Think twice about accepting an ER Offer
I've been in SS ER for a bit over three years, I have my own coverage and worked in London and continental Europe. I will soon join a Family Office's investment team, which means I'm finally leaving the industry. Thought I'd spill some beans on the junior experience.
Looking back, if I had to do it all over again, I'd pick IB over ER. Even though things might've ended up the same for me. Here's why:
- SS ER continues to die and that's reflected by the compensation. Yes, Junior-level base pay might be similar to IB, but the bonus is significantly lower. This get's significantly worse as you move up the ranks. I know IB VP's who make almost the same as junior ER MD's. Not to mention, it's not the best move for your wallet compared to other ambitious careers. Even senior analysts often bail for gigs like Investor Relations.
- ER teams are often the first to get the chop because they're seen as a cost, not a moneymaker. Check out the latest industry gossip, and you'll see how much it's bleeding. But hey, at least ER has an easier time finding a similar paycheck outside the industry compared to traders or sales folks.
- Even the buyside ER industry is shrinking. It's a bit of a gamble to bank on landing a spot there.
On a lighter note, despite the hurdles, ER does open doors. I've interviewed with Family Offices, VC firms, Growth Equity gigs, Corporate Strategy roles, and even some LMM PE firms in my sector. Although, in the PE world, I got a few "no's" because someone else had more deal-related experience.
During my ER stint, I realized I didn't like the nitty-gritty modeling part. Hence my move to become a LP.
So, while SS ER is a decent starting point, if you've got an IB offer on the table, grab it. And seriously, unless you're becoming an ER superstar, sticking around for the long haul seems to be a bad move.
Some added commentary from someone with less YOE:
1. From what I understand IR exits can be for WLB or pay. Depends on the company. If you're going to a large cap, probably pay.
2. So far all the layoffs at my shop have impacted ER fairly proportionately. But it's going to depend on attrition too. If attrition is lower than expected than cuts will be harsher (just look at what B4 is doing).
3. I agree. Made a thread about this not long ago.
I agree that ER really only makes sense nowadays up until VP UNLESS you really like the job, and see yourself as top 10-20% percentile and are happy taking its drawbacks for an arguably more stable career (at least in Europe, US seems like hell).
Curiously though, you said you're becoming an LP, does that mean you're moving to manager selection?
Yeah it's a single family office with 1-2bn AuM. Its less than 5 people incl. the family member himself.
I'll start as an investment analyst, originally the role was for someone straight out of uni but pay is higher than what I currently make so I couldn't complain. And yes a good amount of manager selection (HF, PE,VC) with some direct PE, VC and RE investments.
Basically it's about making money, how doesn't matter.
Sounds like a good gig!
Quite surprised that it pays more but I guess that's family office unless you were at a shop that just pays badly?
Really interesting post, are the exit opps you listed available for someone who did ER -> MMHF in London?
I'm based in Cont Europe now. recruiting here is a more unstructured compared to LDN and especially the US. UMM/MF is always difficult without BB/EB experience due to the lack of oppertunities. Beside that, its really up to you.
re: its a gamble trying to exit to the buyside...is this true across the spectrum? Is it inclusive of MM/SM L/S as well as strong LOs? Going to be starting FT ER at a top US BB soon and curious if my odds of becoming an investor are practically DOA or a massive uphill struggle.
I feel like buyside exit is fairly achievable for those intent on doing so. Need a bit of luck if your desired exit is a very narrow list of funds. But if you include all buyside opportunities, you should be able to get there from top BB.
I think OP is saying that in general buyside recruitment is slowing. This would be the same if you were in ER, IB, S&T etc. Because it's a demand side problem not a supply side one.
For what it's worth, you're better off in ER for LO and you're about equal to IB for MM HF. SM really gonna depend on the fund/strat.
Makes sense, from your POV is it slowing to normal levels? I'm aware it ramped up at some firms over the past 1.5 years. Or would you say it's approaching a cyclical or secular low point? LOs seem to be shrinking their junior intakes after every few years so unsurprised for them.
I’ll play devil’s advocate here. There are a few perks to starting out in ER.
1. Learning: In ER, teams tend to be lean, so responsibilities scale quickly. You’re writing notes, building models, attending analyst days/talking to management, and corresponding with major buyside clients within your first two months on the job. The work is also quite substantive…you’re not up until 2am formatting logos and fonts, you’re l doing real work that needs to be done.
2. Reliability of Experience: In banking, your team might (especially with low deal flow) not get any action. You’ll be pitching into the abyss for two years. Unless you’re truly at a top shop/top group where you’re all but guaranteed to get the deals that make PE recruiters salivate, it’s highly possible you’ll go through your two years with little to show for it. Research isn’t like that…come good or come bad, you’ve got a lot of substantive work you’re doing, and will have a decent portfolio of notes and models to your name.
3. Exits, depending on what you want: After a good analyst stint in ER, you’ll be somewhat well-positioned for all kinds of buyside roles, many of which come with a tremendous paycheck, and are genuinely interesting. There are also lifestyle exists on the corporate side. Sure, there’s not PE, but outside of that, your exits can be as good as IB (if you’re in the right sector and are a good candidate).
I’ve not found layoffs to be worse in ER than in IB. The opposite, actually. Bankers are expensive, and teams with no deal flow are entirely useless.
However, hours aren’t much better either. You’ll be working as much as bankers on slow teams, and even more during earnings. For less pay.
would you say IB>ER for L/S? Referring to MMs and SMs in LDN so not the Coatue/Dragoneer/Elliot/Lone Pine types
I think it depends on why you can bring to the table. What’s your sector? Who was your ER analyst? How is your writing? How is your modeling? What is the speciality of the team you’re hoping to join at the L/S?
Agree with the Exits pretty much similar beside PE. While its still possible to break into LMM PE, UMM and MF PE is impossible.
But its impossible for everyone beside BB/EB because there are just a few opps compared to top IB spots in Cont Europe
I'll actually take the other side here. Family Offices, especially small ones, don't typically pay that well and you usually can make more $ and/or have more optionality doing ER. Good to hear that you got a pay bump but you probably had embedded optionality to make the same, if not more, by swapping to a competitor. Yes the sell side ER industry is struggling overall but so is every other public equities oriented sub-industry. Would argue ER is probably in a better position than most LO vanilla funds because ER is getting commission dollars from the pods which are growing assets and are not as impacted by the shift to passive. Further, what's different about sell side ER is that you can idiosyncratically grow your wallet share within the firm quickly if you hustle and do a quality job and get paid for it so you don't have to worry as much about the overall pie. Have much less control on the buyside because picking stocks is not an hours in hours out endeavor and here is no guarantee of success. Lastly I would argue against your notion that ER is a cost center. Analysts generate research and events that clients pay for. Every time I pick up the phone to call a SS analyst we pay them $500-1000 an hour. Every event they setup is a $1000+ fee for my shop. Tenured analysts also help drive banking revenue because corporates want to have well known analysts cover them. Banks knows this and pay up for analysts with deep contact lists. What is not made clear to young monkeys on WSO is that there are many sr sell side analysts clipping $1M+. Of course you have to climb the ranks to get there but it isnt any different on the buyside or at a FO
Can’t compare SS ER in London / Europe to NYC. There’s a reason why you need to wait 5ish years to get coverage at a BB in NY, but my counterparts in Europe pick up coverage after 6 months to a year.
Some juniors may look at this like a great thing — more responsibility = higher pay early on, but it’s the exact opposite. The comp pool is just so small over there, they can’t afford to pay a fraction of what top analysts in the US get paid…so they fill the slots with cheaper juniors.
Reasons for that are less liquidity and cap for European companies opposed to US counterparts, as well as varying regulations when it comes to how research can get paid.
Also depends on sectors. In biotech/pharma, HF chooses ER over IB by far……
Is this facts? Reason?
Yes facts - reasons are er guys know the science and products better than in guys which is what drives the stock price
If SS ER is a bad role then why is the competition for a seat so fierce? Why not try to go work in an industry with better prospects?
I don’t think sellside research is a bad role at all. It’s more competitive than IB because the seats are fewer.
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