Where do you see the equity research industry going?IB
Moderator Note (Andy): Best of WSO - this post originally went up January 2008 and we thought it deserved to go back on the homepage for those who may have never seen it.
I was just talking with an II-ranked independent research analyst. She was really surprised when I told her that I was interviewing with a BB ER firm; she thought that equity research at BB firms is diminishing in importance because of how brokerage is handled these days. And she spoke about how junior most analysts are these days, and increasingly analysts are putting out sophomoric research and not receiving enough training and inadvertently shooting themselves in the foot. I took the stance that research also provides added value to the investment banking arm; she disagreed and said she felt that most bankers thought analysts did not add value.
Well all this got me worried. No one wants to join a dying industry. She was of the opinion that research is increasingly shifting to boutique firms that institutions will pre-pay for research & services. But even if she's right, and someone does take a job with ER at a BB firm where the business is on the wane, you still end up with all the intangibles that an alignment with a BB firm brings; whereas when you work for an independent you start at a disadvantage in terms of exit opportunities.
So can you guys talk about what you think the future for equity research is and how strong the exit opportunities will be for a research associate that looks to get out of the business after 2-3 years?