This is just one of those threads, where we talk about what theindustry is like. I'm a first year associate at a in ER, and I just finished my 2nd week. I'm working under a group that I really like and I thought I would create this thread to help those out who want to understand the ER industry.
But I'm going to approach this thread from a different perspective. Instead of being a straight Q&A, I'm going to talk about things I thought I knew about the industry or what my perception of the industry was and how that compares to reality. Of course, feel free to ask questions at the bottom. I'll update this as I go along into my new role and I learn more thing.
Perception #1: ER is a cost center and the first one the be laid off.
Reality: ER is not a cost center and is one of the biggest reasons your bank will generate trades from the buy side and have them use your services versus the competitor. The ER department is one of the most useful services for a buyside firm from a sell side firm, so its essential to the success of a BB or any broker for that matter. Therefore, it is not a cost center, it just generates revenue indirectly.
Also, if you are an II ranked analyst, chances of you getting laid off are pretty low. If headcount needs to be cut, the analysts that will be cut will be those that are not II ranked or are generally not seeing a lot of trades in their sector by clients. II rankings and how your bank isa particular sector matters a lot when deciding who gets laid off or not. So if you are an associate going into ER, try to get into a group with a II ranked analyst.
Perception #2: Sell-side analysts live and die off the.
Reality: Depending on your analyst, models are more or less used just to create an EPS number and a price target. It is not the real value add by the sell side analyst to the buy side PM because the buy side PM has a buy side analyst who could do the same thing.
The value add of the sell side analyst is to provide the buy side firm with a different perspective on the stock and get color on companies from their industry contacts. Buy side doesn't care what your rating or your price target is. They care to a degree what your estimate is and they care a lot what kind of perspective you are giving them (generally its something out of the ordinary) and what kind of legal information you can generate from your contacts.
Also, analysts typically don't build models. In fact, analysts are rarely in the office. An experienced analysts job is to meet with clients, entertain, meet with industry contacts, entertain, visit companies and their subsidiaries, visit conferences, host conferences, figure out different perspectives on your companies, and figure out what your next note(s) are going to be.
90%-99% of the modeling, analytic work is done by the associate. They are the number cruncher.
Perception #3: You don't work banking hours.
Reality: It depends on how big your team is and how much work your analyst wants to do. For majority of the associates, they come in around 7:30-8 unless they need to be on their sectors morning call. They also stay until 7-8pm. This is the average day, when you don't have a big note going out the next day or earnings aren't being reported etc.
On the other hand, if you are working for the bigger, II ranked analysts, your hours can be much more. These analysts tend to generate a lot more face time with clients, therefore they need to be constantly thinking of the next note or what else can they do to improve their perspective etc. So these analysts generally assign their associates a lot more work, so your average day can range from 7-8AM to about 9-10PM. If you have a big note going out the next day, you are likely in the office from 6:30AM-12/1AM.
So it really depends. Also the size of your team generally depends on if you are an II ranked analyst or the amount of volume your particular sector is generating in client interest. Again this is generally, but it could vary. I've so far seen the II ranked and top sectors with on avg 2 associates, but sometimes 3, and the non ranked analysts and those in the lower groups only have 1.
Perception #4: Sell side analysts research is BS and they don't know how to pick a stock
Reality: This again depends. Going in I thought most of sell side research was mediocre. But there are some really smart analysts in sell sides who really understand the fundamental dynamics of the stocks they cover. Also, a lot of buy side PMS were at one point sell side analysts who were usually ranked or close to. But there are some really smart guys in sell side research who really know their stuff. There are also some real big dumbass analysts who fit my perception of them going in.
Perception #5: The morning sales call must be so cool
Reality: No one goes to a morning sales call unless you are in sales or if your team is presenting.
I'll update as I go along and learn new things.