Q&A: Sell-Side Equity Research today

Bulge bracket was much more siloed and less collaborative. In the US It took some effort to get other analysts covering different sub-sectors of a broader sector to come together and put a joint or group report out. Interestingly, in London and Europe it was the opposite experience and these type of reports were more common and there was a general sense that coming at a theme or topic from different angles was value added to clients. This was some years ago so perhaps its changed a bit but my guess is not much. One advantage to a bulge bracket or even sub bulge but larger firm, is that you have grater internal resources to tap into. For example, I covered US equites and if I needed some insights on European or Asian competitors or markets all I had to do was pick up a phone for shoot out an email. A smaller firm just does not have that depth. Bulge brackets and larger firms also tend to skew larger cap (unless its a banking client) so you are covering companies with a lot of competition from other shops. Smaller firms allow more latitude in coverage and I found covering some small and mid cap names to often be more interesting. Plus, access to C-suite management is much easier that at a larger firm (non bulge as bulge brackets also get pretty good access). Getting a bulge bracket on your resume when just starting out is, in my view, better than not having it. It gives a broader experience at a sometimes higher level. It's harder to go from small to big than big to small (not impossible but harder). On a more general note, I'm not sure I'd advise a person just starting out to go into equity research. The job is vastly different than when I started and probably not as fun. The compliance restrictions are, in some instances, draconian and, in my view, actually do a disservice to investors. But, if one does want to go this route my advice would be (aside from the obvious, get into the best school you can and get very good grades) to network and really dig into what is going on in the markets globally. Write a couple research reports with full models and have someone in the job review it and critique it. Don't wait until you have to interview to start getting good at writing reports, presenting an investment thesis and modeling. Feel free to follow up with additional questions/comments.

thanks will do

Larger firms have larger teams, in general. Unless you are a very junior equity analyst (just promoted into the job say) having at least one associate is the minimum. The number of assoictes also depends, in part, on how many companies are covered. A general rule of thump is 1 team member for every 8-12 companies (depending on sector). So an analyst covering 7 companies is probably running solo vs an analyst covering 20 companies certainly has one, and very likely two associates. This could easily be three at larger firms. In my view, we will see a drop in the number of companies covered, particularly small cap and mid cap. Bulge bracket analysts are likely top or near top ranked so by definition one would think their research is valued by the buyside and they have the access to senior management at larger caps and are likely being paid (indirectly) for that large cap coverage. I think we could see sm/mid names dropped by bulge brackets unless they are banking clients. This could be an opportunity for a smaller or mid-size firm to pick up share as the buy side is still going to own these companies so there should still be demand for sm/mid cap sell-side coverage. The next 12 months are going to be very interesting. I'm not sure I would panic but opportunities at larger firms may become more scarce.

JPM, RBC, CS (. I do ntot currently work for any of these firms)

I guess it depends on career goals. If he is planning on going back to get an MBA in a year or two jumping to a BB might be a plus. From what you wrote it sounds like this is not the case, however. I would assume getting promoted to an analyst would entail a pay raise plus the opportunity to get his own coverage and name at the top of a report. Over time the pay differential should narrow but its very unlikely to hit parity with BB pay. I have also seen many instances of an ER at a BB getting picked off by a non BB to start as analyst. One thing to consider is where he would be in the hierarchy at the BB. Are there 1-2 ER ahead of him or is it just him? If it's just him it might offer a better long-term opportunity. He also should consider what happens if the senior analyst at the BB leaves (either by choice or not). If it's just him and the senior leaves voluntarily to join another firm there is a good change the ER associate goes with him. If he leaves because the firm shoots him it's less clear. If he's any good he can probably join another team at the firm. It's a difficult question to answer. Is he getting paid so much less because his firm just pays a lot less? How fast is the fast track at the current firm? Having a BB on the resume is probably a plus but there has to be some line of sight to moving beyond an ER associate.

I assume you mean for an equity research associate position. Modeling skills and using Excel are essential. Writing skill is also very important. My best RA's have been those that are self motivated and require relatively little guidance in how to get a task completed. One of the best RA's I had was often coming to me with an idea for a report or some analysis he cooked up on his own. One of the worst need almost constant instruction on what to do and how to do it. I mean I might as well have done it myself. One critical thing is attention to detail. I can't check every single number in every report and model. The RA must be very focused on this. An ability to recognize something that looks out of place is important (e.g. a P/E of 235x, rev growth rate of 350%; these are actual examples of mistakes I caught that my RA missed).