Q&A: I'm a First Year Equity Research Associate

User X's picture
Rank: Senior Monkey | 72

Mod Note (Andy): Happy to introduce another new blogger: "User X". He'll be blogging Sundays at 8pm ET.

Hey everyone, looking forward to bringing some more interesting discussion threads to the site. Quick background:
- Engineering degree + work experience
- Eng-Finance transition
- Equity research at boutique brokerage (supporting coverage of several commodities and alternative energy, with an engineering spin)

Feel free to ask questions and I'll do my best to get you some answers.

-User X

Comments (29)

Oct 16, 2013

Looking forwad to another ER user contributing!

What tier was the MBA?

How did you get the ER job? OCR? Networking? etc.

How much do you make as a first year at a boutique considering you have an MBA but no prior ER experience?

What location/region is your boutique? NYC? etc.

Do you think having the engineering background helped a lot with getting the job?

Lastly, how was the interview for a boutique ER position? Technical?

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Oct 16, 2013

Thanks! I figured another ER opinion might be useful. As far as your questions:

The MBA was at a tier-1 target school.

I was fortunate with my job to have the company approach the school asking for someone with MBA+eng. From there, it was a pretty involved interview process that spanned more than a month (they were looking at a bunch of candidates). Having said all that, I did go through a bunch of interviews during OCR (some of which I got through networking) that helped prep me to land my final offer.

Not gonna lie, I don't make much at a boutique firm. The salary was pitched to me as a mediocre with potential for significant bonus based on individual + company performance. Unfortunately the company isn't seeing much deal flow at the moment...hence no bonus. I was making $75-80k in engineering before making the transition...needless to say I have taken a pay cut.

I'm still new to the whole "anonymous writing", so for now I'll say that my boutique is in a major financial market. Once I get more comfortable I'll expand further.

As mentioned above the engineering definitely helped me get the job. The approach of our firm is to provide a deeper understanding than the street generally offers.

The interview process involved several face-to-face meetings with multiple people within the company (mostly discussion-based on their coverage universe), a financial modelling exercise that I had several days to complete, and a writing exercise that I also had several days to complete.

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Oct 16, 2013

Whats the best way for non-MBA candidates to break in?
Is it easy to break into ER / buy side fundamental investing with an MBA?
Any tips for 2nd tier consultants to get noticed and break in?

Oct 16, 2013

Really the key for anyone breaking into ER is to demonstrate some sort of industry knowledge (or capacity to pick it up quickly) and to gel with the analyst that you'll be reporting to. Since the turnover is not standardized like banking, I think the key is to continue meeting with people in the industry and demonstrate an interest/ability so that when a position does become available, you are on their mind. From what I have seen, many of the ER positions are unposted and are filled based upon relationships.

I don't know that breaking into ER is ever easy, simply because the number of opportunities and the level of turnover is significantly less than banking (which I'm sure most of you are comparing it to). The MBA definitely helped me because I had absolutely no prior finance experience (engineering project management not withstanding).

As far as buy-side analysts...good luck. Unless you are very senior in an industry with significant expertise, a buy-side firm has no reason to hire you without a decent amount of sell-side experience (MBA or no MBA).

Hopefully your consultancy focus is an industry with a direct finance counterpart (e.g., oil and gas or consumer retail). From there try to meet ER analysts who cover that sector.

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Oct 16, 2013

How did you land the job? Can you go into detail of your recruiting process? I'm studying for GMAT now and want to be in your shoes in 2/3 years.

Also: what's your honest opinion on people applying for ER jobs coming from asset management marketing/sales background? Is an MBA necessary?

Oct 16, 2013

I was fortunate to have my company approach my school asking for someone with a similar background as mine. From there it was a pretty in-depth process (as is generally the case at boutique firms because they can ill-afford to make a poor hire).

I had several face-to-face meetings with multiple members of the company to discuss the industry and the "uniqueness" of what the company tries to offer. Following those, I was asked to do a 2-hour writing exercise on a company I knew nothing about and a separate 5-day financial model from scratch on a different company.

I think that asset management marketing/sales background would be tough, especially without an MBA. Even though MBAs are becoming more and more commoditized, they still represent a significant financial/time commitment to getting into the industry. Depending on what your area of focus in marketing/sales was, you may be able to slip in - but I think in general it will be difficult if you don't have the MBA.

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Oct 16, 2013

I'm a 1st year MBA and making somewhat of a career switch, like yourself, into Equity Research. Can you talk a bit about your transition?

Oct 16, 2013

Good stuff! I left engineering for a few reasons. First, my specific field was facing a significant amount of uncertainty that I didn't feel like trying to battle through. Second, my eng firm had been acquired by a larger player, which completely changed the culture and got rid of the small-company feel. Third, I wanted to make more money in the long run.

Once I started looking around, it quickly became apparent that the MBA would be a good way to make the transition possible. It is a bit of a hoop to jump through, but overall a great experience.

You will see from my subsequent posts over the coming weeks that I am positive about the benefits of the MBA, but becoming more negative about the sell-side finance industry. I won't go into all the details here, but make sure you do your research and carefully think about what you want to get out of working in finance (and whether you may be better served applying your MBA to your existing career).

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Oct 16, 2013

I'm currently interning for a boutique ER firm. I graduated in June '13. How would you suggest to turn this intern position into a full time gig? Any advice in networking across the same industry?

Oct 16, 2013

This is a tougher one for me to answer because I never did an internship. The main thing would probably be just to bust your ass and demonstrate your ability to do the job well...i.e., make yourself indispensable for the firm. Also keep in mind whether or not you actually want a full-time gig there. For me this would depend on my relationship with my analyst, the general culture of the firm, its ability to stay solvent (highly important for boutiques), and your ability to get ahead there.

Networking within the same industry is a delicate matter as you don't want to be seen as stepping out on your current employer. That being said, it is a reality of the corporate world today, but I would suggest being discrete but not secretive about the steps your taking (don't flaunt it in your current employer's face but certainly don't lie about it if they ask). Hopefully within your internship you've been exposed to folks from other firms that you can reach out to for at least a quick coffee chat, then go from there.

Oct 16, 2013

Would you mind going into a little more detail about your experience transitioning from engineering to finance? Specifically, what fields are your technical education/work experience in, and do you think engineering added any value to your application in the eyes prospective employers? Alternatively, did they only see your MBA and therefore you effectively re-branded yourself?

Oct 16, 2013

Since I'm still unfamiliar with how anonymous to be, this answer may be at a higher level than you were hoping. My engineering education and work experience are both related to the energy sector. Given that my research coverage now includes certain commodities/energy, the engineering background definitely added value to prospective employers.

In general with ER, it really really helps to have relevant background experience to apply to a sector, even with an MBA. There are more and more MBAs out there, so finance "knowledge" is not really an issue. I found that it was more the converse of your question - there are a lot of firms won't even look at you for ER if you have a generic MBA and no experience that relates to their coverage universe (even loose relation).

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Oct 16, 2013

Do you think you could've made the transition without the MBA and through just the CFA?

Oct 16, 2013

I honestly don't think I would have a chance of passing the CFA without the MBA. I could read the books and look at Schweser notes, but not having a commerce background would make it incredibly difficult to tackle that amount of material.

That being said, if you can get your CFA w/o the MBA, then I think it's difficult but possible to transition (I know cases on both sides - those who could and couldn't make the transition w/o the MBA but having CFA).

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Oct 16, 2013

If somebodys already covering a sector and would like to switch to ER, would an MSF hold any weight in addition to their work experience to help makeup for a nontarget undergrad? Or is time better spent beginning CFA?

Oct 16, 2013

Yes, Masters of Finance does carry some weight and should help. However, from my limited experience and seeing the people from my school who went the MFin route, they have definitely struggled to land the high-end jobs in IB or ER.

It sounds like you may be pursuing your MSF, or already have it...assuming this, my recommendation (and keep in mind I've never been involved in hiring anyone for ER) would be to push your sector knowledge with a strong base of financial knowledge from the MSF. You can register or "pursue" Level 1 CFA for appearances sake if need be, but strong sector experience with a grad degree in finance-related field (MBA, MSF) would hopefully be enough.

I'm not encouraging lying on applications re: CFA. However, let's be honest: CFA is not needed for sell-side jobs...its entire purpose is for buy-side when you are managing other people's money. I don't have concrete data, but I would suspect that the number of people who register and/or only complete Level 1 compared to the number who complete the whole program would be staggering. Level 1 may be a hoop that you have to jump through.

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Oct 16, 2013

Congrats on the top MBA and landing the job. Now we just need to get you paid more!

Oct 16, 2013

Haha, no debate there. Maybe WSO will start paying its contributors...

Oct 17, 2013

SB +1. Appreciate the insights

Oct 18, 2013

Appreciate the initiative.

Your response to the following questions would be highly appreciated:
- interview process (perhaps some examples of your own to approach the interview ques)
- your take on the commodities market after a year at the firm
- where do you see yourself in 5 years from now
- your take on what an ER analyst should really have prior to applying to the business area
- pros/cons about the role

Hope time permits.

Oct 18, 2013

Sorry for the delayed response, but here it goes:

- I was pretty well prepped for the interview process from a number of IB, ER, and even S/T interviews from earlier in the recruiting cycle. At least I thought I was. The interview process for this job that I actually landed ended up being far more conversational and about the specific sectors of coverage (as opposed to IB and big-bank ER where they asked me the standard fit and technical q's). I somehow got through the first meeting with my company, and subsequently tried to read as much of their existing research as I could. I also had to review some of my old engineering material because of the coverage universe.

- My take on commodities...well that's a broad question. I will likely try to tackle that more in depth in a later, more dedicated post, but from at a high level I hate gold (I think it's purely speculative with little industrial use...and even its suitability as an inflation hedge is coming more into question). I'm generally more interested in strategic materials that will have significant importance in moving the "developing" world to the "developed" world.

- 5 years from now..good question. I think it's safe to say that it won't be in ER (more on that in future posts), so potentially PE or on the corporate side working in M&A or business development for mining companies. Or who knows..if this blogging thing goes well maybe a writer for the Financial Times like some WSO veterans are.

- ER analyst should have thick skin, ability to be quick on your feet, creative, and analytical. The individual industries and a lot of the finance techniques can be picked up pretty quickly.

- Pros: challenging, learning a ton, improves several skill sets (modeling, writing, pitching). Cons: brutal hours, less objective and unbiased than I originally thought, declining relevance, can be seen as the lowest out of IB S/T but is arguably the most mentally demanding.

I realize I've written a ton here but may not have answered your q's in significant detail...I will look at addressing some of these in separate threads.

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Oct 18, 2013

What engineering degree do you have? What part of energy did you work in? (I'm in the O&G, but not in Finance) I'm in Houston obviously.

Oct 18, 2013

I would love to answer you on the eng degree and energy focus, but I'm still new and trying to remain anonymous. I will say that I did not work in o&g, but rather another large and similarly polarizing sector.

Oct 18, 2013

What would you specifically recommend for a last year undergraduate finance student to get an internship in ER right after graduation? Any modules to take special attention to? Thank you

Oct 18, 2013

Since I got hired more for my eng skills over my finance ability, I'm struggling with what to suggest for you. I think for junior IB and ER positions, the most needed financial skill is accounting. I would suggest not focussing on resource-based sectors (where you generally need the specialized industry training), but rather looking at ones that have less requirements (consumer goods, financials, etc.).

Oct 18, 2013

What are your hours like during and outside of earnings season?

Oct 19, 2013

Earnings season is all the time. The companies we follow are spread out enough that by the time some are done reporting for a given quarter, another is reporting for the following quarter.

That being said, my hours are generally 6:30am-6:30pm in the office, then I do reading or finalizing a report at home for some time after that. Because it's a boutique, the necessity of face time is somewhat reduced.

Oct 24, 2013
Nov 2, 2013