Have a friend who entered a respected LO out of undergrad. I entered SS ER. Same year. Our compensation progression has been almost on point though he will be capped much lower until he becomes a PM. I am curious why sell siders leave for LO as comp appears to be relatively similar at the lower levels but better for the sell side during the middle of one’s career.
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Depends what you enjoy doing. On the sell side, you really need to constantly be out there with new ideas, thoughts, hosting events, and meeting clients.
May be you just want to analyze stocks and make investment decisions.
That’s because most sellside seats are dead end jobs with no chance of becoming lead analysts. So naturally people want to leave for either buyside or corporate. There’s no upside in sellside until you become a covering analyst while the cap is higher on buyside even without becoming a PM. Buyside is also viewed as more prestigious overall.
Same can be said about most buyside seats, especially LO
I’d bet that banks could cut the pay of everyone in sell side research by 50% and they would continue to do the same job for half as much because they have no transferable skills and few other jobs they could land would pay them as much as the reduced rate. I don’t think comp and headcount is going to fall off a cliff immediately but it’s going to erode over time.
What kind of BS is this. Many sell siders go on to CFO positions, high profile IR roles, strategy roles, BoD roles, etc. Analysts that have been in the same sector for years can have extremely valuable perspective along with deep relationships with corporates across your covered industry.
Your perception is skewed. Yes, there is a general lack of talent in the lower ranks and it is a problem. Most senior analysts have trouble finding associates today that want to work hard and have genuine intellectual curiosity.
There is also unfortunately far too many young kids that have been "promoted" to covering analyst roles solely as an avenue for the bank to ask for corporate access. Research quality in these cases in often extremely poor, but research management doesn't care because they get paid for corporate access and can pay a kid $200k to cover some stocks and they are happy. I hear management teams of the companies I cover complaining about this kind of thing all the time.
That said, those that truly make it and have a passion for this industry (particularly at larger bulge bracket banks with actual budgets for talent) can and will continue to do quite well.
So many people think they can do this job, but in my experience very few truly "get it".
The longer I do this job (8th year at a L/S HF, ignore title), the less and less I talk to sell side research. I agree there is a difference in quality between the best analysts and the junior seat fillers, but the value add from the tail end of quality sell siders is not big enough that I couldn't easily live without it. There is rarely a thesis changing piece of information that I hear from sell side that I don't either figure out for myself or learn from my buyside network before it permeates to sell side. I agree that corporate access is a useful function, but as you point out this can be done cheaply. Research quality is maybe 15-20% of the consideration in deciding where my fund's dollars go - the banks with good corporate access and poor research get paid much more than the ones with better research and poor corporate access. In terms of exits, sure, some exit to well paid corporate seats, but C-suite roles are rare and breaking 7-figures in IR is probably not common.
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