1st Year Equity Research Analyst BB London - Q&A
Hey guys, Long time lurker here, thought I would give back and add some value to WSO after learning a lot from here during the last few years. As the title states 1st year analyst (nearly 2) , have gone through the whole progression system; Spring > Summer > Grad position. I'm happy to answer any queries anyone has about the profession itself or the path to get there.
What sector? Bullish or bearish?
Broadcaster : Bearish Publishers: Bearish Satellites: Bullish B2B/Exhibs : Neutral
Sexy
Do you get hit up by recruiters? How often? For what positions?
Thank you bro
Yeah a few , mainly through Linkedin for smaller shops as an analyst and one for sales. Also a few European buy side firms due to my languages. Nothing substantial to catch my eye though. I don't really trust recruiters on Linkedin , all seem very fake to me.
E: Thanks again.
Ok here we go;
1. It's a sad reality that equity research as a whole industry will get culled when MIFID II comes in, but the right way for some to think about it is as follows;
2. See above , yes you've basically got the gist of it. The good will find themselves in a very strong position while everyone else gets clobbered in a free for all.
3. It's definitely very diverse and fits my profile and languages. Every sector has it's perks and downsides, but it is always good to try and join a high ranked team. (You don't always get a choice). Also note, that some sectors are highly specified and use a totally unique set of metrics making them a whole other ballpark and not really comparable to other sectors i.e Banks, Insurance.
4. Well for me personally we have some European companies under coverage and so the language helps massively when trying to contact management, do market research into the home countries industry. To be honest, clients all converse in English, it is very rare for you to use your language then except if it is a longstanding relationship.
Any advice on what made you look good in interviews and how you prepared?
Hmm interviews really depend on which firm you are trying for. Expect a stock pitch in most. For undergrads trying to get internships, don't worry if you have no clue what ROIC is , or how a debt schedule works. What they are looking for is whether you can find and more importantly convey the story.
Learning accounting isn't hard and will come with time. What you need to have to get in the door is the ability to sift through the bullshit, find a coherent story and make the person in front of you believe it.
Preparation wise , I would say it's important to be knowing what's going on around the world and please please please don't just always focus on MIFID. Every SW and interview I have been in recently just has 10 people asking the same question about MIFID. For me personally what would stand out for me, is someone knowing what research really is, have an interest in the market or show real passion in a sector. Passion always shows.
Have you seen anyone make the jump from valuations to ER?
No, not to my knowledge.
How likely is it for a structured sales analyst to move to ER? Assuming having cleared all 3 levels of CFA
Hi, many thanks for this AMA.
Do you know of any recruiting that occurs at the associate (I.e not entry level) level for people from different backgrounds? You mentioned you don't trust recruiters on LinkedIn. Are there any other recruiters within this space you do trust? (Please feel free to PM this if you prefer) Have you seen or are aware of people coming in with an accounting (ACA) background? Do you have a career path mapped out in your mind? What are your typical hours?
Many thanks for taking the time to answer questions. It is most appreciated.
Regarding recruitment I would say it's best to go straight to the BB's, they do advertise openings in London for associate levels. Yes, accounting to ER switch isn't that uncommon.
Regarding a career plan, I would say I am definitely staying sell side ER for a couple of years to gain experience of my sector and to start getting my client book going. After that that though, it really depends on how I feel , if I think I am stagnating then a move to buy side is the obvious route.
Hours wise, ER is really in the middle between banking and markets hours. Usually during the year we're looking at 6-7/8. But when earnings season hits you for those weeks in the year, it suddenly starts to resemble banking very much with me staying 6-11/midnight (especially if you have both companies reporting before and after the bell!).
Hi , thanks for doing this! if you don't mind , could you tell us which languages you speak? and which would you say have an advantage for your position?
Without giving too much away , I speak 2 European languages (exc. English) and one more. European languages are good if you cover companies who are native to that country in your sector. Easier to make a rapport with management.
.
Ok from the sounds of it, you've go your plan pretty well mapped out. In my experience in the UK, cold calling, especially at BB's isn't very successful. Some SW's offer summer insights the following summer , but only if you are exceptional.
Nice! I was targeting niche investment funds and really small boutiques for experience in particular products as you correctly pointed out, BBs are almost pointless to cold call.
Thanks for the heads up otherwise for the qns - I will bare in mind the 10 week 'interview' when doing my summer. Appreciate the response (Y)
The rest of the question aren't really relevant I find. Especially in my BB, the whole class/ethnicity division isn't apparent at all. It's based on merit. Me personally I went to an awful public school and am mixed ethnicity, never though for a second that it might effect my chances.
Finally I think if you look at the floor the analyst to AVP (we call it avp not associate) is around 1.5:1.
thanks for doing the ama!
Thanks for doing the AMA - out of curiosity, what are the state of ER salaries at your BB?
Base / Bonus for years 1-3. Thanks
Tbh at most BB's you're looking at 50-60k base with around 10-15 bonus.
What grades you get at uni?
First class with honours
Well played
Thanks for all the information, very useful!
I'll start full time in ER this fall and was curious on how much homework or networking did you do after you secured your offer. I have not been assigned a team yet and I have been told I will be during my first days. Maybe I am overthinking but is there something I should be doing before my first day (contacting teams, calling people)? Or I'll be fine just pointing my nose day first?
Curious also about salary if you feel like sharing. Did you go though a probation period as well?
Well, make sure you keep up with he markets and the relevant securities your floor covers. i. e European Equities, UK midcap etc... Also as soon as you find out your team, request if you can have some of their larger sector pieces as these give nice overviews of all the companies they cover.
Thanks for doing this. Here are some of my questions and hope that you don't mind sharing.
1, what are the grey areas in ER? How do you deal with it?
2, if you are assigned a sector you don't have interest at all. What will you do?
Given that bb also cost cutting and having lean structure now, how many stocks do you think is most appropriate- count as # of stock per team member?
How do you make friends, or build rapport, if not friend, with investors, companies or other sell side ppl?
What is your view about ER being replaced by algo or other system from technology advance?
What is the biggest challenges? How do I know if I am suitable or not? if not, what are the exit options?
Thanks a lot in advance!
I am not sure what you mean by grey areas? Do you mean in an accounting context?
Well that's always a risk, especially at BB's you are assigned to a sector and don't have an awful lot of choice in the matter. What I will say is this though, as a graduate keep an open mind as every sector has its perks. Just because you've never heard of the company doesn't mean it isn't interesting. Some sectors might mean you have lots of exposure to management, while others might give you the opportunity to travel a lot. They all have their advantages.
Well once you start covering, an average from anywhere between 7-15 stocks per analyst (I'm talking 4-5 years in).
Mainly through networking at Investor days and results presentation. Also if your team is highly ranked you will have the chance to set up many one on ones and personal meetings with management. Regarding investments its mainly how thought provoking your research is and how good your sales team are at selling it.
ER is an opinion based profession so, algos etc, won't be able to replace opinion.
Biggest challenges are being opinionated and being able to catch investors eye with though provoking research. For ever stock you cover you're competing with at least 5/6 different analyst for the same pool of investors. Exit opps are mainly buy side research or buyside trading.
Many thanks for answering my earlier question. I have a couple of follow up questions, if that's ok with you? If I was interviewing for an associate position, coming in from an accounting background, what sort of things would I be expected to know? Can you provide any info on what things it would be important to prepare? Secondly, how do accountants get around the requirements of modelling experience? How much modelling experience is required to come in as an associate (i.e not entry level) and is there anything you can suggest to gain modelling experience? Finally, can you think of things that would make a candidate stand out from the crowd? Many thanks again for your time and contribution to the forum.
Well coming in for an associate position (or AVP in some firms) is slightly different than starting as a grad. If you come from accounting its a plus, as you will have the financial reporting experience necessary for an associate level.
Regarding modelling I guess they would expect you to have some knowledge of modelling, which to be honest nowadays isn't hard to get with all the resources you get online. Using those + you accounting knowledge I think you'd stand a good chance.
To stand out form the crowd try to apply for a sector that you have a lot of experience in, for example in your previous role in accounting did you work with a lot of companies from a particular sector and have a lot of experience in their accounting practices? etc...
Things like that do make a big difference.
Ignore.
Rankings: Mainly through reputation on the street , everyone knows the top 1/2 teams in each sector. More formally there are the investor surveys such as Institutional Investor and Extel which rank teams and analysts. But its hard to get hold of that information as an individual I think its a paid subscription or something.
Exit opps : Buy side, mainly AM. Or moving on to other banks within research. Every so often we have someone move to Spec Sales.
1&3. So modelling for ER is similar to modelling for IB except you don't need LBO . So I actually did my intial training with the bank with the M&A new joiners. If you're starting as an analyst be sure you're comfortable making a simple 3 statement model that balances with 5-10 years of forecast and adjustable assumptions. Also have a look at simple sum of the parts and DCF valuation techniques. When you start, especially if its at a BB , you get a fully fledged 1 month training program to iron out any weaknesses you may have.
What do you see yourself doing in 5 years? Where do you see the industry of ER in 5-10 years? One piece of advice you wish you knew before starting?
Thanks for doing the AMA!
-In 5 years , I would hope I'm knocking on the door of making VP, there or there abouts.
-ER Industry, see my post above . But in general, the space is going to get much smaller with lots of consolidation. Big Banks and reputable firms will see revenues go up, while other shops will get run to the ground.
-Don't underestimate the hours for Research, at some points in the year you might end up pulling M&A type shifts.
Thanks for doing the AMA.
Are there certain qualifications you need to cover a particular sector? For example, Healthcare seems to require a medical background, but what about Tech/Energy? Consumer Discretionary?
Is it possible to make the jump from DCM to ER without an MBA? Since DCM/ECM is known for little or no modeling, are there other qualifications a prospective ER analyst can earn to become more competitive for these roles? (Like the CFA designation?)
Again, really appreciate you doing this.
How do we prep for ER interviews? What type of financial models should we be familiar with for interviews? How do we get ER interviews (networking or applying online)? Is it worth it to take online financial modeling training courses (WSP, BIWS, etc.)?
Thanks for the AMA.
You mentioned that Big4 ACA -> ER isn't uncommon. For those who made the jump, did they stay within their industry coverage i.e. banking auditor to banking research? Or have you seen people choose/fall into completely different industry spaces?
I've heard from colleagues/friends that people have made the jump from a reputable ER shop to Mid-Market PE, have you heard of this/is this at all common?
Thanks again.
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