Q&A: Equity Research Associate Laid Off

Future of ER needs to be put into multiple buckets: BB's/strong banks that get deal flow: Good to go - maybe some slight fee compression, but if your seat is paid for by the companies that you bank, you're fine. Top MM's/banks that good decent deal flow: Probably face some pressure and will likely reallocate resources to companies they bank or just take a pay cut. Low MM's and boutiques/banks with poor deal flow: "Full service" will begin to look deceiving. These banks are probably good in a few areas and will stick to those few areas that they are good in. Other areas w/out banking support will get cut. Other/Boutique Research Firms w/ strong research product: Interesting dynamic. Hard to say. You have to wonder why an analyst chose to go independent. I'm fairly certain the money is less than a BB/strong MM, but I could be wrong.

I wonder if ER turns into a massive conflict of interest. I've noticed that a lot banks skew ratings towards "buy", whereas BB research that I've read sort of do as they please. I.E. Goldman's Industrials whip they're ratings around multiple times a year based on fundamental data/valuation. Whereas a lot of other banks will cheerlead a stock up, and each research report is either "buy on weakness - lowering price target by 30% and maintain buy rating", "flywheel keeps on turning - increasing price target by 30% and maintain buy rating", "Disappointing quarter but valuation looks attractive - lowering price target by 30% and maintain buy rating"