If ER is really a cost center why on earth would an investment bank with very higher earners pay analysts high 6 to low 7 figures to not help generate any revenue?
General question as that confuses me. I understand the revenue stream is not as clear as it is in IB and ER folks don't make as much as IB but why on earth would a bank pay such high wages compared to most jobs for something that doesn't generate revenue?
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Because it does generate revenue, especially in trading but also helps with investment banking. It’s just hard to attribute revenue to specific actions or individuals.
It could be similar to marketing spend at corporations. You are (hopefully) better off doing it than not, but you can’t go overboard with it.
+1 for the marketing spend
Got it. But post mifid, isn’t there a clear revenue stream that is separated from S&T? Of course I get if S&T is pitching a trade, having an an analyst who is an expert on the name can help close that trade, but doesn’t ER have its own revenue stream post mifid? Like the buy side pays the bank based on how often the ER team they utilize
Yes it does. But there is still a non-tangible marketing benefit to having a research division outside of these fees.
I'm still getting my head around it but it's been described to me as a one-stop shop or quid pro quo type situation where buyside more inclined to go to a certain broker if they have good research/corp access and corps more likely to go with a bank if they have guaranteed coverage from a reputable research arm (note I said coverage, and not a guaranteed buy ratings)
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