Efficient Financial Language Understanding via Distillation with Synthetic Data

Financial text, textbooks, and question-answer pairs are abundant, but only a small fraction is directly usable for reasoning-focused post-training. Existing QA pairs often lack explicit reasoning, sufficient context, or reliably verifiable answers, while textbooks must first be transformed into synthetic training examples. We present a data-centric pipeline that constructs complementary corpora by mining open-source reasoning traces, distilling financial instruction data, and generating knowledge-graph-guided question-answer pairs from financial educational material. After semantic deduplication, three lightweight sequence classifiers select finance-relevant examples, reject under-specified questions, and identify tasks suitable for reinforcement learning with compact rule-based verifiers. For model adaptation, we study supervised fine-tuning and reinforcement learning, while self-distilled fine-tuning and post-training model merging are used to prevent the loss of financial capabilities already present in the starting model. We evaluate the adapted language models using FINESSE-Bench, reporting aggregate performance and changes relative to their starting checkpoints. Across the selected comparisons, ordinary SFT reduces FINESSE-Bench accuracy by 3.2-4.0 percentage points, whereas self-distilled SFT improves over the corresponding starting models by 1.0-2.8 points. Equal-weight merging recovers 3.0 points over its SFT parent and finishes 0.9 points above the original model; GRPO on hard tasks adds 0.4 points after self-distilled SFT or 3.0 points when applied directly to verifiable tasks. These results show that retention-aware adaptation can improve financial reasoning without the regressions observed after ordinary SFT.

Adapting large language models (LLMs) to specialized financial reasoning typically requires expensive fine-tuning that produces model-locked expertise. Training-free alternatives have emerged, yet our experiments show that leading methods (GEPA and ACE) achieve only marginal gains on the FAMMA financial reasoning benchmark, exposing the limits of unstructured text optimization for complex, multi-step domain reasoning. We introduce Automated Skill Distillation and Adaptation (ASDA), a framework that automatically generates structured skill artifacts through iterative error-corrective learning without modifying model weights. A teacher model analyzes a student model's failures on financial reasoning tasks, clusters errors by subfield and error type, and synthesizes skill files containing reasoning procedures, code templates, and worked examples, which are dynamically injected during inference. Evaluated on FAMMA, ASDA achieves up to +17.33% improvement on arithmetic reasoning and +5.95% on non-arithmetic reasoning, substantially outperforming all training-free baselines. The resulting skill artifacts are human-readable, version-controlled, and compatible with the Agent Skills open standard, offering any organization with a labeled domain dataset a practical and auditable path to domain adaptation without weight access or retraining.

Financial sentiment analysis converts unstructured financial news into quantitative signals that can support market analysis and decision-making. Existing work on resource-efficient financial NLP has largely focused on compressing or adapting pretrained language models, with less attention to combining contextual representations with lightweight rule-derived features. This study develops Rule-Aware FinBERT (RA-FinBERT), a parameter-efficient framework that integrates low-rank adaptation (LoRA) with three continuous VADER-derived sentiment proportions (positive, negative, and neutral) and a source-level metadata feature. The standardized four-dimensional feature vector is directly concatenated with the 768-dimensional final-layer FinBERT [CLS] representation and passed through a lightweight classification head. This design introduces only 1,024 additional trainable weights relative to a structurally matched text-only FinBERT model. RA-FinBERT was evaluated against text-only FinBERT and a lightweight DistilBERT baseline for three-class sentiment classification of financial-news titles and descriptions. On the held-out test set, RA-FinBERT achieved 69.89% accuracy and a macro F1 score of 0.634, compared with 63.44% and 0.526 for text-only FinBERT. Neutral-class recall increased from 18.18% to 45.45%. The framework supports both CPU and GPU execution, offering a lightweight and practical approach to financial sentiment classification under constrained computational resources. These findings indicate that rule-derived sentiment information and source metadata can provide complementary signals to contextual FinBERT representations and improve performance with minimal additional model complexity.