What would you like to know about Equity Sales / Research?

Hi Guys -

I'm working on a blog (or maybe ebook) to give junior staff and interns an idea of what it's REALLY like to work in the equities sell-side business at a BB.

For starters, I'm at a top 3 BB based in Asia contributing in an equity sales front office function. Since I joined in Nov. 2008 during the crisis, I have a unique view what has happened since then and how the industry has transformed. I've done work for virtually every buy-side you can name of, from the top sovereign wealth funds (GIC, Norges, ADIA), to every mutual fund you can name, pension funds, teachers retirement funds, and every hedge fund that has invests in Asia. Internally, I work with our sales/research team across London, New York, Hong Kong, Singapore, Shanghai, and Tokyo on a daily basis. I've interacted with over 20+ Managing Directors (including our global business heads), 30+ Executive Directors, and dozens of junior staff.

Here are some topics that I wanted to cover, but if there's anything you guys would like to know that I missed, please reply here and I'll get it added.

Understanding the Equities Business
- Restaurant or Circus analogy?
- How the sell-side makes money

What is an Equity Salesperson
- Core job functions and their value add to buy-side
- Key qualities of good salespeople
- Relationship with Research

What is an Equity Research Analyst
- It's an information business, really
- Equity Research and what they do (and differences between US vs Asia ER)
- Difference between a star analyst (that moves markets) and an average analyst
- Reading between the lines - beyond Buy/Sell/Hold ratings
- Why Equity Research hates IBD, and why IBD hates research
- Around the world in three weeks, the analyst roadshow

Sales vs. Research
- Why each person wants the other's job
- Who gets the shaft during downsizing?
- Does Sales or Research provide more value-add?
- Which path is more suitable for you?
- Do you enjoy storytelling?
- How is staff performance managed in sales and research?
- Why analysts go on marketing trips

  • Corporates
    • Relationships with corporate investor relations teams
    • Why Investment Banks do roadshows for corporates
    • Stories from cool companies to cover (Playboy mansion, living on an aircraft carrier)
    • Shared relationships with IBD/Research/Sales and corporates

Union of sell-side and buy-side
- What is the real value-add of the sell-side?
- How the Buy-side fits in and importance of client mindshare
- How the Buy-side pays sell-side for services and research
- Importance of external surveys that outsiders don't realize (ex: Institutional Investor)

Long-Term Success in Equities
- Modeling skills and financial analysis will only get you so far and why
- People Skills and the 3C Theory (Clients, Competitors, Colleagues)
- Intangible qualities that make you stand out
- Importance of differentiation, responsiveness, flexibility, idea generation, and creativity
- How your reputation supercedes you constantly
- Types of people you will encounter in this business and how to deal with them

For Junior Staff, Interns, and Aspiring Candidates
- Top 4 misconceptions outsiders have of the equities business
- 7 common mistakes junior staff and interns make
- Types of mindless tasks you will be assigned to do because nobody else wants to do it
- 5 things senior staff appreciate when it comes to junior staff and interns
- Case study of an intern that got a full-time offer and what she did right on the job
- Case study of an intern that failed to even be considered for a full-time interview and what he did wrong
- Networking Hacks - quarterly corporate results, industry trade shows, and corporate websites

Let me know if there's anything else I should add. I purposely avoided pay/bonus since it varies so much between different firms that nobody really has a "right" answer. Tks!

  • T

Hi Anonymous Monkey, upload your resume and land a job

Members that upload a resume get 2.3x the number of interview invites through the Talent Oasis. Learn more.

Comments (73)

Jan 8, 2012

This looks great man. I am going to be an intern at a top BB in equities and am trying to learn more about the business. I come from an FI background but want to learn more about the Eq side of the business before the summer.

One other topic I would be interested to see:
-are FiCC people really so much smarter than equities people? Where does this this old stereotype come from and how 'real' is it today?

Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Jan 8, 2012

Hi Dmackorth - Thanks for the feedback. Unfortunately, I don't interact much with FICC so it's out of my realm. Funny thing is one of our MDs on the trading floor admitted to me the same thing a few months ago.

Truth is, the day-to-day tasks don't really overlap between Equities and nobody has time to just go over and chit-chat. But there are jokes floating around on how brainless it is to be a FX trader, so who knows?

    • 1
Jan 8, 2012
Shorttermbuy:

But there are jokes floating around on how brainless it is to be a FX trader, so who knows?

I can assure you that is patently false. Perhaps a spot trader who just has to watch screens and mash buttons as he witnesses the market unfold, but the derivatives traders are some of the most freakishly brainy people I've ever known.

Jan 8, 2012

This is unreal!

Can you please PM me once your blog or e-book is finally launched? I've been looking for a guide like this forever!

Jan 8, 2012

Sounds like a cool idea, would be interested once it is launched

Jan 10, 2012

We don't hate IBD. I just find it amazing that they always find a way to notify us that we have to vet, model and market a little $500m mkt cap IPO 2 weeks before earnings when we get 0 of the upside potential anymore and then forced to cover the stock for the next 2 years.

Jan 10, 2012

Can you comment in your items 2, 3, and 4. (What is an Equity Salesperson, What is a Research Analyst, and Sales vs Research)

Kind of interested to hear your perspective working in Asia. Thanks

Best Response
Jan 13, 2012

Will try to be brief here but in a nutshell:

Equity Sales - Essentially a stockbroker and account manager for a buy-side fund/client. For example, if I was assigned to cover SAC Capital, I would need to make sure their PMs and Analysts are getting the right resources in making investment decisions/actions from my firm (mapping). This could range from research analyst 1:1 access, broking research ideas (or their own views), corporate access, offering a unique market view, making sure there are no trading issues, good rates for stock lending, bookbuilding process, and a bunch of other stuff. The end goal is to capture more client mindshare so eventually SAC (or XYZ firm assigned to each salesperson) does more trading through us (or ranks us higher in broker reviews) so my firm gets paid more, and thus everyone is happy.

Equity Research - In a nutshell sell-side research analysts are a walking wikipedia of their company and sector, offering investment advice or market insight for buy-side analysts/portfolio managers. These are the guys that give buy/sell/neutral ratings you hear about. Economists/Strategists are also grouped into research but it's not really focused in the spotlight compared to analysts. For an Apple analyst (as an example) - besides having a model and forecast, they will need to know their phones and industry inside out, from component makers like the camera, keypad, processor, casing, and touch panel. Gathering all this information from either industry contacts, companies within the supply chain, or various sources they piece it together to get a fundamental view of how the company should look in the next twelve months (or a shorter time window) and take an investment view from there. The end goal is to become the "go-to" person regarding a company (or sector) to buy-side PM/analysts.
Occasionally they help IBD with their IPO deals, but how often usually depends on how good your bankers are at getting that business.

There are also salestraders on the sell-side that cover buy-side traders, but it's not my field of expertise. I'm probably missing some other info if anyone else wants to chime in.

Sales vs Research
In a way, you can think of it as a shotgun (sales) vs sniper (research) approach to stockbroking. Research is a laser focus understanding on a company/sector, and sales is a generalist focus within a geographical market. A salesperson can broke healthcare, tech, autos, or any ideas they like to portfolio managers/analysts, while research can only focus on their coverage universe or sector. There is no way to say which job is better, as it really depends on your personality and what interests you.

Generally speaking, a sales can enjoy the flexibility of having multiple topics to broke about, but they will never understand a company as well as the analyst or have the industry contacts to provide differentiated insights. But for an analyst, a salesperson is helpful in getting your research "broadcasted" out to the investment community (only so many phone calls an analyst can make within a 24-hr day) and help raise your profile/franchise to get more trading commissions/higher broker reviews for the firm.

Management often says that a good analyst is a good salesperson, and a good salesperson is a good analyst. Research needs to have the qualities of a salesperson to get their ideas out there and capture the client mindshare, and a salesperson needs to understand fundamental research so they can broke stock ideas more effectively (instead of being just a copy/paster).

Equities in Asia:
There are a ton of countries within the Asia market, but the business units are generally divided geographically across firms as follows:

Japan - It's in it's own world since it was the first to take off in this region decades ago
ASEAN - Southeast Asia (Thailand, Malaysia, Indonesia, Philippines, Singapore, +/- 1 or 2 others)
Greater China - Hong Kong / China (H-Share) / Macau, Taiwan
China - A-Share market
Korea - Self-explanatory
India - Also in its own world
Frontier Markets - Cambodia, Vietnam, etc (nobody really covers them yet)

Asia is quite exciting as there are so many stories happening at the same time, and as a regional salesperson its just a buffet of ideas for you to broke. If you want to talk about Apple/tech, you can focus your day's work on Korea/Taiwan (panels, camera modules, and chips are made here), and if you want to talk about casinos or Chinese tourism, focus on Macau and Singapore. China consumer of course is a big story that I don't need to go into.

As an analyst in Asia, you will most likely be based in a country covering a specific sector. There is usually a sector team head that coordinates the sector view/strategy. For example, a regional banking head will take input from the Korea, China, Taiwan, Singapore, ASEAN, and HK banks analysts to come up with a strategy piece and sector view. Junior analysts tend to rise the ranks faster in Asia since the business model is slightly different from the US and there is more growth/opportunity/turnover in the region.

As a salesperson, you will either be a country or regional sales. Country sales focus broking ideas from one country, ie: Korea Tech, Korea Banks, Korea Consumer, and regional sales can pick anything they want in the region cross-country or cross-sector. There are benefits/drawbacks of being both, but that is for another post or my blog/ebook haha...

    • 7
Mar 22, 2012

Hi, I am just about to start a graduate job in equity (research) sales for a major bb in London. I have some questions about the job that I haven't been able to find the answer to anywhere so would be extremely grateful if you had any insight...

Firstly, how does the sell-side make money? I understand that these days sales people no longer take orders directly which are then relayed to sales-traders or traders etc. Instead clients have to distribute trades fairly to different banks. If I understand correctly this means that clients also 'rank' sales and research teams, which is another way for them to give the banks money.

How does this work out in practice, particularly in terms of a sales persons' commission? Is this now more based on a desk's performance rather than an individual's performance, given that it is harder to ascertain when a salesperson successfully convinces a client to trade etc. I know that in some desks in fixed income, a sales person or trader might be 'entitled' to a certain % of money generated, but I would assume this is harder to gauge in equity sales..?
Does this make it a less profitable position? Does it also mean that a salesperon's performance is harder to manage/evaluate?

Any info here would be hugely appreciated..
Thanks a lot.

Mar 22, 2012

Amazing, obviously inetersted as I'm lookign forward to move into ER soon.

You can add a section of where you think the industry is going moving forward. Getting bigger/smaller? more macro or company focused?

Mar 25, 2012

theman1980 also sent me this via PM, so thought I'd post my answer here too so it adds value to some readers:

============

Q: Firstly, how does the sell-side make money? I understand that these days sales people no longer take orders directly which are then relayed to sales-traders or traders etc. Instead clients have to distribute trades fairly to different banks. If I understand correctly this means that clients also 'rank' sales and research teams, which is another way for them to give the banks money.

A: Yes you are correct, orders by buy-side are executed through salestraders, although equity sales can certainly take orders and just pass it along. The exact commission is never really set, as sell-side can lower it if the volume is high enough, and depends on how important that client is. Usually buy-side have their own traders that communicate with sell side traders on orders as they are in charge of the execution strategy instead of the portfolio manager - ex: $100mil executed through 10 different sell-sides so its diversified (its better that less people know what you are up to, esp if you are a really large fund that can really move the price in a low-trading volume stock, for example).

Some sell-side may have better rates on borrowing for shorts, derivs, etc so its critical for clients to have a diversified broker base. It's also important that sales be kept in the loop, so when they speak to the portfolio manager they know whats up and don't look like an idiot! (edit: this is pretty big task in the business, keeping everyone on the same page for one client - especially if the client runs an emerging markets fund where you have multiple countries/markets across different times zones/locations)

The other way sell-side gets paid is through the ranking system aka broker review. Every half year or quarter, the buy-side has a bonus pool that they allocate out to the sell side. It is given out based on the ranking/votes that a sell-side firm gets. The higher your tier, the bigger cut your company gets. As a salesperson you are the account manager, so its your goal to rank as high as possible for the firm. What happens is the salesperson in charge will go to these meetings and meet with the CIO, head of trading, head of EM funds, etc. and just basically ask them "how are we helping you, anything we can improve, how is our trading, etc etc" like a service tune-up, and then they blast out the notes tweak it internally with different teams in the sell-side that the client had problems with the end goal to improve service and get a higher ranking, so everyone gets a bigger bonus (hopefully).

Q: How does this work out in practice, particularly in terms of a sales persons' commission? Is this now more based on a desk's performance rather than an individual's performance, given that it is harder to ascertain when a salesperson successfully convinces a client to trade etc. I know that in some desks in fixed income, a sales person or trader might be 'entitled' to a certain % of money generated, but I would assume this is harder to gauge in equity sales..?

A: Salespeople are generally measured by the amount of trading commissions made off their account and the final broker review votes and ranking their firm is at. If there is a consistent progress in ranking up, or getting new votes from very big portfolio managers or penetrating new accounts/relationships, that's when the salesperson gets rewarded. (Edit: But sometime when the market is bad, going by absolute trading commissions can be misleading, so broker reviews usually have more weight since it has a more long-term relationship focus that pays off bigger for the firm)

The way to think about it is 'how can I capture the client mindshare' - how many multinational companies are there in the world that make hamburgers?

How many sell-side firms cover Apple, Nokia, NVIDIA, or any other large-cap company?

When you compare it, equity sales/research a very commoditized business which makes it even more important to stand out from competitors on the street.

The final thing is the sell-side firm's market share of trading. For the top five brokers trading most of the volume in a market, they are making much more money compared to the rest. The bottom few with 2% or less market share really don't get a revenue base to pay out big, unless their IBD or other businesses are good to offset it.

Furthermore, the higher your market share is, the more clients see your firm as an authority in market color, view, and know generally whats going on vs some firm that has 0.5% market share. Its sort of a catch-22, so that's why a lot of boutiques and smaller sell-side firms are just really struggling here in Asia. As a sales, this will make your job extremely difficult because clients will be nearly impossible to penetrate for votes or trades.

The counter to this would be if you had 10+ years experience, and every client on the street knows who you are so naturally trusts you and your personal brand, not the company's. A lot of senior people did this in 2010-2011 as they were promised more cash and have the personal franchise to do that, but its getting increasingly risky as movement has been very limited this year.

To be honest bonus calculations differ across firms, so its hard to say. I'd say the important thing is add value to your clients, be different from the competition and that's the way to go. You will see many sales that just broke stocks verbatim on what the analysts say. DONT BE THIS GUY!! Make sure to have your own view and thoughts, even if they are different or possibly wrong - nobody is right all the time in this business other wise we'd go to Vegas and retire.

As a junior sales, you will probably be assisting the senior sales with some basic reports, data requests, or servicing to clients (very boring stuff but absorb what you can). Most junior sales that I've seen don't get to broke stocks for the first year but it depends on your progress. As for clients, junior sales are usually given really small hedge fund (AUM <$1.5bil) or family office clients, and never the really big long-funds or hedge funds like GIC, GSAM, Schroders, SAC, etc. The senior guys have the relationships with those guys (they also generate the lion's share of revenue) and would be hard-pressed to give it up (difficult to penetrate anyways as a junior guy), but eventually every sell-side firm does have a co-coverage system as a backup. But as the industry ages, the old retire and young become old so there is a natural progression of everything. Can;t expect the senior people to be there forever.

Just remember this is a people business and a "3C policy" one of my mentors taught me:

Don't be an asshole because its a 3C industry - anyone can be your client, competitor, or colleague someday. You never know when you may need help with a new job, or a colleague you treated badly suddenly becomes a big client, or a client becomes your boss one day, etc. Word spreads quick in this industry and your reputation is paramount!

============

Grammar is kind of bad since i literally just brain-dumped it on him, but hope you get the idea!

    • 2
Mar 25, 2012

Q: You can add a section of where you think the industry is going moving forward. Getting bigger/smaller? more macro or company focused?

There will always be a need for ER because its impossible for buy-side firms to cover the hundreds of stocks they cover, while also looking for new investment ideas on the horizon. There will always be a time for top-down (macro) and bottom up (fundamental) analysis, so its hard to say if one is becoming more important than the other. Both are just different tools (like a hammer vs a drill) to use in an investment strategy. Generally though, being a star analyst that covers the biggest companies is more impactful than a macro-economist (unless you can get decently famous on TV, write your own books, etc..)

For the industry, it is certainly not the good old says of pre-2008 or even earlier, where hedge fund bonuses were spent in vegas gambling in $5,000US increments, or macro analysts being flown on private jets last minute to meet clients if commercial flights were full. With the increased regulation and all the bad press its hard to say it's a growth industry, especially in the US/EU markets. They are still very large businesses for each bank, but Asia (Hong Kong / Singapore) are the real jewels that will shine in the next decade. (China is a different subject as they operate within their own world of A-share as of now. But I won't get into this unless someone wants to hear about it)

Overall, you still do get paid more than the average corporate job but if you're expecting blowout bonuses every year that make your mouth drop to the floor like pre-2008, you will be in for a surprise. But, I could be wrong since this business is very cyclical and it can get crazy in bull markets - although highly doubtful given the increase scrutiny and regulation. But every year everybody complains about their bonus- its like an industry standard. (who wouldn't want more right?)

======

Alright, any other Qs?

Apr 25, 2012

I specialize in placing investment professionals like PMs and analysts in hedge funds, mutual funds, FOFs, and endowments groups - as well as sell side analysts (not so much these days). So I'm not as au courant with regard to the sales landscape - and we're beginning to develop that vertical.

This question asks about institutional equity sales' books of business. I'm wondering what average books of business #s are for Associates, Vice Presidents, Directors, Managing Directors, and even department heads if they're still quarterbacking the largest deals.

Do you have some general numbers to throw at me for each career stage? When I ask a sales candidate what their book of business is, I want to be able to know sort of what the average book size is at each stratosphere, so I can have a general idea if someone is particularly successful or not.

Responses are welcome from other folks as well.

My thanks. And nice work btw.

May 11, 2012

Hey Headhunter71 - Sorry I don't have an answer for you, but I do have a general idea of the global AUM of the clients they cover:

MD: $50-100B+
ED: $30-$100B+
D: $2B-$30B
AD: $0.5-$2B

My guess is the ED space is hardest for you to determine, as the gap between the most experienced ED and one that was recently promoted can be quite big. We have a few EDs with close to 20 years experience who want nothing to do with management so they are happy where they are, and a few that were just promoted with about ~10 years in this business.

    • 1
May 11, 2012

How do you only have one SB for this thread? Great stuff +1

May 16, 2012

SB'ed

May 17, 2012

is your blog up btw?

May 30, 2012

Good read - thanks for sharing.

Let us know when your blog / ebook is ready.

SB for you.

"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."

'The Great Gatsby' - F. Scott Fitzgerald

Jun 2, 2012

Equities in Asia or equities in Dallas?

Jun 3, 2012

Great thread.

  1. Can you give us an example of what an average day is like?
  2. When talking with the funds (clients), who do you mostly talk to, PMs, analysts, or traders? And what kind of information do you talk to them about, is it more equity research on companies (similar to what an analyst does), or more on what is happening in the market? I'm trying to understand, as a equity front office member, how much ER analyst 'knowledge' should you have (ie. how close to being an ER analyst should you get to be good), and what part of your time do you spend doing equity research?

Thanks.

Jun 4, 2012

Equities in Asia - a lot of companies (and countries) here are part of the global supply chain, so there is a lot of read-through and implications that happen between listed companies around the world.

Q: Can you give us an example of what an average day is like?

Every house is a bit different, but as a junior analyst it generally falls along the lines of:

7:30AM - Morning meeting - Research presents their latest ideas/reports to sale and salestraders. Salestraders go over the news, related markets, and order flow. Sales asks analysts questions to make sure they understand the reports and have a good angle to pitch clients with for the rest of the day. Sometimes there is a ECM briefing if a deal is going on.

8:00 AM - Get breakfast, read the newspaper and see if anything related to your sector is mentioned that you need to be aware of. For example in the Korean market there is a lot of internal family rivalry among different conglomerates, so the tabloid articles can give some hints on how management might change, actions insider shareholders might take, etc. It's not exactly equity research material but its important to keep an eye out for it. Some clients ask for analyst opinions on ridiculous stuff like this more than you'd realize.

8:30 - 10:00PM or later - Any of the following:
1) Followup with any sales requests (charts, breakdowns, sensitivity analysis, etc) that they asked for during the morning meeting, or help your lead analyst find data and research ideas for their reports. Some your analyst will say "I want to see if there's a correlation between X and Y" and you spend the rest of your day looking for that info, sorting it in excel. Other times clients will have more complicated requests or customized research that you do. Usually this is only provided to the top-paying clients of each brokerage but the 80/20 rule of thumb is that the AUM the more important they are.

2) Updating presentations - Senior analysts go on roadshows quite often so youll spend lots of time updating the powerpoint slides, updating stock charts, graphs, and content within their material.

3) Writing / Preparing Reports / Finding Data - Some analysts let their junior analysts write reports after giving them an outline, while some prefer to write everything themselves and have the junior staff just throw in charts, graphs and supporting material. There is no one shoe fits all answer here as it depends on the experience and work-style of the lead analyst. Some analysts like to keep it short and quick (1-5 pages), while others like to go super deep and write 60-90 page sector reports. From my understanding in the US (at least at our firm), most junior analysts write the majority of the reports, where the senior analyst is much more of a marketing analyst that talks to clients, industry contacts, and corporate management. Relative to Asia its been said to be a much longer transition period to rise faster for junior staff.

4) Admin stuff - If your team doesn't have a secretary, you will probably be doing the expenses, travel booking, and random admin stuff for your lead analyst. This can vary on how humane they treat you. Also includes publishing the report, going over edits with editors, SAs, and related tasks.

5) Attending results meetings - Every quarter there are results and its probably one of the most despised times to be working in research. You attend a companies results meeting, listen to their presentation, and take notes of anything significant then summarize that in a report and give your view on what happens. (In summary - what are the numbers? did it beat our estimates? what's our view? any valuation and rating change?) Results reports are considered maintenance reports and every broker has to do this, but it has no real value add from a client perspective. If you think about Apple and the 30+ analysts that cover it - as a client would you really want to read a 25th report regurgitating the same numbers they announced? Now imaging getting 40-50+ emails about one company's research PLUS sales commentary on the same thing, and how annoying that would be?

6) Other stuff - I might be missing something, but I think the above covers it 80/20.

Q: When talking with the funds (clients), who do you mostly talk to, PMs, analysts, or traders?

Here is the general mapping of sell-side to buy-side:

Sales --> Mainly portfolio managers, relatively less buy-side analysts
Why: Sales can broke a multitude of products and ideas, where research is often laser focused on a sector. Most PMs can invest in a multitude of sectors too (unless you run a sector-focus portfolio), so the sales is generally the liaison window. As a salesperson, you will never know a sector as well as an analyst, so often times you will direct requests over to research if a PM needs more info or is doing homework on that sector.

Research -> Mainly buy-side analysts, relatively less PMs
Sell-side research analysts primarily cover the buy-side analysts that cover the same sector. The difference (which many of you may know) is that the buy side analysts then recommend their PMs on what they should buy/sell and make investment decisions on. From the clients I know a lot of the times its gathering information among the sell-side, doing your own research, and coming up with your own view on the world of your sector/stocks. It's very common for a large buyside firm, particularly long funds or large HFs to use multiple sell-side brokerages (20+ in some cases) so standing out and really finding a leverage point to add value is probably the biggest challenge within sell side research. (This is easily a whole other topic)

Traders --> Buy-side traders
Not 100% clear on the actual details here but the sell-side traders basically cover buy-side traders and deal with the execution of orders. They are the eyes and ears of the market for the buy-side and they highlight anything they see that could affect a clients positions. They can also broke their own views, but their arguments generally wont be as fundamental driven like sales and analysts.

Q: And what kind of information do you talk to them about, is it more equity research on companies (similar to what an analyst does), or more on what is happening in the market?

Sales basically repackages and brokes research to clients, acting as an amplifier microphone for the analyst to reach a bigger audience. It's not 100% of the time like that, but that's the general idea - getting the analyst's research in-front of clients, to capture mind share and add value so at the end of the they you get more votes, traders, or a higher ranking = firm gets paid more. The biggest difference with sales and research is that research can really only talk about their stocks and their industry, but cannot give "official" investment advice (ie: buy/sell/neutral) on companies that they do not cover.

Salespeople and traders on the other hand are quite free to disagree with research, add their commentary and views into their emails. Sales don't publish reports, but they are much more flexible when compared to research. The way to think about this could be a shotgun vs. sniper rifle.

The content you talk about could be anything about the news, rumors you have heard, whats happening at industry events, channel checks, and a whole lot more. A lot of what you talk about also depends on the client's investment style too. If their fund has an absolute return focus or relative. Hedge funds (generally) look for more short term data, where long funds really look beyond the quarterly numbers to figure out trends within an industry. The important thing is to tailor your service to each clients needs so I don't have an exact answer for you.

Q: I'm trying to understand, as a equity front office member, how much ER analyst 'knowledge' should you have (ie. how close to being an ER analyst should you get to be good), and what part of your time do you spend doing equity research?

There is no magical answer on what it means to be a "good' analyst because each analyst has their own style that makes them stand out (or not). Some are great at critical thinking, storytelling, channel checks, or have great industry contacts. Others have the guts to make big calls are willing to risk being wrong to move markets. You could say the best analyst makes stock calls that are right 100% (just do what they say), but conversely, an analyst that is 100% wrong can also add value too right? (just do the opposite of what they say)

    • 2
Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Jun 5, 2012

Appreciate the effort towards the blog post. Look forward to its completion. I currently hold a junior sales role at an independent research firm in N.A. and overall agree with your insight into the sales activities. One thing I would add to the role of a sales member, or better yet stress, is the importance of being a filter. The buy side, particularly PM's, find value in your ability to filter out poor ideas and stay in-front of them with ones you have conviction on. Easier when you agree with your analyst but PM's tend to respect you more when you aren't afraid to take a contrarian stance. The buy-side knows all of your analysts aren't the cream of the crop and it's you job to push the best.....helping the firm to get paid.

Again, appreciate the insight your pooling and look forward to the finished product.

-Brasky Out

Jun 5, 2012

Great insight. I'm curious to hear what you guys are seeing in terms of flows right now, investor sentiment across regions in Asia, and marginal buyers/sellers. Also, if you have color, curious to hear about the relative differences in investor bases between the various countries in Asia. Thank you.

Jun 5, 2012

Also one more thing, you should definitely compile this into an e-book and sell it, you could make some money.

Jun 6, 2012

@ Bill Brasky - Word. 100% agree with what you say about being a filter too - a former boss in management (before he was let go) once told me a good analyst is a good salesperson, and a good salesperson is a good analyst. Pretty much spot on!

@ Slowdive - Large global hedge funds are located in either Singapore or Hong Kong - guys like Citadel, SAC, Highbridge, and a couple more. Moving down, you have some Asia regional-based hedge funds that have an AUM anywhere from a hundred mil to $2bil which is considered super large for an Asia-based fund. Going further, you have some country-based hedge funds within each market that only trades in the domestic market.

Long funds are pretty much in every market. It gets a bit tricky because each country in Asia also has its own domestic banks competing for business, so the whole area is quite fragmented in a way like Europe I suppose. But overall, Asia-based hedge funds are a lot smaller than the US/EU titans in strict terms of AUM. As for investor sophistication, it's up in the air.

Some funds do not have offices and have their PMs/Analysts run the funds based in London or New York. It's usually quite difficult to stay on top of news and catch the sentiment within Asian markets being so far away, so a lot of them travel to Asia multiple times a year. Most of the people on sell-side and buy-side here come from US or EU educated backgrounds, speaking the native language along with a very good (if not also native) command of English. Some places like Hong Kong or Singapore you can get by with just English as a foreigner, but obviously Mandarin is a desired skill globally so that's a no-brainer.

One thing you should also note is that each geography usually has its own mandate. Meaning that a buy-side firm could have multiple Asia funds run from different offices (London, NY, HK, SG), but the purpose and source of funds from its investors are from different bases/countries. A GEM fund manager based in NY might do some work with his Asia colleague in Hong Kong and exchange some ideas or research, so there are some dynamics at work that don't make the answer so clear cut. Occasionally some funds might have internal competition between different PMs, so as a broker you will have to duplicate your services and efforts across one client firm.

Some buy-side clients love coming to Asia (particularly single guys) because you have exotic forms of entertainment like massage palors, hostess clubs, and other stuff that I probably should not post online.

As for an eBook, yes I have thought about that, but I've been really busy and wont have more time until late summer. Perhaps an easier method is to just record some interviews w/ me on Skype, create some worksheets, then put them up for sale for the price of a drink at a swanky hotel lounge bar.

I've lurked around the forums for a while it seems the two main problems people need help with (that also message me privately) are:

1) How to extract your expertise from a different industry and apply them to finance interviews.

2) Understanding how the whole industry works at a macro-level and how the different players work with each other (buy-side, sell-side, and corporates).

In my view, a lot of threads are caught up in the tactics of interviewing, modelling, X firm vs Y firm - and while they are certainly relevant, the big picture is often missed on why you are doing the work you do. Because the more senior you get, it actually becomes much more of a relationship business compared to the junior levels. This is not just for research, but unanimously across client facing departments within an IB.

Happy to hear some other problems people need help with.

Jun 11, 2012
Shorttermbuy:

@ Bill Brasky - Word. 100% agree with what you say about being a filter too - a former boss in management (before he was let go) once told me a good analyst is a good salesperson, and a good salesperson is a good analyst. Pretty much spot on!

@ Slowdive - Large Global Hedge funds are located in either Singapore or Hong Kong - guys like Citadel, SAC, Highbridge, and a couple more. Moving down, you have some Asia regional-based hedge funds that have an AUM anywhere from a hundred mil to $2bil which is considered super large for an Asia-based fund. Going further, you have some country-based hedge funds within each market that only trades in the domestic market.

Long funds are pretty much in every market. It gets a bit tricky because each country in Asia also has its own domestic banks competing for business, so the whole area is quite fragmented in a way like Europe I suppose. But overall, Asia-based hedge funds are a lot smaller than the US/EU titans in strict terms of AUM. As for investor sophistication, it's up in the air.

Some funds do not have offices and have their PMs/Analysts run the funds based in London or New York. It's usually quite difficult to stay on top of news and catch the sentiment within Asian markets being so far away, so a lot of them travel to Asia multiple times a year. Most of the people on sell-side and buy-side here come from US or EU educated backgrounds, speaking the native language along with a very good (if not also native) command of English. Some places like Hong Kong or Singapore you can get by with just English as a foreigner, but obviously Mandarin is a desired skill globally so that's a no-brainer.

One thing you should also note is that each geography usually has its own mandate. Meaning that a buy-side firm could have multiple Asia funds run from different offices (London, NY, HK, SG), but the purpose and source of funds from its investors are from different bases/countries. A GEM fund manager based in NY might do some work with his Asia colleague in Hong Kong and exchange some ideas or research, so there are some dynamics at work that don't make the answer so clear cut. Occasionally some funds might have internal competition between different PMs, so as a broker you will have to duplicate your services and efforts across one client firm.

Some buy-side clients love coming to Asia (particularly single guys) because you have exotic forms of entertainment like massage palors, hostess clubs, and other stuff that I probably should not post online.

As for an eBook, yes I have thought about that, but I've been really busy and wont have more time until late summer. Perhaps an easier method is to just record some interviews w/ me on Skype, create some worksheets, then put them up for sale for the price of a drink at a swanky hotel lounge bar.

I've lurked around the forums for a while it seems the two main problems people need help with (that also message me privately) are:

1) How to extract your expertise from a different industry and apply them to finance interviews.

2) Understanding how the whole industry works at a macro-level and how the different players work with each other (buy-side, sell-side, and corporates).

In my view, a lot of threads are caught up in the tactics of interviewing, modelling, X firm vs Y firm - and while they are certainly relevant, the big picture is often missed on why you are doing the work you do. Because the more senior you get, it actually becomes much more of a relationship business compared to the junior levels. This is not just for research, but unanimously across client facing departments within an IB.

Happy to hear some other problems people need help with.

Are you in HK? I am in HK right now till the end of the week and would love to talk. I wonder the WACC that you may use for HK/ China stocks?

Jun 11, 2012

Thanks again for this post - informative and to the point!

I have a question regarding the chances offered to an experienced Analyst in IB to Sales - How hard it is? How do Research / Sales look at junior I-Bankers who do this move? Are skills transferable? How often this happens?

Thanks again!

"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."

'The Great Gatsby' - F. Scott Fitzgerald

Jun 12, 2012

@ Heavy Bag: I don't know anyone that has made the move from IBD -> Sales so I can't offer much insight. The IBD switches that I know of have gone to research.

Sales is very relationship driven with your institutional clients like hedge funds, mutual funds, etc so coming from an IBD background you are starting from 0 in terms of client traction. Remember it's broker ranking/votes and trading commissions that the firm cares about in the end. It doesn't make much sense unless you are willing to start from scratch.

Research makes more sense because you are already covering a certain sector as an IB analyst and have overlapping universes with the research department so its an easier transition. A lot of clients that I pull biographies on seem to take this path, along the lines of IBD --> Sell-side Research--> Buy-side research --> Portfolio Manager (but we are talking super experienced w/ 12+ years or more)

Some analysts do switch to sales too after having a strong profile as a research analyst. It's a much better lifestyle and you don't have to chase quarterly results four times a year. I'd say this is much more common than any IBD switch to either role.

My guess is if you can find a student that has done both IBD and Sales internships before it would be more insightful.

@blueslord - Sorry, not based in HK!

Jun 12, 2012

Thanks a lot for your message - it makes total sense.

The road from IBD to sales is definitely a difficult one, unless you are willing to start from scratch or you already have relationships through your network.

"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."

'The Great Gatsby' - F. Scott Fitzgerald

Jun 12, 2012

Thanks a lot for your message - it makes total sense.

The road from IBD to sales is definitely a difficult one, unless you are willing to start from scratch or you already have relationships through your network.

"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."

'The Great Gatsby' - F. Scott Fitzgerald

Jul 15, 2012

Hi all -

With market volumes and client activity being low, it's freed up some time for me to work on this project again. Alternatively its bad news across the street - no deals/trades = no revenues = no bonus.

It seems a lot of people have questions but they are all over the place, so would love your help to help me focus on what's important. I have a short survey of 5 questions if you could help steer me in the right direction.

http://www.surveymonkey.com/s/F8SBV9K
It takes about 20 seconds to fill out so tks for all the help!

Jul 16, 2012

bookmarking!

Nov 26, 2012

Is this ebook finished?

May 5, 2013

Awesome content and information! Thumbs up.

May 12, 2013

Bookmarked. Also interested to see the final version of this ebook.

Oct 25, 2014

Thank you. Excellent article. I wonder how the ebook thing worked out...would love to have a read

Nov 1, 2014

Thanks for this. I know it's old, but does anyone know if anything else was published?

Nov 1, 2014

sp myself. come on guys!

Nov 1, 2014

Generally it's more of a career path from what I understand than IBD is. That said, I would kill for an equity sales position right now considering how much I don't want to go back to IBD.

Nov 1, 2014

I did half of my internship in trading and half in banking and I must admit that I liked the former a lot more than the latter. I did interact a lot with sales and I really want to do my next internship in sales. Sales I believe can exit into private equity (not sure about this, i remember it being mentioned on wso sometime ago). Sales people can also get into trading after a while but most people stick in it I guess. I say take the offer and if you want try and lateral into IBD after a year when the markets are better (although I think you wouldn't want to once you get settled into that sort of a lifestyle). Pay is equal to IBD in the earlier stages but I believe at later stages, sales people can make a lot of money

Nov 1, 2014

Interested in this as well.

Nov 1, 2014

I would imagine it's the trader at risk, not the salesman. The client would still rather talk to a real person who's reacting to the market like an intelligent human would, but they won't care if the actual trade is executed by a person or a program.

Nov 1, 2014

You do know that algo desks have traders on them right? It's not like they click a button come back 6 hours later and print out the P&L.

For the desks that deal with large hedge funds who do tons of size, not much will change. For the smaller roles the traders will have to be more mathematical and the prime brokeage folk will most likely not have a job.

Nov 1, 2014

not a bad point^. I think that the cash eq. business has already seen a drastic change in the way that things are done. That said, there will always be a need for both salesmen and traders, just a lot less of them as time goes on.

Nov 1, 2014

Keep in mind there are sales-traders and institutional sales people in equity s&t. Sales-traders sell execution to buy side traders and institutional sales people sell ideas to buyside PM's and analysts. I can't see institutional sales people's jobs changing much but I bet eventually sales-traders will become "algo salesmen"

Nov 1, 2014

sales-traders also offer ideas to the buyside but typically they are more catering to the buyside traders information/execution needs. Think of them as doing the role of both salesman and trader at the same time but usually the trading is done on an agency only basis. They can offer a high quality service to a client that is too small to get attention at a bigger shops.

Pure institutional sales would be more for the megafunds/large mutual funds 3bn AUM+
sales-trading for smaller funds say 100mm-3bn AUM

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Nov 1, 2014

Doesn't pay depend on the flow?

Nov 1, 2014

I've actually never heard of that before... I thought bonuses were connected to flow, but never base pay.

Nov 1, 2014

SALES & trading.... front office?!?!

I'll let you figure that one out...

This link will answer your other questions: //www.wallstreetoasis.com/forums/institutional-equit...

Nov 1, 2014

yes, it is front office. starting salary 70k+10k signing etc...same as every other front office position.

Nov 1, 2014

You've been here for 1 year and 3 weeks and you haven't figured out that Equity Sales is FO?

I call troll.

Nov 1, 2014

I've gotten so sucked into the prestige monster that is WSO, that I have completely stopped using common sense.

My deepest apologies to the WSO community. I will try my absolute best to quit creating troll like posts.

But on a serious note, any numbers on the year end bonuses/ pay progression?

Nov 1, 2014
porsche959:

I've gotten so sucked into the prestige monster that is WSO, that I have completely stopped using common sense.

BWAHAHAHAHAHA

Nov 1, 2014

Yes it is FO.

@ a BB expect anywhere from 60 - 75k base.. could be more with more credentials/exp.

At a boutique shop, they may pay a little less depending on your experience, etc.

Nov 1, 2014

Of course its a FO role.

Bonus should be on par with other s&t analyst in your class. Doesn't deviate too much in the first 2 years .

exit ops are HF sales role, but most stay in sales. If your good, the potential to make a lot of money is very good, given you have the skillset for a sales role. Most people in sales aren't that concerned with exit ops, it is an exit op for some traders

    • 1
Nov 1, 2014

Sales is the definition of front office...

Nov 1, 2014
Relinquis:

Sales is the definition of front office...

My god...was it that obvious?

All this IBD or bust talk has gotten my mind outa wack.

Nov 1, 2014

Yeah. IBD is sales too especially at the VP & MD level, i.e. when you actually become a banker. That's why IBD is considered front office. All client facing roles are front office, generally speaking.

Don't feel bad. It's still a relevant question to ask at the entry level & for particular job descriptions that might be ambiguous.

Nov 1, 2014

Here is a recent thread on this subject
http://www.wallstreetoasis.com/forums/institutiona...

And also better to start at a top firm where you get training and a salary

Nov 1, 2014

If you matter to a bank as a client then it will make a difference but doesn't guarantee a place for the candidate you're trying to help. They will fast-track matters or politely say no highlighting someone they just hired etc.

Equity sales isn't something I'd recommend unless small caps and distressed stuff. Most sales guys in US or Euro large cap space I know are worried they might get fired even though the desk has done well.

Margins are super tight and people are realising research guys sell as well; they actually know the company and management so much better. I've seen way too many equity sales guys sending out tons of emails with their names at the bottom but the moment you call them, they won't know the entire story or will simply ask their research guy to call you. So we started speaking directly with research (which is what the PM had suggested initially anyway)

Equity sales also involves higher proportion of uninteresting tasks such as simply acting as a bridge between a client and research or company, organising conferences and so on v/s say HY credit where idea generation matters.

Having said that a sales guy we regularly interacted with would always leave at 5pm but has done very well over the years. I wonder how many such strong sales people though.

In terms of prep, no straight answer - should be very easy to get along, have an interest in the markets, know a few companies as stock ideas and the usual why equity sales etc.

Nov 1, 2014

Think long term......

Nov 1, 2014

My thought on equity sales is that it obviously lacks the big upside that other areas of finance have, but it also cannot be automated much further, and margin compression has already occurred. Thus relative to fixed income where there is still a lot of automation and margin compression to come, it feels safer. Yes, margins can always go lower, but it seems that the bulk of pain has happened already. They will always need someone to chaperone the management teams and get the analysts on the phone. That said, I only interact with sales guys from the other side (as an equity L/S analyst) and I do not cover financials, so if you guys have a differing opinion, I'd love to hear it.

Every area of finance has secular challenges to some degree. It is a matter of balance risk/reward and other factors. I get that the work is not very analytical, but for my friend, it would still be a significant improvement relative to what he is currently doing.

Nov 1, 2014

I've been co-oping at a boutique shop for the past year and may end up taking a role in equity sales. My thoughts are purely as an observer and my experiences working with our sales guys.

1.If I want to help his candidacy at particular firms, would it be worthwhile for me to reach out to the analysts? Guessing they would have a decent amount of pull.

My suggestion would be your sales rep as well as the analyst- my particular experience is that the sales guys will do more for you in terms of getting your buddy a job than a sell-side analyst.

2.I get the sense that equities desks have done well this year and are looking into expanding headcount - would you agree that this is the case?
We have been expanding but mainly hiring individuals that already have well established relationships- if your targeting smaller boutique shops its tougher getting started due to lack of coverage (or quality) so you really have to be motivated to make it work. That being said "doing well" is relative, our guys have done well this past year and I would feel good about what they're taking home.

3.Anything in particular that would be good for him to read? What is the main criteria that you look for (I'm guessing personality fit)? How much market knowledge would he be expected to have?

It benefits him to learn as much about the financial markets as humanly possible. There are plenty of brokers that do quite well for themselves being chaperones. I find that it is much easier to establish relationships or even a conversation by having something intelligent to say. Personality is huge and having the ability to start a conversation with a person that has no interest in talking to you is paramount. As the above poster stated, the buy-side gets bombarded with research notes every morning by random brokers so understanding the value in the information and how or even if it should be disseminated is huge.

For your friend I would start with getting the coverage universe for whatever institutions/sales group he's targeting and learning a little bit about each company. Thinking about- Who would find this information useful- Who are the major holders-How do I find this information-How should I reach out to them.

If your actively trying to get him a job in equity sales, call up some of the guys that cover you and have them take you out for beers and bring your friend along.

    • 3
Nov 1, 2014
Danny36:

As the above poster stated, the buy-side gets bombarded with research notes every morning by random brokers so understanding the value in the information and how or even if it should be disseminated is huge.

For your friend I would start with getting the coverage universe for whatever institutions/sales group he's targeting and learning a little bit about each company. Thinking about- Who would find this information useful- Who are the major holders-How do I find this information-How should I reach out to them.

Thanks for your insights here. I'll be starting as an analyst in equity sales, mid market firm, in the new year. My experience is limited as I'm a recent grad but am looking to prepare as much as possible prior to starting out.

Looking at the quotes above, how would you suggest I best prepare myself in these few weeks? Understanding financial metrics/measures, what their relevance is, which measures are important, how to calculate them quickly etc. Any insight would be very helpful.

Nov 1, 2014
Nov 1, 2014
Nov 1, 2014
Aug 8, 2016