Q&A: ER Analyst at Top BB (Plus About ER & General Advice)
Long-time WSO user, created a new account for this Q&A. I got a lot of help from this forum during my recruiting process and I owe a lot to WSO. Wanted to try and give back by offering some insight into equity research, recruiting, exit opps and general life at a BB think (JPM/MS/GS/BAML). Background: Ivy, 3.75 GPA, some work experience and leadership in extracurriculars but no finance experience before junior summer. Story: Knew I wanted to be involved in the public markets and finance and eventually become an investor. Knew I wanted to work hard but not go sleep deprived and gain the 15 pounds in a hate my life kinda job in IB. So I pursued ER at top BBs and ended up with a few offers in my junior summer. Got a return offer after 10 weeks and that is how I ended up in my current job.
About ER: Very team specific, but in general you're doing a lot of modeling (~40%), writing reports (~30%), speaking to sales force and buy-side clients (20%), and other misc stuff for the team (10%- attending conferences, organizing primary surveys, etc etc). Again, this is highly team specific. This break-up will change as you progress through the ranks (higher you get, more you'll be on the phone). But in general, you're getting a lot more client interaction first year in ER than in IB. The lead analyst will often refer clients to you when its about a specific piece of analysis that you did so you can walk them through it. Lifestyle: Very very team specific. Generally need to get to the desk by 7-7:30, before morning meeting or morning call with sales force. Leave generally by 6:30-7:30pm and during earnings season hours will be 6/7am- 10/11pm or later. Lifestyle is shitty compared to a 9-5 job but for finance and for how much money you're pulling in it's definitely a perk of the job. You can easily make the gym 4-5x/week, happy hour friday and Knicks/Yankees games when you're able to cop tickets. Limited weekend work, maybe few hours on Sunday but I don't think that happens every weekend for the average team. People might also log in from home. Taking time off is also a lot more chill in ER, no ongoing deals that might blow up so the unpredictability that everyone hates in IB isn't as much of a factor in ER. People definitely can take time off in a more flexible way and it's not very likely you leave the office at 7, take your girl for a nice dinner and get called back to the office in the middle. Knock on wood, but I don't think that's as much of a problem in ER from my experience. Obviously there will still be exceptions and general stress/timelines especially during earnings. Comp: First year at my firm will look like 85 base, 10 signing/relocation 30-50k bonus= 130-140k. Obviously this has changed just this year and I also I can't be certain since bonus season isn't here yet. Can't speculate how this will develop given the changes in comp on the street, 85 base is confirmed though. Exit Opps: Most popular exits are HFs (Surveyor, SAC, etc) or top AM shop (T Rowe, Capital, Neuberger, etc). Other buy-side opps will be start-up HFs that most other people won't have the opportunity to interview for. I was surprised by how many people jump to industry- Investor Relations or Biz Dev roles in their sector. Top MBA is also a decently popular exit- I don't think I can name a person that went the MBA route go to less than a top 5 ranked school. Hopefully this continues though, and note I have a very limited sample size. Hope that helps, feel free to ask anything else I didn't cover and I'll try to get back and answer questions whenever I can.
Thanks for this, great post! SB
Thanks for doing this, threads like these are immensely helpful.
Currently working part time at a small ER shop as an ER Assistant...looking to break into a FT ER or Credit Research role ASAP. Have a roughly 3.2 GPA, but graduated from a top LAC this June.
How would you recommend I get in contact with analysts? Cold messaging on Linkedin? Everyone recommends tapping your existing network...but honestly my existing network has not really been helpful in the slightest over the past few months.
No problem. For networking I found Linkedin very helpful, you can find professionals in your areas of interest and then reach out to them through their email you find on your school directory. One tip would be as specifc as possible when reaching out. So instead of "I'm also interested in finance" say "I'm also interested in ER/Sales/IB in the TMT space/Industrials/whatever"
Cheers, always fun to see fellow ER people contributing. My question - whether (or how often) you get frustrated that half of your time is spent trying to convey the key message in as good a way as possible, tweaking graphs, making everything presentable etc. versus the time that you be spending doing actual analysis (AKA what you get on the BS)?
Yeah definitely, especially in the first year the formatting/presentation B.S. can be pretty annoying. Hopefully as you go along you'll be able to move to more high level stuff. I've found that lead analysts respond pretty well to initiative on the associate's part. So if you're getting tired of the formatting/writing, maybe come up with a game plan for a particular analysis/primary research piece you can do and present that to the lead analyst.
In your opinion, how do you add value as someone in ER? Definitely don't mean that disparagingly in any way - but I did an ER internship and chose to move to ib for a number of reasons, among them the fact that very few people actually read the reports you publish in detail and most will do their own research anyway (speaking to an er analyst at the bank where I currently work, he actually mentioned something like 5% of people will read the reports they publish in full). Do you think the value is mostly in management access etc?
Additionally, I'm potentially interested in ib long term but also potentially interested in moving to a markets related buyside role (am/hf). I also want to do an MBA in the us (I'm international) and possibly work there after - Visa won't be an issue for personal reasons, but there's a chance I won't be able to get pre mba buyside experience - in that scenario, how helpful do you think a couple of years in er would be (or even s&t) after my ib analyst stint? Do you think that would help with post mba buyside recruiting more than a longer stint in ib (keeping in mind good chance both could be in the us pre mba)?
See my WSO Blog
So most PMs and investing teams at HFs and AMs generally cover a much larger universe than teams at BB ER groups. Buy side analysts will generally be responsible for whole sectors while ER teams cover 15-20 stocks.
Buy side PMs rely on sell-side analysts to provide specific industry/company insight when they start looking at a name. It's hard for a TMT PM to know everything about all the names in his sector, so when he starts exploring ideas he'll need hardware analysts, semiconductor analysts, software analysts, etc. Sell-side value comes from providing that industry expertise, models, and specific company knowledge. When the buy-side is ready to take a position they will know much more about a company than anyone on the sell-side, but that definitely isn't the case in the beginning. For example, my boss maintains really complex models on the companies we cover, we get calls everyday from buy side shops asking for the model and asking him/me to walk them through different assumptions/etc.
They won't rely on our model completely use it at least use it as a starting point. It can be hard to maintain updated models on 200+ companies as a buyside PM.
Management access is another big component, in addition to conferences, etc.
This will also depend on what the lead analyst on your team is good at/known for
how hard is it to go from BAML(from your post im 99% sure youre there, but anyway) to a HF? You listed it as a common exit op, but how many that want to jump to HF make it?
Also, how does being in a constraining sector a la RE, FIG, etc. affect your buy side ops?
I'm actually not at BAML, included them because they have a lot of top ranked analysts. Can't speak to other banks but HF exits are pretty common from my firm. Citadel, SAC/Point72, Carlson are all common. In terms of sector I think it depends on what the need and availability is on the buy-side.
How does the exit to the buy-side work. Do headhunters reach out or is it through networking?
Also, on the bonus front - I thought bonuses came in a little lower for ER?
Thanks a lot for the thread, such posts can be really helpful.
I don't mean to hijack the thread and I'm guessing OP will come up with a more comprehensive answer for you, but to your revenue q - buy-side clients will process trades through banks, and choose how to distribute trades (commissions) between banks (ER analysts) - thus the S&T commissions M&I is talking about come in part from the buy-side clients allocating money between analysts.
See my WSO Blog
Buy side clients will also vote on analysts. More votes = bigger bonus.
Chances are the industry won't be able to follow this kind of commission structure via S&T in the long-run if the new regulations go through. Research and S&T will have to be completely separate - i.e. you will not be able pay for the research by making sure the trades are given to BAML (or insert any other bank). This, in addition to "who pays for research" debate will likely change the industry and the number of key players in the field quite significantly.
Nothing in the interview process was too unexpected. Stock pitch is a huge part of it, got asked it in almost every interview. Id suggest focusing on fundamentals and demonstrating you understand the business. There might be some valuation and accounting stuff in there too. More common is asking about the markets/economy or about news you're following.
I'd prepare a long and a short at least. I got asked for a long then short sometimes, most interviews just ask for one pitch though.
notthehospitalER is spot on about revenues
What can those questions cover?
Thanks for doing this! I have a questions regarding valuation of the stock pitch. The stock I want to pitch has really high ev/ebtida compared to its industry, but from its fundamental I think it's still under-priced, but how would you explain this extremely high ev/ebitda? Thanks!
On performance, sell-side vs buy-side: http://www.people.hbs.edu/dshanthikumar/BuySidePaperMarch52007.pdf
Hi, thanks. I have one question
In ER, are exit options for 2 tier investment banks much worse than bulge bracket? I heard BBs are actually not a T1 shops for ER, since there are quite a few better names for the ER
A bunch of independent shops, speaking about Europe: Autonomous Research, Sanford C. Bernstein, Arete Research, Redburn Partners etc.
It all depends on the analyst, generally BB firms will have more top ranked analysts because the size of the department might be a lot bigger than boutiques. But there are a number of top research shops that are known for the quality of its research more than anything else. Bernstein, ISI, etc.
thanks for doing this! adding to frontpage today at 11am et
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No problem glad to help. Thanks for WSO haha
is it top down or bottom up?
which makes more sense when pitching to clients?
In general? Mostly bottom up but macro factors will play into your analysis and price targets significantly. With that being said each analyst has his own style and background that he/she likes to apply to analyzing stocks.
Wow...comp seems as high as IB? OP so ER Analysts are making as much as IB Analysts if we are to by your numbers.
his bonus numbers are less than half of what I've seen for first year bankers this year/last.
So the good time are back like it's 2006/7?
Not quite, IB overall comp for the first year will probably be 10-20k higher than ER. Bonuses for IB will be about 50-70 depending on rank and such. Overall though, for all front office positions at BBs the comp will be pretty close at the analyst level. this includes S&T, ECM, DCM, also
Hey strats90, thanks a lot for making this thread. Wondering how you or colleagues of yours would view a candidate with a MSF who's currently in a client-facing but BO role at a BB (fund accounting) with very high performance reviews looking to move to ER?
How long does it take to move up to the next analyst level (i.e. 1st to 2nd year), I heard at some shops it takes 1.5 years rather than 1.
What would you consider to be reputable ER shops outside of BBs or those outside of major financial hubs (NYC/Chi/etc.)?
I think it depends on shop, I'm not sure theres a clear cut transition, it more depends on whenever your base gets bumped the 10k or whatever. I can't really speak about ER shops out of NYC, I do know theres a fair bit of ER opportunities in san fran
Is there typically a time limit set in place as to how frequently your base will get bumped up by the ~10k? I know its annual for corporate & investment banking but I have a buddy working at a MM shop where it happens every 1.5 years as opposed to annually? Would it be an annual bump at BBs?
What are your thoughts on STRH ER platform, looks like they are trying to grow and hired Sal Catrini a while back.
Also sent you a PM if you get a chance to respond. Thx.
Thank you so much for offering to elaborate on your experience. I am looking forward to learning from you.
Could you talk about your view on the following questions? - What do you do outside work to continue improving your insights and inputting better assumptions into your modeling process? - Is moving from credit research to equity research a natural transition or more of a difficult one? - You talked about Linkedin a little bit and I have been actually using your technique of being very specific about my interest in ER / Credit research, but people only add me but don't respond to my messages. Do you have other suggestions? - Is equity research an industry that will be there 5-10 years down the road?
Not a problem, I'll try and address your questions best I can:
1) In terms of outside of work, I think it just comes down to a passion for investing and becoming a better investor. The more you like it and are driven to be better, the more you will read about the industry/company, follow up on leads, mull things over, etc. There are so many ways to improve, especially in your first few years in the industry, whether you want to go to the buy side or stay on the sell side.
2) I am not sure the process of moving from equity to credit research. In terms of internal movement, I think it depends a lot on your reviews and how you are perceived by your bosses and in the firm.
3) I think ER will definitely be around in the next few years, there is a need for it at every bank that has an equities business and that wont change.
4) In terms of networking, I would also suggest not ask for anything right away in terms of having them push your resume. Just try and learn and genuinely want to ask about career advice and other insights.
Exactly what I have been experiencing as an incoming ER analyst.
"People definitely can take time off in a more flexible way and it's not very likely you leave the office at 7, take your girl for a nice dinner and get called back to the office in the middle."
How important is it to have a particular industry in mind when you're interview for positions?
In my experience it isnt important at all, team placements will generally happen much later in the process and depends on availability & your preferences. If there is an industry you are particularly interested in and that fits with your story I think that's definitely appropriate to mention but no need to stress about picking an industry for the sake of interviewing
How did you know this? What lead you to finance?
For me, probably parents interest rubbed off on me from an early age. i look at top buy side investor today and they are incredibly smart and knowledgeable and its something to look up to. With that being said, I am still just starting out, not sure if I will end up in finance in the long haul. There are lots of interesting fields out there today, VC, tech, corporate strategy, etc.
I'm a recent 2014 graduate and just made FT, thanks for taking the time.
How is being placed on a general rotation looked at vs being placed on a specific industry for exit opportunities?
From what I can see moving to ibd from ER is going to be tough. My stats are meh (3.2, semi target). Might have to do b-school if I want a chance. How often do you see guys at your firm switch to ER from something like ibd or s&t?
How much emphasis do you place on technicals and modeling in your reports? I've been told some of my reports are too long.
What would you estimate is your offices' ratio of in house research vs outside when putting together a pitch?
What's your opinion on moving to investor relations?
I see lots of questions here on HF exits from ER. But of all the "equivalent" sell side/buy side roles (IBD/PE, market making/buyside macro trading, and ER/buyside fundamental research), I think ER is the one sell side area that actually has enough going for it, such that it's not an obvious decision to take the corresponding buyside role.
IBD to PE, you get better hours and more money. Market making to buyside macro trading, you have about the same level of downside (and though buyside is slightly harsher, the gap is shrinking given the current state of market making) but vastly more upside. In ER, you don't have to be a rockstar, don't have to work too hard, and can still make a very good living. As a buyside research analyst, the incremental upside to ER is not as great as the IBD/PE or S&T/macro prop trading step-up, and the downside is far far worse. Simply put, the minimum level at which you need to perform to keep your job is much higher as a buyside research analyst than it is for an ER guy, and IMO not worth the incremental reward.
So to those of you in ER asking about exit opps, this may ironically be the one space where you might not necessarily want to exit.
SS ER becomes pretty darn cushy if you're a respected analyst. Some more tenured analysts work from home most days (i.e. the Hamptons during the summer months) and log probably 30-40 hours of real actual "work" outside of earnings.
Funny you mention it since I'm actually on the buy side and these are precisely my concerns. I'm trying to avoid falling into a trap since I'm only just starting out. I'm at a small to mid cap firm and I'm already working on a heavy schedule due to the size of the firm and low number of analysts.
How do you feel your job compares to your friends' jobs in banking, consulting, tech, etc in terms of comp, lifestyle, satisfaction?
I think it compares pretty great tbh, it offers higher comp than consulting + less comp than IB but a lot better hours. Lifestyle is good but not as good as buyside at most places. In terms of satisfaction, the indirect revenue generation can be frustrating and the culture can be more intellectual than other parts of finance which is a good/bad thing depending on the person.
Thanks for answering my question. Can you comment on how the comp progresses from year 1 to year 2 to year 3? And do you know how pay is at the boutiques/independents?
How much has your personal portfolio/investing skills improved since you started working in ER?
How do you learn about an industry if you don't have access to industry primers?
How does recruiting work for Equity Research Sales? Are associates divided into the research and sales roles once they have been hired or has this already been determined beforehand?
This is really dependent on the firm, smaller shops might lump sales and ER and trading together but a lot of other places will recruit specifically for S&T and ER
Is it okay if you can provide pointers to someone like me who has a doctorate degree in physical therapy and wants to pursue his goal in investment banking?
I am currently taking certification courses from New York Institute of Finance, and I don't know what else would enhance my qualification.
I have list of things in mind that I think I need to do within the next 8 months. -Get a good gmat score-Get CFA level 1 -Attend Investment Banking Institute -Apply in Boutique Banks and prove to them that my previous business ownerships, and value investing strategy application in both Hang Seng Index and PCOMP is worth giving a chance for an aspiring willing to be unpaid intern.
I am having a great sense that the road will be tough, but I will really appreciate your time providing help.
To add up,
Currently at age 25, I know I might be aiming too high to achieve this goal coming from the healthcare field (the Philippines), but I have been wanting to become one since I've watched Margin Call and other inspiring corporate movies with tough guys in cool suits. I've been improving my investing methods and doing my own analysis for 4 years now.
The reason I even pursue the Doctorate degree because it is the only way for me to transition from a U.S. working Visa holder (tied to 1 profession) to a green card (U.S citizen = freedom) so as I could pursue this dream.
I apologize for making my inquiry long, I just think that I will still have a chance to go through with it because I still have time before reaching the age of 30.
Thank you for your time sir.
The CFA is not as helpful in investment banking roles, but for that it can just demonstrate an overall interest in finance. CFA is much more applicable to investing roles, portfolio management roles, both on sell-side and buy-side. IB is financial advisory work that is less applicable in terms of CFA.
Hello and thank you very much for sharing.
I will be interviewing with senior management (assoc. director of research) at a BB (this is following an interview I had with the associates on the particular research team and after doing a modeling test) and wanted to ask if you know what senior management looks for in a candidate vs. what the senior analyst/associates look for. From my understanding, the actual team wants to know you can do the job, fit well within the group, and are interested in the sector. Thanks in advance.
From my experience interviews with senior management are pretty similar to those with specific teams. I think management will focus more on macro kind of issues, like that you are actually interested in the job and want to stay, and have the overall ability to succeed. For some shops, management interviews are essentially just a check, after the team approves you.
You're awesome, OP. Thanks for the post. What knowledge and skills are most critical to: 1) get the referral and 2) succeed in the interview?
Besides being well read, having a long and short stock pitch prepared, and a strong interest, what skills would an interviewer like to see?
Should I arrive at the interview with a DCF and DDM model or industry report that I've structured? What else can you think of that I can develop to make myself more marketable?
Thank you for your great insight. Helped me a lot to get a better picture about the industry. - How, in your opinion, is ER at BB different than ER at some funds like Fidelity or in that range. I just want to know so I can focus on the right path. I am looking for long term mentality type of investing and not sprint run. Thanks a lot
sell-side and buy-side are pretty different roles. Being on the buy-side you're more solely focused on investing and really digging deep into investments. On the sell-side you are doing that but also spending a lot of time on talking with clients and the sales force.
Most people on the sell-side want to end up on the buy-side at a shop like Fidelity. However, even though some could go to the buy-side directly from undergrad most will choose to start out at and work for a couple years at a good sell-side shop because it offers a formal training grounds, and access to a lot more buy-side firms to exit to. Going to a buy-side firm directly might limit those exit options and offer a lot less formal training. Hope that helps.
Appreciate the info
Thanks OP for this thread. Really insightful!
For background, I'm a junior at a Canadian school (think Queens/Ivey/Waterloo) pursuing a finance/accounting major. Went in only knowing the accounting industry, did an internship with big4 and eyes opened up to the enticing world of finance. Just had a few questions I was hoping you could comment on;
From your team, or ER industry in general, do you think a CPA/Big4 experience has any value-add to the role?
From your experience, do you think it's possible for a Canadian CPA, CA to break into ER at a BB in NY? If so, what would be my best course of action to pursue this?
What does an average day look like for you? and how has that changed since your first year?
Can you speak more on exit opps towards investor relations and business development? Is ER a sought after experience for these roles? How about corporate strategy and corporate development?
I'm still very much interested in obtaining the CPA designation as it has considerably more recognition and value here in Canada. However, I'm not sure if it big4 is right for me long term. How would you suggest I transition/pivot away from big4 and accounting towards ER, ideally at a BB in NY?
Again thanks so much for the post! much appreciated.
Thanks for your sharing strats90.
My background: Big 4 Financial Services Audit, interviewing a top BB ER role
Last month, I have went through an experience hiring process with sector head (MD), regional ER head, an other sector head (MD), one interview per week. All the interviews went very smooth.
Since no follow up massages received for a week, I have called the MD's secretary last Monday, who arranged the interview, to check if there is any update, only been told the MD was in travel during the last two weeks and the process is still on.
I was wondering is it means I am not the first ranked candidate? Is it appropriate to follow up with the MD directly through email? thanks again
Thanks strats. Solid post. I'm a current first year MBA looking to break into ER. Currently enrolled in a top 20 but "non target" school for most BB's. I did have informal visits with two BB's during our fall break. Coming from a pretty strong pre MBA finance background. Any advice for networking and eventually landing interviews? Thanks!
How difficult is the modeling in the ER? I'm about to start a new ER job and worry that my lack of modeling experience will be a real headwind. Thanks in advance.
Have you seen people make the switch from ER to IBD at your firm or others? If so, what reasons did they have for doing so and how did they go about doing it?
Any tips on evaluating senior analysts during the interview process?
How do we figure out what there reputation is like without working in the industry?
Thank you for your post. I hope to break into equity research and am polishing up my story during interviews.
How should I answer the question "have you had experience working with financial statements" if I have never worked with financial statements on a job? Should I simply show my stock pitch write ups to compensate for the lack of real on-the-job experience?
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