I haven't seen one of these in a while, so I figured I would start one. I am a Vice President in equity research, with coverage of a selection of stocks (from mid to
small cap firms) within a large sector. I'm at a top 10 bank.
Ask me about how the industry works, lifestyle, recruiting, compensation, etc.
first, thanks for doing this AMA.
second, I'm inclined to take people at face value, but your misspellings make me think you may be misrepresenting yourself, please do yourself a favor and become a Certified User (AndyLouis can help you here). I only say this because we often times have 17-19 year olds on here acting as if they're sage kelly day in and day out, giving advice to other 17-19 year olds, and it doesn't make the forum any better. having someone with your experience is great, just need to make sure it's legit.
couple questions: -what industry? -how'd you get your start? -aside from updates from companies you cover and the basics (bloomberg, factset, reuters, etc.), what are your news sources?
Sorry for typos - on a phone 1) won't disclose industry 2) did investment banking for a couple of years. wanted to do something public market oriented (was looking at ECM, hedge funds, mutual funds) and surprisingly ended up in research 3) news sources include industry tailored publications
Research compensation is lower than Banking. MBA associates probably make 125k-130k base and a 30-40k bonus the first year. Bonuses don't necessarily double the next year. The next bump likely comes if/when you make VP.
Hours are about 60 a week. Higher during earnings season. So the hours are better than banking.
Exit opportunities is where research shines - ranges from mutual funds, hedge funds, companies, investment banking (syndicate, ECM), sales, etc. I've seen it all. Any job that requires knowledge of financial statements and the ability to write is fair game.
Thank you for doing this, I am interested in making the jump into ER myself.
Couple of questions: - I'm at a big four accountancy firm studying towards an accounting qualification (ACA/ACCA/CPA) as well as CFA. What else could I do to improve my profile? (for example, do you think writing my own research on sites like seekingalpha.com could be beneficial or can backfire too easily?). - From my understanding teams are relatively small and turnover of employees is very low. Do you have any advice about how to approach networking for ER specifically? (anything different from the standard cold-emailing and asking to meet for coffee?) - Are you worried about the future of ER as a business? - I hear that ER really differs from bank to bank, with some banks treating it like a real revenue generator and others as a cost center. I also hear that it is very important to work under a good analyst. How easy is it to jump from sector to sector or bank to bank, in case you end up in a detrimental spot? - What do you look for when interviewing a candidate?
Thanks again.
1) I have never seen prospective candidates write on Seeking Alpha - I'd imagine it could be a detriment. I would try to show interest in equity investing in an organized way - maybe keep a personal model portfolio, have a written stock pitch, etc. I have seen accountants move over to equity research through networking and demonstrated knowledge of / interest in markets.
2) Teams are small, but turnover isn't necessarily low. I would try to network with anyone in an equities division of an investment bank (sales, trading, research). Those people can pass your resume along to hiring officials within research. Those individuals can interview you and make sure you are top of mind for open positions.
3) I am not necessarily worried about the future of ER as a business because it is one of the few parts of the bank that is basically required by regulation - if you want to be an investment bank that underwrites equity, you have to have equity research. As much as clients say they don't value research, they spend lots of time on the phone with analysts, read reports, consume corporate access, and otherwise use analyst's time. As commission revenues shrink, research budgets may come under pressure, which could lead to pay cuts and such, but the departments themselves will always be there.
4) You are correct - some banks do invest heavily in research, some try to spend as little on it as possible. If you department likes you, it can be easy to move from team to team - but this generally happens only due to a triggering event (an analyst leaves, a junior spot with more upside opens up, etc).
5) I look for candidates that: - Write well - Can be personable in front of clients - Can articulate an investment view without being too "pushy" - Can show a desire to get deep into financial statement or industry data to answer a question - Understand the role is not just picking stocks and generating alpha, but actually managing a lot of different audiences
There have been a few "Why did you stay on the sell side? Why not go to a hedge fund?" questions, so I figured I would address them all here. I periodically am approached by headhunters for hedge fund jobs, but never really sought them out in any meaningful way(I did seek them out after banking). Here are a few reasons
1) Most hedge fund jobs I have seen were for junior analysts to work for a senior analyst or PM - by the time I was being approached, it seemed like a step down in seniority
2) I saw pathways at my current bank to gain more seniority, responsibility and comp, so I was never in a hurry to leave
3) I genuinely like client interaction - obviously there is less of that in a buyside role. I like debating scenarios with a wide variety of clients. I also like traveling to meet companies and clients, marketing meetings, etc. I enjoy many aspects of the job.
4) I am sensitive to quality of firm - there aren't a ton of hedge funds I would really be gung ho about working for
5) Hedge funds, mutual funds are always options down the road. So are other corporate jobs.
Most of these answers boil down to personal preference. I enjoy the job, the bank has sought to give me more responsibility and pay, and I don't necessarily think the grass is greener (for me).
One thing to note for you guys is the fact that I have worked for so long on the sell side may actually make me less attractive to some buyside firms at this point, especially those that want more junior talent, so if you want to go to the buyside, it's best to jump after one or two years.