I w ould love to get an overall discussion on how people in the business (and outside of the business) view ER a few years after the adoption of Mifid, after last year's Covid boom in equity trading, the current issuance boom, etc. My gut is that the outlook for equity research as an industry/job opportunity has improved compared to say three years ago. Bonus pools seemed to increase this year, there is a lot of deal flow and the need for analysts.
I can also answer questions for anyone. I am a sector analyst with a team now (think Executive Director / Director level, so between VP and MD).
Don't really have anything to add. Trying to break in ER because I like the work, but keep hearing about how the outlook isn't good. So its nice to hear a positive opinion on ER's outlook.
any particular sector you're passionate about? Seats are opening up, jump on the opportunity while it's hot. Also happy to talk about how i broke in from with a non-traditional background
I am seeing tons of opportunities across multiple sectors at different firms. My biggest problem is that it is hard to tell which shops/analysts are strong in research. Therefore, it is hard to tell which opportunity is actually a good one.
Has the pool of associates to recruit decreased due to the perception of ER’s future? Was wondering if that has made it harder for analysts to staff their teams. Might be sector specific.
You could say that the pool is a bit decreased, but there are still plenty of candidates. All of the BB banks recruit out of college, and for those that stick in the industry, there are always lateral opportunities. I've seen increased hiring (which is a bad thing for some analysts as it may be competitive to hire associates)
Can you give us a breakdown of what total comp looked like at each level this year?
I don't have all of the levels, I am not as close to comp for those the first few years in the industry. Bonus pools seemed to be up in the mid to high single digits this year, with a firm or two increasing pools in the low teens. New analysts with sector coverage responsibility seem to start at ~350K to over 500K depending on the sector; hotter sectors (internet, biotech, etc) seem to start higher. As you know, which coverage analysts, pay can vary widely. Top analysts in important sectors can get into the high six figures, with a few superstars here or there getting into 7 figures (though less than were used to be several years ago, or so I'm told). Associates with a few years experience and an associate corporate title seem to get base in the mid 100s with bonuses that can range from 50K or more (total comp in the 2s). VPs slightly higher.
Firms that are known to pay aggressively for senior analysts include Wolfe.
Would you say hotter sectors (biotech) with higher degree requirements (PhD, MD) have seen better prospects in terms of pay and bonus for associates. Been getting more recruiting outreach but not sure if that is just because it’s the season or because there is a real dearth of potential associates to recruit from.
What would pay be like for someone with an MBA and 1-2 years of experience as an IB associate? Also, what other shops are known to pay above market?
There are a lot more analysts making over 7 figures then you think.
Have been seeing more job ads recently. How have you been finding work life balance? I’m hearing greater coverage with leaner teams are resulting in longer hours
I interned in ER a few years ago and my 2 cents are:
- there was an initial nervousness around MIFID II impact to ER careers
- majority of individuals I worked with during my brief stint moved to adjacent industries (buyside, IB, consulting). A senior member of my current team joined from ER at at a senior level for IB due to uncertainty re long-term impact to the industry
- our ER subscriptions, in terms of # of providers, has decreased but we place more reliance and speak more frequently to our highest quality providers who we continue to subscribe to. My inference would be (as an outsider) overall fee pool has decreased but still a significant opportunity for the highest quality shops
- a number of firms which ceased coverage of various sectors / verticals are resuming / initiating coverage as the market never completely dried up as some previously predicted
What's true:
-leaner teams + less resources + WFH = more hours and the perceived better work/life balance is not as true anymore
-there is some consolidation...Wells Fargo had a significant layoff last year (including some very talented people) and most firms are on a flat/down trajectory on headcount rather than hiring.
-data-driven work is a bigger slice of product than fundamental research (though few traditional SS shops do data consistently well)
What's false:
-AI/automated programs are replacing research analysts..absolutely not the case and will not be for some time.
-Buy-side firms are broadly insourcing more research functions (this is partially true at some leading shops, but not overall)
-compensation is down in recent years
1) Agree on leaner teams
2) There has been consolidation, but I feel that has slowed down a bit. Not sure if we will see Nomura situations this year
3) Data driven work is a bigger slice - thought your comment that few traditional SS firms do it well suggests that there is a glut of data driven work coming out of firms that clients don't value
All I have to see have a look at Wells, Barclays, etc.
Great firms, great opportunities in ER but headcount exceptionally died. Where you used to have team of 10 covering the universe now you have a handful at best.
Agree - know a few very good analysts who had their direct reports chopped to 0 or 1 (not sexy sector)
Can someone explain to me why ER is sometimes crossed across the wall to talk with investment bankers? I thought the two divisions are not allowed to talk to each other. What value does an analyst provide to a banker who only cares about M&A?
I dont know about the M&A part, but if the bank is doing an IPO for a company as a lead coordinator they will have their industry er analyst write the initiation for it for investor education purposes
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