A warning to those aiming for Sell Side Equity Research

After spending 2 years in SS ER (BB) I feel like I have a responsibility to let others know the huge pitfalls of starting your career in research. All I'm about to say has been touched on many times on this forum but I thought I'd compile a list to save college kids and folks looking to lateral some time. I get a bunch of networking/chat requests from those two groups and I always try to be very honest about my experience here vs. other associates who embellish a lot of aspects of the role.

Before everyone posts hate comments, I know experiences vary widely. Your time in research will be extremely different to other associates and will ultimately depend on 1 person: your Analyst. However even a great analyst (I am extremely lucky to work for an analyst who doesn't care about facetime or overworking me, gives me full modelling responsibilities and actually considers my opinions on target/recos etc which is very rare) won't make up for all the other issues I lay out below.

1- Your exit opportunities are extremely narrow:

Compared to IB and strategy consulting, you will have access to about 5% of their exit opps. Realistically, ER associates can land in either investor relations, MM or LO buy-side if they're top of the crop and work for a ranked Analyst (a lot of average associates will end up at lesser known LO/retail investment funds with a huge pay cut) or something like corporate banking or a back office role at the same bank. Your peers in IB will have the same access to these jobs, plus everything else (PE, corp dev, multi-strat HFs, you name it). Some ER associates will get fed up and move to IB in the same bank but most of them will lose a year or two doing so. Also most ER associates are 26-33, not an age where you'd start thinking about getting killed in IB.

I went into ER because I wanted to go into LO and was very close-minded when it came to IB, I always saw it as gauche/unrefined or not as intellectual because of all the b.s ER/value investing propaganda. I have since changed my mind about what I want my long term career path to be but since I chose ER as a first step, I don't have that luxury anymore.

Now there will be a select few associates that do end up in atypical roles for their backgrounds but they are far from being a large %. It isn't impossible, just much, much, much harder. The issue is that outside of public equities, very few people know of equity research, what you do as an associate and how valuable your basic skillset can be. Most of the time you have to educate them (yes, I model - probably more than IB - yes, I build/run M&A models my coverage universe is super acquisitive etc. etc.). Everyone hiring knows about IB, plus you get no transaction exposure in ER.

2- Your compensation will severely lag those of your peers in most other capital markets roles:

Not much to elaborate on here. Base will often be similar or even sometimes nominally higher. Might be different in other shops but most don't get a base bump each year. You only get a base bump when you get promoted to Senior Associate an so on. Your bonus, even top bucket, will pale in comparison to what your IB peers make and the rift gets wider as you progress. This is true even if you work more/less the same hours if you're in a hot sector. You're worth less to your bank and thus get paid much less.

3- There is almost no career development opportunities in research:

As opposed to IB, consulting, PE etc where the career progression is very clear (A1, A2, A3, As 1... VP... MD...), You only get promoted every few years in ER and the promotions don't mean much, you still do the exact same work. The issue here is that your skill set doesn't grow, meaning your exit opps after year 2 are the same as the ones after year 5. You're basically the same candidate at those two stages. You might get more interactions with clients but that's really it. If your goal is to become an Analyst, you might be waiting for years while they replace those retiring by external hires. An Analyst role opens up only when someone retires or goes to another bank/buy side and if you don't have the sector experience and seniority to fill their shoes then you can wait another 5-10 years. A couple associates at my bank have been waiting their turn for over 10 years. There is not much they could do now other than keep on waiting. Leaving to the buy side would make them lose years worth of time spent in research since they wouldn't get hired as a PM, usually just as a senior analyst, the same role an associate with 2 years of experience would have.

4- It gets very boring very fast:

If you cover a single sector, you will probably get exposed to the whole spectrum of corporate actions in 1.5-2 years. The companies you cover will have all raised debt, issued shares, acquired/divested, changed management, raised/cut dividend, you name it. After you learn how to deal with each different scenario, the next one will be very similar. You aren't learning anymore after and it gets boring, regardless of your sector (some get obviously much more boring, I would not be able to do my work if i had to be in mining or ag chem). On the other hand the job gets very easy to do. An equity raise would take me a day to go through with modeling and writing. It'll take me 25mn now to be done and move on to the next thing. A lot of associates get comfortable with this and stay in the role because of that. I know that sentiment is shared in IB, only there you don't get pigeonholed after a while.

5- It gets very lonely very fast:

The only person you will interact with is your Analyst. Sometimes a sales guy and sometimes a client if you're lucky but most analysts take care of all the relationships. It's hard to make friends or a network and there is almost no camaraderie in the bullpen since you never get staffed with other associates and get to work with them.

If you go into ER because you want to remain in public equities, you have to be 1000% sure you will not change your mind. I thought it was the case for me but after working on so many acquisitions and high growth tech names in my coverage universe I've started to find VC/PE more interesting. My path there will be so much harder than if I didn't cross off IB initially.

Sorry to all those in ER that I've offended and best of luck

Comments (72)

Most Helpful
  • Analyst 1 in ER
Jan 21, 2022 - 8:37pm

We of course all have our biases but my experience is different. Let's start on what I agree with. The titles and ranks really do not matter. Work can become repetitive once you've seen it all. Realistically from a technical knowledge perspective, it takes a maximum of 1 year to know everything a VP or above does. The differentiator of course is experience and industry knowledge but that comes with time. I also agree progression can be a little bit slow at best and it doesn't help that, at least in my team, there is a lack of acknowledgement for good vs. bad associate. IB cares a lot about top or bottom bucket. In ER it seems that as long as you somewhat do your work, you will be rewarded the same. 

Now to my disagreements. I don't think pay is lagging, at least if you're in the right place. I am in my first year and all in all getting $150k. My friends that went into IB are making $100k+$50-80k. I am barely making less money and yet my work hours have been anywhere from 30-60 hours with the average probably right around 40 hours. My friends in IB are easily working 80-120 hours. Nobody wants to stay in IB and they leave to PE, HF and so forth at the same time that I would. Sure, exits aren't good if you want to go into PE but someone who starts in ER most likely doesn't care about PE. I joined ER to either stay or move to HF/LO, so I don't care about any other exits and frankly I don't think anyone should start in ER unless they want to keep working in ER or move to the buy-side. ER feeds into HF/LO much more than any other industry. 

  • Associate 1 in IB - Cov
Jan 23, 2022 - 8:40pm

What sector do you cover? Are exit opps any different for people who join ER post mba?

  • Analyst 1 in ER
Jan 23, 2022 - 11:52pm

TMT 

Take what I say with a grain of salt given my lack of full knowledge.

Simply said, I don't think anything changes. As a matter of fact, I would even argue you perhaps have better exits as a junior. Take for example a HF, they will only recruit people as a PM if they already have buy-side experience. You can't be a VP in ER and then get a risk taking position on the buy-side. In terms of IR you might fare better as knowledge is more easily transferable and can take up top position. I don't think I would go into ER post-MBA unless I plan to stay.

Jan 22, 2022 - 12:46am
Smoke Frog, what's your opinion? Comment below:

Telling the truth about er will really upset those users.

I made a comment earlier on why IB gets compensated better than ER and still get hate messages to this day from people lol.

Jan 22, 2022 - 2:24pm
Smoke Frog, what's your opinion? Comment below:

Oh I see, being real isn't ok if the comment is "hurtful", didn't realize I had to be nice when posting obvious info.

If you hate your comp in ER you shouldn't blame others, you should try to hustle and change your job.

  • Analyst 1 in IB - Gen
Jan 22, 2022 - 2:32pm

again, the issue is u confidently post blatantly false info on topics you clearly know nothing about. you coming across as a douchebag is just funny

Jan 22, 2022 - 2:36pm
Smoke Frog, what's your opinion? Comment below:

So I say IB pays more than ER, and I'm just a jerk and wrong.

OP posts the same thing and you agree with him.

makes perfect sense. Shocked your just a junior analyst with such comprehension skills lol.

  • Analyst 1 in IB - Gen
Jan 22, 2022 - 3:22pm

Smoke Frog Equity research is something anyone can do, you don't need a relationship with companies. And you don't bring in any revenue

Equity research is where people who couldn't get into banking go or people who want to eventually move into banking but can't get in at first.

The OP asked my ER pay is lagging. It's cause you don't pay the second tier people, that's why. 

IB is paid better than ER because the job is tougher and requires more talent. The pay reflects this.

Quick snippet of some of the patently false information you've spread. No one disagrees IB pays more than ER since it more directly brings in more revenue. But the stuff you've claimed is wrong and stupid

Jan 22, 2022 - 8:52am
bbps, what's your opinion? Comment below:

This post is classic Dunning-Kruger effect. OP, I felt similarly two years in. If you're going to stay, you should ask for lead coverage on a few stocks. 

  • Associate 2 in ER
Jan 22, 2022 - 12:48pm

I think your experience is highly reflective of what bank/analyst you work for. I graduated from a top target, work for a HoF analyst... have nothing but positive experiences to cite personally. Got a 40k bonus my first year post-college and a 30k base raise. I have good exposure to the Tigers and every other good fund through my MD. On average though, I'd say IB > ER, but if you get a good seat you'll be chilling (same as S&T)

Jan 22, 2022 - 1:08pm
loanboy043, what's your opinion? Comment below:

Hey OP I enjoyed reading and just wanna say high quality, value-adding write up. Good insights that might otherwise be overlooked. You seem bright. Anyways all the best. Keep moving forward

  • VP in ER
Jan 22, 2022 - 9:31pm

I agree with OP, that is just the reality, believe or not. Having said that, it still makes sense for some people to enter the industry, for example, working in biotech ER reasearch with a Ph.D. in Biology.

  • VP in ER
Jan 22, 2022 - 9:48pm

biotech is very hot right now, compensation is higher than covering other sectors; having a PhD is an advantage in the biotech world, compared to other alternatives like doing scientific research, ER compensation is not bad 

Jan 23, 2022 - 2:57pm
matt19215, what's your opinion? Comment below:

How easy is it to cover your own stocks?

I have been applying to some ER groups at some boutiques. There is one firm that is tech/software focused that I have some connections and old classmates at. Could I tell them straight up i want to cover my own sector (video games/interactive entertainment)? Some of the analysts at this boutique have been promoted to analyst after only 2 years 

  • VP in ER
Jan 25, 2022 - 7:46pm

That's very true, I know a guy who was an ER associate and got laid off. After 6 months of job searching, he started at Berenberg as a covering analyst, covering a sector in which he did not have too much knowledge.

Jan 23, 2022 - 3:09pm
SanityCheck, what's your opinion? Comment below:

What OP said is 100% true.

And you should compare comp for the 30 year old ER associates that he mentioned vs. a similar 30 year old banker or VP in PE. That's where the compensation gap gets you. And by then you're usually stuck, again echoing the OP

  • Analyst 2 in IB-M&A
Jan 23, 2022 - 4:12pm

Just to add another POV, I think this is all very team dependent.

In top ER teams in hot sectors where your senior analyst has a client list made up of top LOs/HFs once you start covering stocks or interacting with these clients you should have a very good chance of recruiting with these funds. LOs opps are obvs dominated by ER. For HFs, sure in absolute numbers you might see more ib people, but considering more ib recruit for HFs given the larger base relative to ER my observation is that the chance of getting into HFs is quite similar between the two. Further an issue in this forum is the circle-jerk over tiger cubs which are ib/pe exclusive so people just assume the best funds are only available from ib. This forgets about the many other funds with great unit economics but smaller scale which recruit from either ER or IB or exclusively ER. Unless you are tiger or bust, top funds are avaible for both

I agree, no name places and crap teams in rubbish sectors will have a horrible time. But surely thats the same as a crap bank, sht sector and zero deal flow ib team?

Overall, dont do ER if you want maximum optionality in exit opp or if you want to stick to a sell side role with highest expected value of comp. Do do ER if you know you want to exit to LOs or you're happy landing a great HF place which isnt Tiger. Personally, IMO for those who know they want to exit into public equities after two years (and can land a good ER role) I say ER is a better choice given WLB, general market learnings and direct interaction with funds

Jan 25, 2022 - 12:24am
marketMergerMaddie, what's your opinion? Comment below:

Hey I think there are some great points here. I never worked in SS ER, but work in LO today, and I would say of my class, it's almost 50/50 IB vs. ER for our Equity Research Associate Analyst program. I think it's awesome if you want to go into LO, but I think people entering the space is that the exist to PE just won't be available. Also, I appreciate you calling out this forum for its obsession with Tiger Cubs, which nobody ever wants to do. 

Overall, better work life balance, similar comp, and solid exits

Jan 24, 2022 - 11:01am
Monkey_47, what's your opinion? Comment below:

FYI I think a lot of this is probably less true for Europe (by which I mainly mean London) - look at the backgrounds of the partners at the 'brand name' SM HFs in London and you'll see a lot of them started out in SS ER. From my experience generally the London offices of all the big banks are a bit less hierachical than the US ones and there is plenty of scope for you to progress rapidly if you can demonstrate you are good. E.g. I joined SS ER straight out of undergrad and had client coverage after 12 months then a sub-sector of my own to cover after 2 years (then jumped to a buy side seat after 3). You see far fewer people who are still just working as an associate 5-6 years into their careers - I tihnk because the norm is for the 'sector head' to keep coverage of the 8-10 largest stocks in their sector then delegate other stocks to team-members, unlike US analysts who seem to like to cover 20-30+ stocks each.

If you're getting stock & client coverage then you're getting experience developing, pitching and defending an investment thesis, which is going to be the #1 most important thing you need if you're going to start interviewing for the buy side.

Comp points are fair. For me work-life-balance was a much more important factor in my early 20s.

Jan 24, 2022 - 3:21pm
research_guy, what's your opinion? Comment below:

Sorry it sounds like you have had such a lousy experiment and are jaded by it. 

At the end of the day, your success is determined by your attitude. I know several people who have gone from SS ER to PE/VC (especially SS teams very heavy into the banking side w/ IPOs, etc.), and what separated them was not having a bad attitude. You don't get people to like you being whiny. Network your butt off and make good contacts, and don't wait for anyone to do it for you. That is they key to making it in this business. 

Good luck in future endeavors. 

Jan 24, 2022 - 3:48pm
Not anonymous, what's your opinion? Comment below:

Fully agree here, this isn't me complaining to strangers on the internet. I've owned up to my choices and am doing whatever it takes to end up where I want to be. Just thought I'd shed some light for those not in the industry yet. 

About your point though, I've been hammered by IPOs one after the other since May 2020 so pretty heaving into the banking side as you said. How have your friends leveraged that to get ahead? The issue is that most of the work is done "behind the wall" with very limited and constantly chaperoned communication with banking and pre-ipo investors given regulatory risk, so not much space to build a network there. Appreciate any insights and thanks for giving your opinion.

Jan 24, 2022 - 4:12pm
research_guy, what's your opinion? Comment below:

Perhaps it's different at a BB (I know my new Analyst came from a BB and said it was much different) but at my MM shop we are heavily involved w/ bankers/privates. It is constant communication daily w/ the banking side (chaperoned, obviously) and constant dialogue with private companies. That being the case, former associates on the team have attracted the attention of notable PE/VC firms because of this unique experience. Of course, this is all case-by-case.  

I understand where you're coming from on the deal side - we've been involved with >2 dozen in the last 18 months and I can only imagine how draining that must be with being fully behind the wall. 

  • Research Associate in ER
Jan 26, 2022 - 3:26pm

2.5y in ER in a dynamic sector and you are absolutely spot on. Pulling 70-80h weeks on the reg (earnings can be north of 90h albeit I cover two regions) and being severely undercompensated (monetarily and non monetarily) vs sales traders IBankers can get very demotivating especially after the learning curve starts to flatten

Jan 27, 2022 - 1:40am
_k, what's your opinion? Comment below:

For a first FT gig out of school you get to cover a broad-ish base of basics both technical/hard skills and soft skills (how to cold call clients for mktg, navigate awkward conversations etc, staying organised with data etc)

  • Associate 1 in IB - Cov
Jan 26, 2022 - 7:15pm

Are salestraders paid well?

Jan 26, 2022 - 11:28pm
ZZZ123, what's your opinion? Comment below:

From someone that did 2 years in ER at a top BB, this is dead on. Every single one of the points: the repetitive/boring work, learning everything about your industry after 18 months, the comp, limited range of exit opportunities (can't move into PE and others), the loneliness, everything.

Switched to IB last year and heading to UMM PE this summer. Leaving ER was the best decision I ever made.

  • Prospect in PE - LBOs
Jan 27, 2022 - 1:26am

To add one more thing: maybe I am just not smart enough. It is frustrating that the sales or some clients expect you on spot to know every little detail of 20 some companies you cover and their competing programs. It is not like you walk into a presentation and you can defend 20 slides. Questions can come out of nowhere…of course you can always dodge gracefully…

  • Junior Trader in S&T - Comm
Mar 11, 2022 - 4:24pm

I just started in ER, do you have any tips because my end goal really is more PE/VC? Should I lateral after a year into IB?

Jan 30, 2022 - 6:35am
Pallad1um, what's your opinion? Comment below:

I have some junior friends in ER, and they agree with most of what you say. However really enjoy working in IPOs since every case is different and you learn about a new company etc, not too far from the IB work.

Have you worked on any IPOs, is it fun?

Feb 7, 2022 - 8:23pm
Not anonymous, what's your opinion? Comment below:

I have on quite a few and they're right it is much better than the daily stuff. Much more demanding though so there's a point of diminishing returns after a bunch in a row.

  • Junior Trader in S&T - Comm
Mar 15, 2022 - 5:57pm

Just now reading as I'm just starting ER this year, anyone have tips or advice so I don't get pigeonholed like what everyone is describing on this post??

Mar 19, 2022 - 2:07pm
SST791, what's your opinion? Comment below:

Stay until you have a good understanding of your companies under coverage and have established fairly strong relationships with the buy-side/corporates (lean more into those relationships where you see yourself exiting). From my experience, it's around 2-3 years. Technical skill set can be learned in 1, so the rest is up to you and the amount you network.

Apr 5, 2022 - 3:29pm
adm98, what's your opinion? Comment below:

Equity research associates can also exit to IB and equities S&T, right? I've anecdotally seen associates do both these moves. These exit ops, coupled with the ones you already mentioned, aren't a bad deal. Also exits aren't everything, lots of people in SS ER that I've seen want to stay there in the long run due to the better WLB (in comparison to IB/PE) and decent pay if you make analyst. I know this site seems to worship PE as the be-all end-all, but not everybody is aiming for it.

Apr 14, 2022 - 11:28pm
badtradeseveryday, what's your opinion? Comment below:

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Apr 15, 2022 - 7:40pm
dickthesellsider, what's your opinion? Comment below:

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Apr 27, 2022 - 4:14pm
ArchBrand001, what's your opinion? Comment below:

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