Eluding the monetary carnage of stock market plunges is essential for individuals and businesses to avoid drastic hits to their portfolios. OnCNNMoney, reports showed that 93 percent of investors lost money during the stock market shakeup of January 2016. Averting this loss going forward is a big reason why companies are hiring quantitative analysts. They’re called the “Rocket Scientists of Wall Street.” Quants are skilled financial gurus who apply complex math formulas and algorithms to identify investment risk. On the buy side, quantitative analysts use models to determine stocks’ profit potential and weigh risk against reward. Quants on the sell side help organizations properly value their assets for maximum gains. Although less common, quantitative analysts could also work outside investing to establish pricing strategies in business or crunch actuarial data for insurance.
Salary
The Bureau of Labor Statistics estimates there are 268,360 financial analysts, including quants, employed across America. They earn a mean annual wage of $95,320, or $45.83 per hour. The top-paid quants work in financial investment activities for an average salary of $119,570. According to GlassDoor, quantitative analysts bring home an annual mean income of:
- $109,390 with Bank of America
- $121,339 with Citi
- $142,667 with Bloomberg L.P.
Beginning Salary
Recently graduated quantitative analysts typically start with a decent yearly salary around $61,650 for their mathematical ability. However, senior quants with significant experience can eventually earn over $160,760 annually. Salaries rise exceptionally higher in top-paying metros like:
- San Francisco
- New York City
- Boston
Quantitative analysts could also position themselves for advancement to Chief Financial Officer for a median salary of $305,248.
Key Responsibilities
Quantitative analysts have the primary responsibility of ensuring financial firms don’t assume risks that aren’t proportional to expected market returns. They develop intricate mathematical models to accurately make profitable decisions about:
- investment
- pricing
- risk management
“Front office” quants often collaborate with stock traders to design computer-based algorithms for well-informed buys and sells. “Back office” quants are more involved in researching the statistical validity of new financial strategies. Common tasks given to quantitative analysts include:
- performing risk analytics
- modifying bond pricing
- monitoring market dynamics
- inventing new statistical software
- presenting investing recommendations to senior management
It’s their goal to locate the best trades quickly and efficiently before the firm’s competition.
Necessary Skills
Being a financial geek must have extensive knowledge of stock market terms like:
- derivatives
- index funds
- expense ratio
- earnings per share (EPS)
Quantitative analysts need the mathematical skills to handle complex calculus, statistics, and linear algebra. Programming skills like C++ would be helpful for quants developing new statistical software. Quants need in-depth analytical and critical thinking skills to assess trading performance. Decision-making ability is crucial to establish sound investment solutions that will generate profit. Quantitative analysts must have the organizational skills to handle mass amounts of data without confusion. Becoming a quant also requires:
- independence
- strong work ethic
- ability to thrive under intense pressure
Degree and Education Requirements
Employers filling competitive quantitative analyst positions will expect interviewees to have at least a master’s degree from top-tier quant schools. Most sharpen their numerical prowess with a master’s in:
- quantitative finance
- computational finance
- or financial engineering
“Back office” quants often pursue more scientific degrees like:
- statistics
- computer science
- physics
Unlike most finance careers, holding a MBA won’t cut it because statistical ability is more prized than business acumen. Many senior-level quantitative analyst jobs at top-tier funds prefer a Doctor of Philosophy (PhD) in mathematical finance or risk management. Make certain you’re knowledgeable about:
- probability
- matrix methodology
- derivatives modeling, etc.
Pros and Cons of the Position
Young mathematicians and statisticians often dream of becoming a quant, but it’s important to remember there are rewards and challenges. On the plus side, quantitative analysts are able to apply algorithmic methods to discover new ways of analyzing financial data. Quants get quicker feedback and results on their work than most mathematical jobs. The lucrative salary and potential for bonuses with prestigious Wall Street firms is an obvious win-win. Quantitative analysts have plentiful career choices for advancement, including CFO. Greater awareness on the importance of quantitative analysis is also increasing hiring.
However, competition is very heated for the few quant positions available in financial firms. There’s little career security because unexpected volatile market conditions could threaten a quant’s job. Quantitative analysts have extreme stress dealing with large amounts of money that could be lost with poor choices. Work-life balance is skewed with long hours behind a desk. Significant time and money must also be invested in mastering advanced math.
Getting Started
Gaining real-world experience in quant finance during your schooling is essential to avoid being deemed “too academic” by employers. Actively pursue quantitative research internships, which are available with:
- JPMorgan Chase & Co.
- Goldman Sachs
- Barclays Bank
- Morgan Stanley, and more
If an option, elect to complete a master’s thesis and doctoral dissertation to show employers your ability to work independently on multifarious research. At graduation, don’t be discouraged by taking lower-level financial analysis jobs to establish rapport within the industry. Pursuing credentials like Chartered Financial Analyst can further certify your quantitative and analytical skills. The CFA Institute requires passing three rigorous exams modeled after situations quants actually face. Some could add the Certificate in Investment Performance Management (CIPM). FitchLearning also provides a six-month training program for a Certificate in Quantitative Finance (CQF).
Future Outlook
Ever changing market conditions are amping up the industry’s need for risk management. Investment portfolios becoming more complex with a wider range of liquid and illiquid securities. Quantitative analysts will be called for their in-depth knowledge. The Bureau of Labor Statistics predicts overall employment of financial analysts will grow by 12 percent through 2024 for 32,300 new positions. In particular, CNNMoney projects 10-year job growth in the smaller quant niche to surpass 41 percent! Quantitative analysts can find success with:
- hedge funds
- investment banks
- financial software companies
- insurance firms
- management consultants
Quant positions are most heavily concentrated in financial headquarters like:
- New York
- Chicago
- London
- Hong Kong
- Sydney
Quantitative analysts hold an intellectually stimulating role in the financial market using abstract mathematical models to answer investing questions about risk and pricing. Quants have gained acclaim for utilizing data science to accurately predict the profitability of stock market trades. Becoming a quantitative analyst could help computationally inclined finance professionals command vast salaries while churning their firm’s profits.
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