My understanding is that in most areas of finance, financiers bonuses are remunerated based on performance which can be quantified by business they brought in, transactions made, volume traded etc etc. However in ER, to me, it seems there's no logical way to remunerate accordingly.
Does your bonus reflect the profitability or performance of the firm as a whole? Enlighten me.
Thanks in advance
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Interested.
Each PM usually has an annual budget that he can spend on research/trading commissions/sales advice/corporate access. Some firms vote on a quarterly basis, some on a semi-annual basis and some on an annual basis. Rankings and commissions are directly linked to each other so the bonus of a research analyst is pretty much dependent on the ranking. There are several awards globally, the most important ones in Europe being the Extel Survey and the Institutional Investor Magazine Ranking.
Hope this helps.
Thanks for clarifying that. I suppose that makes it important to belong to a strong firm so far as remuneration goes then. I'm graduated as an engineer (double major in Physics and Maths) and looking to make the switch. I was planning on trying to break into trading but I am quite competent performing research so ER may be a good area to look into. Any thoughts? I noticed you're in ST.
Are you working right now? You should definitely try to leverage that combination by working in the industry for a few years so you have the contacts in the industry that you're interested in and the knowledge obviously. By then the banking sector will have stabilized and you'll have a great shot at breaking in as an associate. I know a lot of ER guys who did this and are far more successful than their peers. Remember that you have to be a likeable guy in order to pull of an ER gig since relationships are key in the ER business. Many ER guys are nerds and not very good at communicating their views etc. Work closely with your sales guys... and go on dates with a lot of girls to improve your face time appearence and your confidence. When you work at a high profile ER shop or brokerage you will meet many top tier PMs. So make sure you're comfortable around them and that you can present your views/recommendations with confidence.
Your comp is directly linked to the performance of the firm as a whole as well. Rankings aside, if the bank does shitty (like last year was bad for everyone) your comp will suffer, doesn't matter if you're 1st, 2nd, 3rd or runner-up in II you're still getting hit and will get lower than what you got last year.
The other bad thing for ER is guarantees. The continuous battle for II rankings creates more competition, where younger or unranked analysts will be let go and a ranked guy will be brought in with a guaranteed comp package ...which cuts into the research bonus pool. Bonus pool comes from S&T commissions and some banking fees, although nothing like it was pre-Spitzer.
@ nauprillion, I am working at the moment for an ASX200 company, which operates in the resources and energy sectors. I have a rather gregarious personality so they are getting me to work in BD as I can help out the older guys who don't h Ave the technical background to do the research and market/competitor analysis. My next rotation in the grad program is likely to be in our internal strategy and M&A department which I am hoping will give me good exposure to all of the things you mentioned. I already have a ton of contacts in the oil and gas exploration game so hopefully I can grow my knowledge and continue to leverage my network to break in.
@Flake, thanks for the insight. Pre-Spitzer? The thing about information/research which I don't understand is how it is managed and sold from the ER team who generates it, to end user. Do firms have 'subscriptions' of sorts? I can't see how commissions would come into it.
In general, any recommendations on good shops to look into? I'm considering taking a little time off to do an internship over the next couple years to get a couple runs on the board in the financial world.
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