Have you decided that Equities Research was for you (see my Overview of Equities Research) but have no idea how to break into the field? Well this post is for you. It follows on from my overview of Equities research and will focus on the nitty gritty of how to actually get an Equities Research job.
In my last post I mentioned that there were really 3 ways that people moved into Equities Research:
- 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
In this post I’m going to focus on the first two methods of getting in. The last method takes 10 – 20 years of effort before you enter banking and I’m all for positioning yourself but that plan is a little too long term for the purposes of this post.
Equities research hiring tends to be much more cyclical than Investment Banking
The fact that Investment Banking divisions seem to turn off the taps when it comes to hiring (both graduates and lateral transfers) is the bane of anyone (especially university graduates) who is looking to get into the field. Equities Research is even more cyclical than Investment Banking
Whereas investment banks need a constant supply of new graduates because of the hierarchical nature of the industry (and thus they tend to flex their number of graduates up and down) Equities Research divisions turn off the tap completely. In a downturn an Equities Research department may not hire a single new analyst for a year or two and just stick with the ones they have.
Equities Research teams have much more flexibility to turn on and off the hiring tap and to mothball certain teams until the markets improve again and you see this happening in every cycle. In tough times they also prefer to poach analysts from other banks rather than go out and hire new untrained staff.
It is worth being aware of the fact that the market can sometimes be like this but don’t write off Equities Research just yet. At most points in the cycle there are plenty of opportunities (via direct and lateral hiring) to get in.
Graduate entry programs are incredibly competitive and you should position yourself well in advance
Getting into an equities research position at an Investment Bank is incredibly competitive. But here is some good news…it is not as competitive as it is for the Investment Banking divisions. In fact, people that apply for Investment Banking jobs are actually much better suited (and often more interested in) Equities Research but they ignore Equities Research because of the lack of perceived prestige. This is great if you have decided that Equities Research is what you want to do.
Getting a job in Equities Research (as with banking) is about positioning. The way to position yourself for a banking job when you are at college or university is very similar to banking as well:
- Get into a good university or college
- Get good grades
- Get involved in finance early
- Be well rounded
- Get an internship in a related field
- Get the Equities Research internship
- Leverage the internship into a full time position
For those who have read my 7 Steps to get into Investment Banking, they would realise that the steps I have outlined above are exactly the same. Have a look at some of the articles I have written on the above topics to get an idea of how you should think about positioning yourself early.
For all the similarities in the graduate recruitment processes there are some important nuances that you should be aware of:
- Grades and analytical skills are far more important in equities research than they are in banking as the role is more focussed on analysing companies than it is about ‘doing the deal’
- Getting involved in finance is not the same in equities research
- Investing is more important than finance competitions – start investing early and have good reasons and analysis behind any investments that you do make
- Starting your CFA is probably a good move…it is much more important in Equities Research than it is in banking and the first unit should cover the same material as your finance majors at college anyway
- Networking is also important (as it is in banking). However again they are not the same. In equities research the senior analyst is often far more involved in the recruiting process than an MD ever is
- The related internship should be something analytical not something transactional like banking
Not everyone is going to be able to land the Equities Research job straight away and if you didn’t get a role don’t be disheartened…you can always lateral in later.
Lateral transfers into Equities Research can be done…but you need to have the right finance background
Doing a lateral transfer into Equities Research is actually more challenging than Investment Banking. Lateral opportunities open up in Investment Banking because of the amount of turnover in the industry. Equities Research staff typically last much longer and their need to pull in lateral transfers is lower.
However opportunities do exist…if you have the right finance background. So what do Equities Research teams look for in a lateral transfer? They are looking for anyone with significant and detailed excel / business modelling experience.
When you join an Equities Research team there is so much to learn. You have to learn about the industry you are covering, the companies in your sector (even the ones you personally are not going to be cover) and you are going to have to take control and understand the models you are inheriting for the companies you personally cover. With all the things you have to learn no one is going to want to teach you how to model as well.
As a result, the people that tend to get hired have a strong excel modelling and analytical background. They tend to be from
- Valuations / transactions teams from accounting firms
- Corporate M&A and transactions teams
- Industry research houses
- Consultants of all kinds
- Boutique investment bank analysts
- Bulge Bracket Investment Bank analysts who have decided to do something different
As long as the role you have is excel heavy and you can model like a superstar Equities Research teams will have a look at you. Unlike investment banking, having sector experience is actually pretty valuable. If you have actually worked in an industry and can work your way around excel pretty proficiently then Equities Research teams will look at you.
Positioning yourself for Equities Research is all about being able to demonstrate your analytical skills and your excel modelling proficiency. Do this and you will have no problem getting into Equities Research.
Are you thinking about getting into equities research? Do you have any questions or stories about your attempt to get in? I’d love to hear them so share them below
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