In this section of the blog I’m going to providing alternative ideas for people looking into the finance industry. If you’re really into finance but are not sure about investment banking or perhaps you are in investment banking but are looking to do something different then hopefully I can provide you with some food for thought as well as other options.
In this post I’m going to be discussing sell side equities research roles. For the what, why, who and how of equities research keep reading below.
What is equities research?
Equities research analysts typically research listed equities within a particular sector and then form a view about these investments and provide recommendations to clients about these stocks (typically buy, sell, hold type recommendations).
In order to do this the equities analyst must:
- Understand and value the companies they cover (they build much more detailed valuation models than the investment bankers typically would)
- Keep on top of all the issues that are affecting the company
- Write reports on the company which investors are likely to read
- Market these reports to investors
- Provide an insight into the companies that investors cannot get themselves
Why do equities analysts exist?
Typically equities analysts work within Investment Banks and effectively support both the Sales and Trading as well as the Investment Banking sides of the business. For more information about how they tie into the overall picture see my post on What Do Investment Banks Actually Do?
Different investors use equities analysts in different ways
- Individuals / smaller investors tend to trust the research of equities analysts a little bit more. They do not have the time to research the companies and are not experts in the field (as equities analysts soon become). They are the ones who concentrate on the recommendations themselves
- Smaller institutions tend to use equities analysts for the access they can provide to companies. An equities analyst representing Goldman Sachs or Morgan Stanley is going to have much better access to a large companies than an institution with $100m under management
- Larger institutions typically have the research capability in house and have their own analysts doing what the Investment Banking equities analysts do. However they typically use equities analysts as a check to make sure they haven’t missed anything and are typically interested in the sector research that the equities analysts do
Who becomes and Equities Research Analyst?
Much like investment banking, Equities Research departments at investment banks often hire graduates straight out of university. Although there isn’t the same hype associated with these roles, they are fought after because they provide access to a career that many prefer to investment banking.
Equities research analysts are typically much more interested in investing in companies than in doing the deal. Graduates often make the approach of applying to Investment Banking when what they are really interested in is Equities research.
Equities analysts are paid very well. Not as well as investment bankers but certainly more than the ordinary person on the street. Unlike Investment Bankers, they also tend to have a life. Although they will be incredibly busy around reporting season (twice a year in most countries, four times a year in the US) generally speaking they are in the office by 7 in the morning and then out by 7 in the evening. Not a ‘normal’ day by any standards but certainly one that you can do for quite a long time.
How do you become and Equities Research Analyst?
The title ‘Analyst’ is actually the highest in Equities Research (not the lowest, like in banking). You normally start out as a Junior Associate or something similar and then work your way up. Equities Research Analysts internal rank within the bank is normally Director or Managing Director.
There are a few ways you can become an equities research analyst
- Enter a graduate program run by a major investment bank
- Lateral into the role after doing another finance related job
- Become an expert in a particular field (e.g. Healthcare) and then transfer into a senior position
Getting into Equities research warrants its own post and I will go into this in much more detail in that post. But effectively there is less competition as you go down the list but you need to be actively positioning yourself in order to land one of these roles.
Do you want to get into Equities Research? Is it something you would consider or are considering? Comment below or send me an email and I’ll see if I can help out.