company's emergence as the largest
healthcare company in the United States United States, officially United States of America,
republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The
United States is the world's third largest country in population and the fourth largest country in
area. . You can reach him at SSpiech@ameritech.net or (317) 287-5730.
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