Quick Bio: I'm in sell-side research and have been for 4+ years now covering the same sector. Prior to research I did a few years in a finance-related role that was moderately applicable to my current role. For the people who care, I went to what would be labeled a "non-target" university and obtained a wildly mediocre GPA. I'm a CFA charterholder, went for the designation to bolster my non-stellar academic profile to whatever extent it was possible. Given my tenure as a "junior sell-sider", I'm obviously looking to change it up and make the move to a new opportunity. Happy to discuss anything. Some of my answers may be a bit on the generic side, some may be in greater detail, heck some may just be soap box responses depending on the day I've had but the end goal is to provide value-add content to anyone curious about sell-side research without giving away my identity. I would say I've experienced more than a normal junior person in my stint through multiple employers/market cycles/swings in investor sentiment (all pertaining to my specific sector) and hope it serves this community well. Will do my best to answer your questions as quickly as possible and individually but depending on time and question backlog, I might just fire off multiple bullets in a single response. So with that said, fire away.
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Started strong and after some changes have seen it be more average to below average. Rough progression has been as follows (in total comp): ~$120-125k, ~$110-115k, ~$125-130k, then flat and now on track for ~$140-145k if the variable portion is roughly the same as the past couple payouts.
The overwhelming majority of the "increases" have been driven by base bumps/promotes, so low-calorie at best. When it comes down to brass tax, the way you get paid in research is to help drive banking revs up for your respective group on the other side of the wall. If you want to get paid decently well at the "junior" ranks i.e. not a senior analyst, go work at a BB.
Thanks for the AMA. Couple questions here.
1.) what are your hours like? Are you happy with where you are in terms of comp/life balance?
2.) in banking the higher up you go the better the hours. From what I’ve read here it seems that it’s not as clear in ER. Is this true?
3.) Do you think there’s a conflict of interest for sell side researchers if they cover a company that’s also a client? Is that allowed? To what extent are you a “cheerleader” for the firms that you cover?
4.) How does your role compare to buy side equity research (think Wellington, fidelity, etc.) in terms of what you do?
5.) Everyone says they have “differentiated research” in marketing, but what makes a firm good at ER in general? In today’s Information Age how do you get around the fact that everyone is a able to access information quickly?
Thanks again, if you need to condense answers into one no worries.
Solid questions here. I'll do my best to interject as little bias as possible and give enough detail without writing a novel.
1) Hours are highly variable and heavily dependent on a wide variety of things however I would say the largest drivers of your overall experience will be your direct boss (Sr. Analyst), sector being covered, and whether or not it's earnings season (or any other fire drill mode). That being said from talking to my friends at other shops i think the average is fairly close to 50-60 mark in a week. For me personally I have seen a material deterioration in control of my schedule relative to what it has been in the past so my top-end can swing violently and without warning to +10-20. So in that light, I'm not very pleased with my current comp to work/life ratio which is a contributing factor to seeking a new gig.
2) Generally true I would say. Things in ER are less cut and dry as compared to banking generally because there aren't multiple levels of seniority that allow for delegating: it's just me then my boss then the head of research for the bank. That being said, once you hit the Sr. Analyst level you have substantially more control over your schedule however, the less you do the less you'll earn since you aren't helping the bank's bottom line. Also, it can be a much shorter time span from junior to senior in ER as compared to analyst to VP/Director in banking.
3) I'll take this one out of order, think it will make more sense that way. Yes, we cover companies that are banking clients as does everyone in the industry. Research is legally not allowed to drive banking decisions and vice versa and FINRA has been cracking down pretty hard when they find something like this happening. The main conflict of interest on the ER side stems from people refusing to write anything remotely negative about a company because they are afraid of losing corporate access. In my experience companies are generally aware of when they do something that upsets investors and can understand you having a negative bend in your note. The most difficult situations are when a company feels investors are too worried about "the near term" as the stock gets punished because management feels they are right and the Street feels very differently. However, I've always been a "call a spade a spade" guy, if a company screws up then say it like it is...in a very politically correct and gentle manner ha
4) Well, in my role I spout about a bunch of nonsense that adds little value and/or report the news...in all seriousness, buy-side guys don't have to focus on things such as writing, updating marketing decks or other various forms of administrative minutiae that adds little to no value and prohibits you from doing real analysis and drawing conclusions. I have heard some of the bigger LOs like you mentioned do write a decent amount but that it's less formalized and you don't have stroke egos of companies because it's all for internal use only.
5) Just because you have access to information and data does not mean you are equipped to leverage and interpret it and subsequently draw the proper conclusions. Also, I'm generally privy to certain information that Joe Blow would never have access to given my relationships and direct access to management and IR. Differentiated research is more deep-dive/thought pieces that explore certain attributes of your universe that others haven't thought to explore or write about in detail. This takes various forms and is unique to each sector and Sr. Analyst. There are some guys though who are flat out dumb and it baffles me they are still employed. Maybe Mifid II will fix that.
Hopefully this response wasn't too long.
Day to day isn't too standardized. Show up around 7:30/6:30/5:30/4:30 am depending on your time zone (I'm not 4:30, that would suck). We have a few morning calls/meetings with the entire research department and then with our respective groups. These are sales calls, just giving your thoughts on anything that has happened in your arena. Generally move through my to-do list after that which can be anything from models, company calls/meetings, client projects, industry events really no set task list that appears every day. You have to be reactionary in ER, mostly before or after the bell, but during the day you can get random calls from clients or clients asking you for things. Usually punch out 11-12 hours after I started.
In your first year or two you will not do most of what I described. You will be doing a lot of grunt work as well as studying for your licensing exams. It will likely take you 8-12 months to have a handle on basic responsibilities and to develop a baseline knowledge of your particular group of companies. Year two is a little better since you should be more efficient with the mundane at this point and you will start to be included more in the things I mentioned above.
This is very sector dependent: DCF is a highly academic exercise but that does not mean it's useless and it certainly has its place in particular industries in various forms. Multiples are all relative and, in my opinion, are a trap for lazy thinking sometimes (again, depending on your sector - sometimes these are the only things that work). In my particular sector, people are attempting to use multiples based on historical averages even though one could argue there has been a shift and history is no longer a viable sense check. I always think using multiple valuation techniques is a best practice, that way you have a sense check. One of your valuation methodologies should not be Sum of the Parts. Just don't.
I think an appetite for learning and a natural curiosity are natural traits of good associates. Ask questions, don't worry about asking a dumb one. I would rather you ask me a basic question with honest intent behind it rather than keep quiet and mess something up. Also, and this sounds cliche, but a good attitude goes a long way. Yeah, you're not going to do a lot of the fun or interesting stuff right away, but doing your best work on the menial tasks and doing so with a great attitude will make me want to give you more to do and include you more in other aspects of the role.
Thanks for the AMA. Just as an introduction, I am an equity research analyst too covering EMEA TMT space. I just wanted to hear your thoughts on the following
Slightly focused on Europe, but how do you think the industry has evolved post MIFID II? Has it become harder to sell research given the unbundling from S&T?
How do you think roboadvisory services is going to impact the industry going forward? Do you think there is scope for significant value addition by humans vs standardized robotic recommendations (especially during times of irrational exuberance often seen in markets)
Thanks in advance!
Happy to answer the questions. Will assume you are based elsewhere outside the US given your coverage so just bear in mind my responses are from the US perspective.
1) I think MIFID II is an interesting thing: on one hand you have increased clarity for investors which should help them better allocate dollars however on the flip side that has meant a pretty sharp decline in the size of the global wallet used to pay sell-side (not to mention what I hear has been an incredible bureaucratic headache). I'm not sure buy-side ever really paid specifically for research but rather other touch points within the realm of sell-side research such as corporate access, they just have to be open about how much they spend now. Net-net I think the regulation squeezes some firms out of existence and those who are able to meet client needs will survive. Too many sell-side people, many of whom get paid very well while providing little value.
2) Don't think this will impact the space in a significant manner, mostly because there are multiple qualitative touch points that seem like difficult hurdles for robo's - relationships with companies, being in the room with them and investors to see body language, to infer tone when discussing certain topics among other things. It feels like, once you boil it down, the robo thing is just a glorified factor model. And I believe there is always an element of human intuition: how many robo-advisors would punch out of a position in reaction to factor limits being tested instead of understanding what is driving the spike in factors in the first place? Maybe I'm just old-school but I think the human element will always be around. That being said, I'm all for technology that makes my day to day easier so bring on the bots that can write my earnings notes once I load a model!
1) Mostly an upgrade in reputation but also a chance to try my hand at a new sub-sector. Process is fairly straightforward, you know someone has a need so you find a way to get your resume in front of them. From there it was a basic series of interviews that you would expect for sell-side research. Offer in hand 6-7 weeks later.
2) Those are interesting meetings. If it’s someone I have a good relationship with and hold in high regard, I’m willing to take another look. Sometimes we miss stuff on the sell-side, shocker I know. But if it’s another meeting with another generalist type guy (or even certain sector focused guys) who’s pounding the table on something that doesn’t warrant that level of enthusiasm, I become very skeptical very quickly. Do a little channel checking and find this guy has said the same thing to a few other firms and you know he’s pushing his book. I’m not a fan of that stuff. I feel you can generally tell if client is sincere because the line of questioning is well thought out and doesn’t focus on nuanced details that don’t drive the actual conclusion. However, a previous boss of mine was fond of “sourcing” ideas from client meetings. Drove me nuts.
There is a fair amount of very specific detail here and I'm hesitant to offer any advice simply because I'm not you and I don't know your entire situation. I'm also not going to tell you "do what you find interesting" or "just go for it" or anything generic like that because that could be terrible advice based on a multitude of factors. You've reached a point in life where you likely have more substantial financial and life obligations/responsibilities than a kid coming out of undergrad so there is more to consider outside of job satisfaction.
Here are some pieces of information I can give based on what I know of the industry:
1) If you're looking for career progression, this might not be for you. I'm not really sure what you mean by "famous" but bottom line is that your potential boss is highly unlikely to leave any time soon if he has relatively solid clout. Sr. Analyst seats are pretty cush if you are highly ranked. Also, as I stated above somewhere, there isn't any predetermined path to seniority in ER. You could be promoted in 2 years or 10 years or never.
2) Depending on bank size, you will almost certainly make more in ER than you currently do. At the very least, you will likely get paid in your first year or two what you would've been making with your promotion in consulting. PhD generally lends itself to better pay especially for the industry coverage group you've picked.
3) No idea. It will likely be a very steep uphill battle if that's your end goal. The higher likelihood is you being a career sell-side person who, if you're good, can pull decent money even as a Sr. Associate depending on your bank.
It basically boils down to networking. I cold emailed like crazy after deciding this particular sector interests me most. I practiced building models (which were terrible) and even sent one with a few resumes trying to find a way to stand out from the crowd. Once I landed an informational interview type call, I would ask thoughtful questions and attempt to demonstrate my passion for the subject matter at hand. My first boss told me he was giving me a shot over others because he felt I wanted it more. I think one of the more important aspects though is maintaining the connections you make and developing them into relationships. Don't be the guy who emails me once with a blatantly obvious motive and moves on to the next.
1) insanely busy
2) the faster you are, the higher likelihood your note is actually read. However, my stance has always been that it’s better to be fully accurate with some decent commentary than be first by regurgitating the release. Now if it takes you more than 2-2.5 hours to put out your initial take, just don’t bother. Nobody reads it at that point.
3) no real answer to this question. Too dependent on multiple factors. Also, not sure if you mean “view” as in opinion/thesis or “view” just updating my numbers and putting out a conclusion. If the former, I don’t let an earnings release change my opinion/thesis especially without listening to the call and following up with the company. That’s how you get egg on your face. If you mean the latter, I think I gave enough in the previous answer.
4) again depending on your definition of “view” but no I don’t anchor myself. I do the analysis and let the chips fall where they may. I use consensus as a sense check but sometimes there is only a one maybe two people with fresh numbers so it’s not too helpful. If I’m very different than consensus I’ll talk to the company again to see if I’m missing something, which isn’t always helpful.
Sorry in advance that these responses will be on the short side, just not enough time in the day sometimes.
1) No idea since my move into sell-side research was a little more a-typical. Some people like seeing progress towards CFA, some don't care. It might get you through initial HR screens but the potential Sr. Analyst might not care.
2) Applying through company sites is futile. You need to be reaching out to Sr. Analysts now and networking because there is no structured hiring process (some banks have post-MBA ER recruiting though).
3) I have seen people cover those industries without a phd or industry experience. All they had was a science-based undergrad degree. Targeting other industries won't help you land where you want, if anything it could be to your detriment. Talk to Sr. Analysts covering the space you want to cover.
4) I've never seen anyone go VC from ER. I've seen some PE, but most go public markets or corporate. Not to say it can't be done but after 3 years in sell-side ER at a decent bank you're likely hitting $150k+ all-in and since you don't have a banking or transactional background you will likely have to target smaller or newer VC shops which likely leads to a pay cut for you. Maybe not, but that is my assumption.
Honestly the niche value-add stuff is highly sector-dependent. I would say most if not all teams already use data analytics if you cover a space that has large sets. But it's really about doing two things: 1) Figuring out what clients want be it corporate access, industry data points, whatever and 2) Leveraging that to make money for the bank which will in turn make you money. This could be through events, attending conferences or industry stuff, you pick.
As far as feeling burnt out, i notice this creeps up most for me when I feel my work load is heavy on the low value stuff (updating background files, publishing recurring notes that report news, etc.) because I feel there is little purpose in the job at that point. But when I'm out meeting companies or clients, attending conferences, doing some heavy modeling, then I feel I've accomplished something that is somewhat meaningful. Even if I bang out 14 hours that day I can still feel good.
So I guess find ways to keep yourself busy with what you find most enjoyable. If you don't like any aspect of the job then you're probably in the wrong job altogether.
Alright, a fair amount of variety in this post - I'll do my best to answer everything but remember it's based on my personal experience or experience of very good friends in the business.
For your first actual question: LA is not a major market for sell-side research, or banking or really much public equity investing. There are a handful of big institutional guys out there but it's actually a small market. If you're going to move to California then San Fran is where the action is. The only kicker is it will be heavily tech focused (at least from what I've seen, could be different bank to bank) so if you're looking for FIG or really anything else, you need to be in NYC.
I think we should note at this point that an MBA is not a terrible idea for you assuming you could make it into a top program. I know a lot of the top Boston based LO's recruit directly from grad programs and won't touch sell-side. Pretty sure Citadel also does summer internships for grad students and the offer rate for FT is something absurdly high. Something to bear in mind.
On to your second question: I would argue your $125k all-in for a 1st year ER person is high, especially for a BB where they have completely standardized everything. 1st Year's get a base of $85k (generally) and I've heard BBs do a $10k signing bonus with a $15k stub so they can get everyone on the same schedule moving forward? Someone feel free to correct me as I have never been at a BB for ER. Now all of that being said you're in a different position since you have professional experience. Not really sure what your comp would be. Would think your base is no more than $85k unless you make more now and bonus is left up to performance of you and your team as well as the sector you cover (if clients aren't paying attention to your coverage then it's likely harder for you to get paid). I think someone without any ER experience but has some finance experience could expect $125k all-in in the 1st year. Last part here, everyone's budget for living is different so I can't tell you how to allocate your $ between certain things.
Finally your last question (set): Nobody cares what your face looks like as long as you're well groomed. I've seen burly man beards and squeaky clean faces, as long as you look professional I've never seen anyone care. My group is a little more casual re: dress code but some guys still prefer business casual. Some guys prefer chinos and sport shirts. The only time people go full suit is when you're getting in front of a company and even then (depending on the industry you cover) that could be just a sport coat. I think in general ER is a little more relaxed than banking but I would say all of the sell-side seems to be shifting to a little more relaxed version of office dress unless the occasion calls for some increased formality.
There is no way you will start at 9am. The markets open at 9:30/8:30/7:30/6:30 depending on your time zone. Companies issue releases before the open and (usually, if they are nice) do it earlier enough for you to digest it and put out a note. Starting late is not an option until you rack up some seniority in which case it simply turns into you showing up 30-60 min later than the junior guys. I would advise you to think long and hard about making the move because most people don't think through the increase in hours compared to a "regular" job.
I would probably have not been so focused on the next opportunity but rather wish I would have focused more on doing well in the current seat to make sure I acquired the skills necessary for that particular stage. Not to say you can't ever acquire skills, but the moral here is patience matters in a world of fast-pace churn and burn. Take your time.
I did finally make the exit, been out for a handful of months now. Ended up doing something I never thought I'd do - corp finance. Found a really good gig at a small company in my covered industry as right-hand man to the CFO.
Happy to elaborate on my exit and the experience of figuring out when/where/how to exit from a sell-side research seat and mid-pandemic.
Bottom line: it was a great move that positions me well for the long-haul and helps me round out some of the "banker" style experience that research guys get dinged for frequently.