Howdy. Special offer! Limited time only

Is ER a common path to take in becoming a money manager of some kind? What is the pay like when you first start and as you move up through the ranks? Is the work any fun? It seems like it may be a little slow paced for me? Thanks for you help.

Yes - it is a well trodden path (and sometimes it goes the other way as well). If you aspire to manage money then you should look at buyside ER as you will be better positioned to learn to make investment decisions and you should have the opportunity to transfer if your employer recognises your skills.

The rest of my answer relates to the sell-side because that is my background.

It's been a while for me and I'm not current on starting packages so you should search the posts from other juniors for the actual numbers. Total comp (salary plus bonus) will be capped until you get to VP or equivalent level.
After that, it is theoretically unlimited but basically determined by the commission that you bring in (or can at least be linked to you). The basic salaries do go up but the difference is made up in bonus.
You can see then that the three key components are;
1) How much trading does your house do?
2) How big is your sector relative to the wider market? (derivative - is there higher trading levels in your sector eg tech or media)
3) How high up are you in your team? (the team head will take disproportionate reward because they have better links to the commission).

This is the first stupid question but I'll go easy on you.
I will say that you certainly have more flexibility and responsibility as a junior in research than in IBD. For one thing, junior analysts don't have to make coffee (that's what secretaries are for).

The pace is what you make it. There are times when you have to be more contemplative and that could be mistaken for being slow.
You won't be short of work though.

You're welcome. Hope it was useful.

inscrutable,

Do IBD analysts often come to you for support when attempting to value a private company or finding comps?

If you did play a support role during an IBD deal, how did your responsibilities change on a day-to-day basis?

Also, aside from first-person communication, what was your main resource for info. Did you use Bloomberg often? Capital IQ (I think thats newer).

Thanks for your help

If aspiring to manage money at a long only or other fundamentally based hedge fund, does it matter what industry/sector you get into as a sell-side analyst? ie - are certain industries more beneficial in preparing you for the buy-side?

The boutique that I moved to did not have an IBD division so not a problem there.
When I was in BB, I used to deal with IBD a lot.
Valuing a private company or comps is something that any junior IB worth his/her salt should be able to do themselves. They would sometimes ask for what my comps table would be (which may differ from consensus) but I just added a couple of the juniors to my distribution list and I was never asked again.

I entered the industry when the conflict of interest had already emerged as a wider issue and I was only ever "taken over the wall" a handful of times. I still had a lot of interaction with IBD though where it was never made clear what the agenda was.
In general, dealing with IBD is both gratifying and frustrating at the same time. On the one hand, it's nice to be acknowledged as the expert in something (even if you are not) but it's also not nice to know that you're not directly rewarded for your insights. I figured that a bigger overall bonus pool meant a bigger bonus for me so I was alright with it.
I was always nice to IBD (character flaw?) so they were always nice to me. However, they would probably be nice to me even if I treated them like crap because I had something that they wanted.

Believe it or not, first-person communication ranks pretty low on my list of available resource. It's nice to be able to rattle off the list of CEOs and CFOs that will take your phone calls - an accounting colleague of mine went to work for a company that I covered. He only met his CEO twice while I had the guy on speed-dial.
I'm not sure about the US but in Europe most analysts use Reuters - I did at BB. When I moved to the boutique, I switched to Bloomberg and I now have both. Despite the clunky interface, I find bberg easier to use but Reuters better for newsflow.
Depending on the kind of analyst that you want to be (fundamental v newsflow driven) will determine which one you prefer. I've never used Capital IQ so I can't say how useful it would be.
You would also probably subscribe to industry trade journals or websites.
There is also a hell of a lot available for free on the internet - you just have to separate the wheat from the chaff.

You're welcome.

If you aspire to manage money, why not go into asset management rather than sell-side? Sell-side is not a better jumping off platform than being a buy-sider.

No long-only money manager that I know of only invests in one sector. A lot of hedge funds have discrete pods that are sector specific but those jobs are hard to get.

In general, I would avoid the financials as they have different accounting rules and drivers. Everything else is unit price x number of units = revenue, less costs = profit.

How did you move from being a qualified accountant to ER?

Hi inscrutable

Thank you for your time here. Would you say that previous academic research experience will someone get a position in ER? I have some healthcare-related publications and heading to a top MBA program this year. Will I be able to leverage my publications towards an ER position in a healthcare group?

My final question was concerning the level of vertical progression in ER. Is it quick? Does it top out fast? Post-MBA, one enters ER as an analyst? or associate? and then what?

Thank you once again.

I fell into research by accident (I also fell into accountancy but that’s another story).Although I enjoyed my three years, I knew that I didn’t want to pursue accounting as a career. Come qualification, I had decided that I definitely wanted to be an investment banker and approached recruitment consultants with that in mind.

One of them arranged an open evening with a smaller – but very well regarded – investment bank that combined IB and equity research. At that point, I had no idea what equity research was or that it existed as a real job that paid money and everything. Because I had expressed an interest in IB, the recruiter had set up a one-on-one chat with one of the IB partners. Having heard the presentations on both IBD and research earlier in the evening, I then spent most of my one-on-one talking about equity research. Needless to say I didn’t get invited back for a proper interview (what can I say? I was young and naïve).

The evening had, however, unearthed a latent passion for research and analysis. By the way, I think “equity analysis” is a much more appropriate description of the job than “equity research” – academics do research. At this point, I will throw in the best piece of careers advice that anyone will ever give you – [b]follow your passion[/b]. I tell this to kids (and adults!) who are impressed by how much I make and what car I drive. They are more impressionable than you guys because you know what is potentially out there. If anything, this advice is more important for you than it is for them because you are at a pivotal point in your professional life and you are more easily led down the wrong path. I have been giving this advice for years and recently found out that Warren Buffett also advocates it. It doesn’t matter whether I came up with it first or him (and the odds are firmly stacked in his favour) but the fact that the greatest investor in the world has said it means you should really sit up and take notice. I digress but I’ll go into more detail another time if anyone wants.

The recruitment consultants then set about getting me interviews in equity research and I eventually got a job in a valuation group within BB. This was around the time when the banks were embracing EVA methodology and they all wanted a piece of the action so it was pretty easy for an accountant to wangle his way in. From there, it was pretty straightforward to move internally into a sector team (good analysts do move to different houses to maximize value – you only get market value when you move – so openings are frequent).

I have been described as “stockbroking gold”. This is not a comment on my analytical ability (although the fact that smart people trade on my advice does say that I’m not too shabby). Rather, I am an unusual ethnicity (for the city), have a distinctive appearance (manufactured but to my personal taste), and have a regional accent that you would not associate with either of them – in short, I am memorable. This will not make up for the quality of your work but in a situation where an investor has just had six analyst meetings he will most likely remember the advice from the Glaswegian Pakistani girl with the enormous bosom (I am none of those things but it highlights the point).

Yes, or at least it can't hurt. If you were to ask me whether you should undertake academic research to improve your chances then I would say no but you have already done the work, it is a sunk cost, and there is no incremental effort on your part so use it. Just make sure that it is work that you are proud of. I am embarrassed by my undergrad dissertation and the only reason I keep a hard copy at home is to remind me to be humble.

As above but since you haven't done your MBA yet you have to work out the opportunity cost of your MBA compared to spending the time on the job.

I covered part of this in a previous post but I'll add to it here.
The two factors that over-ride everything are how good you are and how "hot" your area is but I would say very good by most people's standard. Probably quadrupling over the first five years - more if you're good, less if you're average (but I have no interest in giving advice to anyone that just wants to be a "journeyman analyst" - and there are a lot of those about).

I would have thought probably an associate. With your industry experience you may even make VP but you shouldn't take that for granted.

Just to clarify the hierarchy because different banks have different titles and sometimes the same name will describe different positions at different banks. I will use the generic ones but they were different at the BB I was at. From junior to senior;
Analyst - entry level. This is on a training contract and you're not guaranteed a permanent job after this but more often than not you will go on. Grunt work but there'll be a lot of interesting things to do. If you have the time, there's also scope for initiative (and I would argue it's neccessary for long-term career success).
Associate - typically after 2 years of being an analyst but can be 3. A bit more responsibility, possibly coverage of some smaller companies (but you're name won't be the first on the cover).
Vice President - 2-3 years after being an associate. Primary coverage of names that matter (from a commission point of view). Sales and marketing responsibilities.
Director - anything from 2 to 6 years. I've no idea how this is formulated and I suspect it's used to keep people that may be planning to jump ship. You are not a director in the legal sense. From VP upwards there is no theoretical cap on your earnings (below VP there is a range and your performance v your peers will determine where in the range you come) so I think it's all down to title envy.
Managing Director - undetermined, might never happen. Congratulations! You have scaled the heights that mere mortals can only dream of! It's a real shame then that it's a white elephant. I think it's an excuse for the bank to pay out more of your bonus in stock. You also get to sit in more boring firm meetings to decide corporate strategy (oh, and you get to vote on who should be promoted to VP and Director levels if that floats your boat).

You are welcome. Hope this helps.

the_inscrutable, excellent information thus far, thank you for taking the time.

I'm a newly minted life science PhD and have been offered an ER position that I wanted to get some opinions on in terms of advantages/disadvantages it may provide. The position is best described as a "roaming" associate working across the healthcare team, not specific to a certain subsector (pharma, biotech, med devices, etc). Apparently, I would work with the analysts in groups equally with the goal of working towards synergy building across the healthcare team. I had never heard of such a position, but have been told its becoming more common, usually among groups covering healthcare since biotech and pharma are so interrelated.

Would such a position (with perhaps more breadth than depth than a traditional associate role) be uniquely advantageous or disadvantageous in any way? ie, in terms of skills developed, attractiveness for future job moves? any thing else... thanks again

Firstly, congratulations on your PhD!

I would personally avoid this “opportunity” unless it’s the only offer that you have or there is explicit scope for stock responsibility at a later stage. This is because you will see an asymmetric impact on job satisfaction v potential pay. ie this role might offer a slight improvement in job satisfaction (and it may even be negative if you are jack of all trades, master of none) but you will almost certainly take a dive in remuneration.

In the early years you will be range bound but this will not be the case later on. It helps if you think of the market for analysts to be like the market for any other product – demand and supply rules!

What determines how much your employer will pay you in the medium/long-term? It has to be economic for them to employ you or it is not worth doing so how much commission can you bring in? Unfortunately because someone else is the lead analyst within each of the sub-sectors they get first dibs on the comm.

Even if you do justify some of the comm., your employer only needs to pay you enough to ensure that you don’t move elsewhere – and there’s not many places you could go and do the same thing (and if you were going for a sector analyst role you’d be at a disadvantage v other existing sector analysts).

I’ve been critical here because it is relative to a standard equity research role. You will still be better paid than 99.9% of the world and that money will buy you a very comfortable life so don’t sweat it too much.

great stuff, thanks. A follow for you if you'll indulge me further.

Assuming this roaming healthcare associate job is followed after a couple of years by a more traditional VP-level position, what should I consider when choosing a subsector (biotech, pharma, devices) to focus in? Is one subsector better than the others in terms of career upside? pay? opportunities to jump to buy-side, etc?

Hi the_inscrutable -- I think it is a very noble cause that you are so generous in dispensing your knowledge on sell-side research. (in fact, as a regular poster on analystforum.com, I know we could use your insights there).

Just curious, how do you have so much time to post so elaborately on this board? I mean, I'm at a top bulge bracket shop (unlike some of the pretenders and posers on this board like you pointed out) and it's not like I'm doing work *all* the time...but what you're doing just seems like an incredibly time consuming endeavor, and I personally would never have time fo rsomething like that. Just curious what compelled you to be so generous about posting here (and again, I mean this in the most positive fashion)

I was not expecting this so early on but this is the smartest question posed so far – the situation thus far looks strange as you have pointed out. As I pointed out in another post, the single most importing thing to consider in analysis is motivation. An experienced equity analyst offering free advice to junior or wannabe equity analysts apparently in return for nothing? What’s the catch? What’s his motivation?

Before I give you the answer, why don’t a few of you have a crack at analyzing my motivation? Marks out of ten will be awarded and you will be assessed on (in no particular order) logic, originality, suspicion, and forecasting. Anyone getting 10 out of 10 can have my job. 9 out of 10 and you will get a personal letter of recommendation from myself to anyone that you want (caution – will probably carry little weight to anyone that does not know me).

ps my full board name is the_inscrutable_chicken but the forum cuts it off
pps I don't have CFA so I'm not sure what value I would add on analystforum.com

An easy one. Go with the one that you know the most about - you will enjoy it the most.
In terms of pay, as a general rule the bigger the market cap of your sector the better it will be. A friend of mine is a top 3 ranked devices analyst but I was paid a lot more than her (and I am currently unranked) because my sector was much larger than hers - she's not poor though.

the_inscruitable_chicken wrote: "I was not expecting this so early on but this is the smartest question posed so far – the situation thus far looks strange as you have pointed out. As I pointed out in another post, the single most importing thing to consider in analysis is motivation. An experienced equity analyst offering free advice to junior or wannabe equity analysts apparently in return for nothing? What’s the catch? What’s his motivation?

Before I give you the answer, why don’t a few of you have a crack at analyzing my motivation? Marks out of ten will be awarded and you will be assessed on (in no particular order) logic, originality, suspicion, and forecasting. Anyone getting 10 out of 10 can have my job. 9 out of 10 and you will get a personal letter of recommendation from myself to anyone that you want (caution – will probably carry little weight to anyone that does not know me).

ps my full board name is the_inscrutable_chicken but the forum cuts it off
pps I don't have CFA so I'm not sure what value I would add on analystforum.com
"

well, i've been doing the same thing as you on analystforum for a while (also don't have CFA charter but have extensive experience in sell side research) and it's because i enjoy teaching people and sharing whatever knowledge i have, while also engaging in intelligent discourse with people that care to learn or think intellectually about relevant issues in research and investing. i mean, as research analysts, i suppose it's only our nature to think critically and analyze everything, while also focusing our efforts on those things that are most likely to create or add value.

so, that's my reason. what's yours?

This is what 99% of sell-side analysts think their job is - but it's not. Discuss.

ps I like the way you phrased your answer (for the benefit of everyone else, this is a common trick of the sell-side - probe the client for their position and try and fit your view to theirs). You also get marks for credibility of story. Unfortunately you lose marks for false consensus. Overall I give you 6 out of 10.

if 99% of analysts think one way and you think another, i don't feel instantly compelled to defend my response (as well as consensus) without at least hearing an appropriate rebuttal from you. but thanks for noting that the rest of us are "wrong" -- it's about as logical as my rating your thesis as a negative number on a scale of 1 to 10, as it were.

You're looking to hire a junior and you want a whippersnapper to stand out with his questions.

You are looking....primarily

Alright, finally get to fire at a senior

1. Give me some pay guidance. I'm very good at ER but worried I won't make the big bucks corp financiers make - I'm about the cash now that I'm truly happy at work - any guidance (you should know a thing or two about expecting some kind of guidance) - and GBP is fine as I work in London.

2. How has spitzer changed your life? I work at a top boutique and our work is linked more to salesman and traders whereas there was a lot more IBD influence at a integrated - does this change the bonus structure or mean the death of ER in terms of making cash?

3. What do you think of Fowler leaving Merrills? Sign that finally people are realizing these BB's top ranked analysts don't do an ounce of research?

oh wait, one more,

What are the exit options? I've heard moving to the buy-side in a long only fund - can you move to other types of funds? What about PE? A guy I know got recruited to move to a prop desk -is that common?

I could play games here and we could end up going back and forth so I'll just come out and say it. What you described was the role of the buy-side analyst. The job of a sell-side analyst is to get people to buy and sell stocks.
You can be a successful sell-side analyst even if you don't realise this - but it is what it is.

No, and there are easier and more effective ways to find a junior.

Why are you worried about what somebody else makes? Even now in the early stages of your professional life you are making more money than most of the country. You are happy at work - that is what matters.

I cannot really say how Spitzer has changed my life. The regulations were there beforehand but it was a period in the cycle when it was very lucrative for people to break them so they did.
Equity research analysts were paid well before the IBD scandals, they will be paid well after.

He was just the one that got caught and I don't feel particularly sorry for him. When you hear US analysts talking about earnings being "a penny ahead" or "a penny light", what do you think? There are a couple of sectors where it is possible to forecast revenue pretty accurately but for most of them you'd have to be pretty damn good (or lucky) to get within 1%. By the time this filters down to the earnings line, how likely is it that you'll get within a penny?

Firstly, you have to ask yourself why you want to exit (presumably having worked so hard to get in in the first place). If you move somewhere else, what will be different about that job that will make you happier? If it's about the money, how much is enough? What do you want to buy? A ferrari? A boat? A bigger house? An island?

To answer your question, from sell-side equity research I know people that have moved to long-only buyside, hedge funds (including me), prop desks (happens a lot at one place I know) and IBD. I don't know anybody that has moved to private equity but I'm sure it has happened.

The reason I asked is b/c it alludes to my first question - money. I'm VERY happy on the sell-side right now and I think I'm very good at what I do, but I'm now about money. Since I can't really get any guidance (and yes, I know it's about market cap and other things - assume large mrkt cap for now) on my upside, it makes me think I should explore other options that fully reward me for my skills - and I know that sounds silly, but I would like a ferrari and a boat and I want to find out how to best do that in the context of ER - so if that is on the buyside or at a prop desk, I would like to know, b/c I can't ask anyone at work as it's tacky and there aren't any websites I know of that give me guidance.

If you can't give guidance, then how about this - is it possible to own a ferrari in sell-side ER with a large market cap and considering you're good. I believe I definitely have the skills, but it is these vapid material questions that no one likes to respond to.

And thanks for taking the time to answer - good stuff all around and very informative.

I will refer back to my answer on your own thread.

What is it that makes you good at your job? Are you a great stock picker? Are your forecasts spot on? Are you very convincing in your presentation? Are you very aggressive in closing the deal?

Once you've worked that out, you then think about what job would best suit your skills. If your forecasts are great but your stock-picking is not then you won't last very long on a prop desk.

As a general rule, the better that you can link yourself to the revenue then the better you will be paid. A second general rule is of risk/reward - the more you risk, the greater the potential reward.

Yes, you can have a ferrari and a boat in equity research (or a sizeable castle in Scotland like one analyst I know has) - if you're good enough.

These questions may seem basic from your point of view, but I've been wondering about a few things.

How often are you client facing or talking to clients? Generally what type of clients are you talking to?

Can you give a very general breakdown of what you do everyday ie, 2hrs reviewing the markets, 4 hrs researching your companies, etc.

Hey The inscrutable chicken,

My question is more about breaking into the industry. I'm assuming the time when you changed your career path from Accountancy to 'Equity Analysis' it was fairly uncommon to do this? These days I have heard alot of people going to a Big 4 Accountancy firm then trying to break into Banking after attaining their ACA/CA etc. So, do you think it is still common for people to enter banking the way you did or has this process been 'done to death'?

Secondly, I truly value your advice on doing whatever your passion is. I agree with you that you should do whatever interests you most, rather than doing something for the money, although this is much easier said than done! But what would you suggest to someone who knows that Banking is right for them, but not sure which division? Obviously, internships are a way of providing insight, but is there anything else you reccomend? To give you a better idea, I am due to commence university here in the UK this September. Thanks for everything so far, much appreciated!

OK, I'll agree with that.

I will take a shot at why your doing this, prolly will be way wrong but who knows.

You basically answered the question with your first post, by saying there is alot of misinformation out there. After your many years of success and doing what you love you want to give back to others hoping to be where you are one day. You prolly were confused along time ago and faced many of the same choices as people who use this forum do today, as seen by your telling of your experience in accounting. Also long time ago you prolly had the choice to goto trading/corpfin etc, but in the end you ended up in research. Which was the best spot for you. So you want to make sure some youngster does not make the same mistakes to go another path if "research is the right one for them". Lastly you want to show that ER should be an option for those superstars coming out of top schools.

--------------------------------

Onto my questions, I had 2 interviews last feburary for ER summer internships which I did not land. Both interviews were some of my toughest, as one interviewer literally grilled me to death to know, why I choose "x" and if I follow the market daily. The other guy said I knew my stuff from a qualitative level but could not connect with the "numbers", he like'd how I chose stocks and my knowledge but said I lack the overall package.

So I am wondering, if I want to get into this after undergrad, is there any real good books out there on ER Models/Theories, what can i do besides reading the paper everyday?

If the question is how long before I can start talking to clients then the answer is probably after a year or two. You might be thrown "stray" clients - ones that don't particularly matter to your company to practice on.

At the point that you are an established analyst it will depend on what's happening in your sector - if there's a lot of newsflow then you might speak to some clients (particularly hedge funds and prop desks daily).
When you write a research note, you'll also ring around all of your clients to alert them to it. You will also go out and market your research face to face. How often depends upon the analyst but they will usually try to work in a trip around II time.

Institutional (long only, hedge funds, prop desks), no retail.

It's very difficult to say as it varies from day to day and also from analyst to analyst.
The only thing that I did religiously was to check the news every morning (sorry, I know that won't sound particularly helpful).

To give you some guidance, here is how I see a "textbook analyst" spending their time (I've got some bad habits that I wouldn't want to pass on)
2-4 hours - scanning morning news, morning shout (aka squawk box aka hoot & holler), client calls.
6-8 hours - collating information, devising investment theses, writing research.
1 hours - coffee, lunch, making fun of your colleagues.

I don't think it was that unusual when I did it. Accounting has always been viewed as excellent all-round basic business training so I don't see why the banks would not want to hire from there.

There are hundreds of functions within an investment bank so I can't go into the specifics of each one. Internships are great because you get to see it for yourself and form your own opinions. However, you'll only be able to do a limited number of them.
Why not try asking people out to lunch? Make it clear that you are not after a job from them but that you are interested in picking their brain. You will get a lot of people saying no but you might get someone that says yes.

A good answer, similar to the previous one from numi but using the information available to justify your comments. False consensus not applied but a bit limited in creativity. You get 7 out of 10.

I sometimes wonder whether the competition for summer internships is greater than it is for full-time positions! If I were looking for a summer intern, I would make sure that they are polite, presentable, reasonably smart and had big hands (for the coffee run).

To answer your question, I would read up on valuation (anything by Damodaran) and try to get hold of some research reports. You won't be able to get hold of anything very recent but they are out there (try looking on company or regulator websites).

How many undergraduate summer interns do bulge bracket banks normally take in London to Equity Research? The reason I ask is that there is a lot of talk that it's almost impossible to get in.

I don't really know - we never took any but a BB research department can be over 200 people and groups don't really mingle (a product of the musical chair approach to hiring) so I would have thought that there would be some.

I think the reason that there aren't many is that everything that you do will have to be double-checked in which time the analyst could have done the work themselves. An analyst won't mind doing this for someone that will be with them for a couple of years but it's not such a good investment if the person is gone in a couple of months.

If you know someone in research then you should probably approach them directly. Promise that you won't get underfoot and you are willing to do all the drudge work and get the coffees.

If you do get an internship, it will look very good on your resume, whatever you end up doing.

Don't bother asking me - I'm going away for the summer.

I guess I'm pretty good at stock-picking, but I'm very good at getting info that no one else gets through my search skills and I'm also incredibly convincing. (I used to be a debating champion - but that's beside the point)

I'm a very good writer for the most part and I enjoy that aspect of research, but part of me figures I would be quite good at sales or an a prop desk. I like research a lot, but I'm really looking to make an insane amount of money - I am part of the me generation, so I guess it makes sense.

But thanks for clearing a lot of this stuff up - People were calling ER a dead desk, and I'm glad that a senior has confirmed my presumptions about the industry.

Insane money, eh? Work your way up the research ladder, bring in $4m of comm that can be attributed to you and you’ll pull in $500k to $1m a year for the rest of your career. Sock a fair bit of it away in investments, watch it compound up and you’ll be set in a few years to do whatever the hell you like.

Can’t bear to wait that long? Want that Ferrari today? Then join the prop desk. You get to play with somebody else’s money and keep a slice of the profits. Be warned though, the market can remain irrational longer than you can remain liquid in this situation. On 31 December 2003, you could be convinced that the Sainsbury share price will double and you’d be right – on a 4 year view. In the meantime, you would have lost 20% and been fired.

The risk-reward ratio is still in your favour because of reward asymmetry on a prop desk (make big profits and win big for yourself, make losses and don’t lose out financially yourself) but it won’t be much consolation when you are pounding the pavement for another job (where they won’t mind why you lost your last job).

You used to work on the sell side and work now on the buy side. Why did you make the move? Do you see better career prospects on the buy side? Are there anything you miss from the sell side? Do you want to manage money some day? How long would it take for you to manage for example a small part of a fund?

This "challenge" is awesome! Something different on this Forum, where all the topics are (about) the same... so here goes my analysis step-by-step:

Step 1: 3 possible motivational areas to start with: tangible, intangible, other.

Step 2: Tangible excluded as you won't have any material benefits from posting on this Forum. Hence focus on intangible.

Step 3: Within intangible area I'd analyse 2 motivational groups: professional motivational factors and personal ones.

Step 3A: Possible professional motivation can be being noticed (i.e. stand out from the crowd) and be offered some great job or even get some media recognition. However:
>>> this Forum seems to be "junior" (not many seniors/Partners here),
>>> haven't heard about any media representatives here,
>>> Forum is anonymous,
>>> and you indicated clearly that you value your privacy,
so I exclude this motivation as well.

Step 3B: Personal reasons I can think about: ego boost, teaching nature, boredom, loneliness, other.

Step 3B(1): Ego boost - search for recognition. Factors to consider:
>>> you have already worked there, where many dream about (BB bank, #1 team, hedge fund),
>>> you are around 34yrs (21 at graduation + 3 big6 + 8 in ER + say 2 in HF) and have money & position others envy you,
>>> you don't envy others ("Why are you worried about what somebody else makes?" line you wrote to Monkey suggests that your life is not about envying others),
>>> you have already had a lot of recognition ("stockbroking gold" and even the fact that you want to write recommendation letter means that you must be well respected in relevant circles).
So all in all I exclude ego boost as your motivation.

Step 3B(2): Teaching nature - excluded based on Monkey's try.

Step 3B(3): You are bored and are looking for entertainment. Factors:
>>> you are ca. 34yrs and already have achieved a lot. What else is there that turns you on? Money you already have, position & prestige also...
>>> you seem to be however very down to earth (logical, humble, polite, with attention to details - no spelling mistakes etc.)
Tough to judge, but my gut feeling tells me it's not the motivation.

Step 3B(4): You are lonely and in this way you kill the time. Factors:
>>> you write posts at late hours (assuming you're in the UK) and also on Saturday and Sunday, and you reply to posts almost immediately,
>>> you don't need to work on weekends as you are already "after" this stage of the career
So maybe (unless you have family) this is your way to kill the time? But again (gut feeling) I wouldn't bet on this one.

Step 3B(5): Other - life reflection. Having gone successfully through traumatic experience (although of course I don't wish you any!) like disease/accident/etc, you realised how lucky you are and how great life is. As a payback you have decided to do some community service and one way to do this can be to educate others. Hence your posts on this Forum.

Because all others reasons I have already excluded (apart from Step 4) I keep this motivation as a possible one).

Step 4: The last motivational area I can think about is Others – and I mean by it that you don't have really any motivation. You just stumbled across this Forum, got excited with it (as it happens with new things) and got even more excited once you decided to trick us (competition for motivation while there is no any motivation).

So my finalists are steps 3B(5) and 4. Because, based on your posts, you seem to be very ethical guy, I exclude step 4. What leaves me with Step 3B(5): Other - life reflection.

Even if I'm wrong, it was fun! ;-)

P.S. I suspect that there is also some kind of hint in your nick. So I googled it, but my search didn't bring any conclusions (apart from the fact that you are faithful reader of Going Private, you post on Gizmondo and you like James Enck ;-)

... creepy a bit?

I certainly had not achieved everything that is possible on the sell-side but I had achieved everything that I wanted to (that was practicable).
If you cover the same companies for too long, you become somewhat jaded and either become too cynical or too favourable to the companies that you know well.

The rewards could ultimately be much higher on the buy-side than on the sell-side but it's not a particularly meaningful question. On the buy-side, you might go on to run the department/division/company. On the sell-side, you might go on to run the department/division/company.

I do miss the instant gratification of the sell-side sometimes - it is a much more dynamic place. If you are the axe (perceived to be the best informed or most insightful analyst) on a company and some major piece of news comes in then the phone doesn't stop ringing.

You can be an analyst and manage money at the same time. This could be because it is a sector-specific fund (or a book on a prop desk) or it could be because the firm wants you to keep up your analytical skills.

At most buyside places the "goal" of the analysts is to manage money and I'm not sure why that is other than financial reward.

I won't quote your post because it would get too long.

Firstly, congratulations on being the first to do any basic research (Google). Others may have used it too but if you don't say that you did then you can't get any credit for it! I am still a faithful reader of Going Private but, sadly, Jimmy Enck has moved onto pastures new so I have to settle for sending him abusive bloomberg messages.

Your post is very well structured, makes good use of the information available, and follows through logically - apart from step 3B(3) where you assumed that a down to earth person cannot be bored and looking for entertainment. I suspect that you already had your gut feeling and was stuggling for a reason to exclude it?

It didn't quite fill the bill in terms of the marking criteria that I laid out so I can't give you a 10 (although by putting my job on the line I'd effectively ruled that out anyway), but I can give you a 9. If you are looking for a job in research then I would be happy to write a letter of recommendation for you.

Only a bit?

This is what I'm fundamentally worried about when staying on the sell-side, using my previous conceptions based on instinct that then formulate into hard line thoughts that ignore possible fluctuations on a company. The fact that there are analysts that are mega-bulls on one stock is a concern to me - surely they are not outperforming on all factors.

How do you avoid getting tied to your previous recommendations whilst at the same time not changing your recommendations through the rough times? To me, this is the ultimate challenge in ER.

Well... I didn't want to sound like a freak ;-). I just found the 'challenge' cool. Nevertheless, I'm happy with 9 points ;-).

The inscrutable chicken - can I PM you?

inscrutable chicken -

I have an upcoming interview and modeling test with an equity research team.

What is the best way to prepare for something like this? I have strong accouting skills, but just want to make sure I can translate this during the modeling test.

Any advice on preparation?

No company will outperform on all factors but some will be outperforming on most. The key is to decide what are the ones the market cares about the most at that time and the risk that the negatives materialise during your recommendation period.
Even a mega-bull will acknowledge negatives about their company. They might not get written about in a research report but they will be discussed with investors in meetings.

Because of the broker-community's preference for churning stocks, recommendation periods are typically 12 months but it's generally unlikely that full value will be realised over such a short time period.

I think the harder thing is to justify a large change in fair value when little has changed fundamentally with the company; both in terms of explaining to the market and in terms of believing it yourself.
One way that many analysts get around this is to change their target prices/fair values in a sequence of smaller increments. Have a look at how many price targets out there offer more than 30% up/downside relative to the prevailing price. There won't be many and the gap is more likely to be within 20%.