Are you looking for equity research jobs? It is indeed a great industry to work in. But as you must know it gets really tough to break into these jobs sometimes. Let me help you and give you some information that would help you kick start your journey in equity research.
Equity Research is all about financial statement analysis, economy analysis, comparable company analysis, valuations, recommendations, investment decisions, research report writing, management interactions and a lot more. This job fits well for those who enjoy and understand financial modeling, passionate about analyzing companies, have a right attitude in decision making and meet rigid deadlines.
1) Equity Research Course 11 Course Bundle, 40+ hours
2) Business and Financial Modeling (University of Pennysylvania)
3) Wharton Business and Financial Modeling Capstone (University of Pennysylvania)
4) Introduction to Finance: Valuation and Investing (University of Michigan)
5) Valuing Projects and Companies (University of Michigan)
If you can picturize yourself doing all it, equity research can be one for you! Anyway, let’s get started and understand equity research jobs based on the following points.
- Criteria and credentials
- The good side of the equity research jobs
- The evil side of the equity research jobs
- What is expected from you at equity research jobs?
- Equity research job hierarchy and roles
- Who provides you with equity research jobs?
- Work culture
- Equity research jobs salary
- Quality of work
- Exit Opportunities
- Tips for getting hired
Criteria and credentials
- For equity research jobs, you can either join right after their graduation or after attending a MBA program. For the bachelor’s degree specialization in economics, finance or business would be helpful along with accounting knowledge and good computer skills.
- Further up a master’s degree, again in economics, finance or business would increase your chances of landing up with an equity research job.
- Many get into equity research spend almost 5-10 years working and then look for analyst job position in the industry.
- Another credential that can be important to crack the equity research jobs is having an internship experience in an investment banking firm which would prove you interest and inclination towards equity research.
- Apart from this CFA is one such credential that could provide you with a good base to get into equity research. This CFA credential can prove useful for the job opportunities if you clear the three levels of the CFA examination, meet the educational and work experience rule the institute specifies. Checkout the CFA Dates and Schedules
Have a look at the below screenshot to know the criteria specified by equity research firm/division in a job opening for the position of Equity research associate and Equity research analyst.
Equity Research Associate
Equity Research Analyst
The good side of the equity research jobs
- The economy is ever evolving which directly affects the Investment banking and equity research industry. If you are someone who is well updated about the market conditions, you would be interested in doing this job.
- The work is not as monotonous as it gets in other finance jobs. You will have new deals to work every time, which would be different from the other.
- The job is challenging as you would be competing with analysts at other equity research firms too and would want to keep your best foot forward.
- There is a lot of hard work time that you would use in publishing your research. But from there comes the motivation as your name too would get published with the work you have done.
- You would develop details knowledge about a sector
- You also get to interact and communicate with senior management teams and investors
- The compensation in the form of salary and bonus too would be satisfactory for the hard work you put in. Checkout the differences between Investment banking and equity research
The evil side of the equity research jobs
- In not so good economic conditions getting a job in this field becomes difficult as there is tough competition and job positions are also less.
- The industry is fast paced hence the great work done by you would get irrelevant quickly. Also because of this you might feel that you are not appreciated enough for the hard work you put in.
- The working hour are comparatively longer than the routine corporate finance jobs and is majorly a deskbound job.
- You will have to face work pressure not only from your company but your clients as well.
What is expected from you at equity research jobs?
- The Equity Research Skills sets that you would need to excel at research jobs include financial analysis, business analysis, financial modeling, write reports, make presentations and sound judgment.
- You need to be well versed with accounting and finance concepts but also should be aware of corporate strategies and keep update on the issues and regulation of the industry.
- You need to have good communication skills as you would be constantly in touch with your clients, and learn about their management teams.
- To would have to maintain and update the financial models in line with any new information that affects the stocks you are studying. Again you need to communicate the same to the sales force, traders of the investment bank.
- After you have gained enough experience understanding accounting, corporate finance and capital markets you would be asked to analyze a cluster of stocks within a specific industry.
- Since you are allotted a specific stock to study you need to know everything about them and become experts on to make investment recommendations.
- You need to study the official financial information which is published by the equity issuing company through the sales report; annual financial reports etc. and use it to predict the future trends.
- As discussed above you would be expected to provide intuitive investment ideas and recommend a buy/sell/hold rating on the companies you analyze. This is communicated to the interested parties such as the institutional investors, traders, general public via research reports and formal presentations.
Let’s summarize the key accountabilities of an equity research analyst;
- To make the quarterly updates
- To write event updates
- Updating the sales, dealing, and trading team about the latest events in the sector/company
- To build investment ideas/views that are distinctive in market
- To bring maximum number of companies under coverage in the sector he/she track over a period of time
Equity research job hierarchy and roles
The structure of the equity research jobs is where you would have one head person who would generally make the decisions and others follow them.
Listed below is the job hierarchy that can be found in an equity research division of an investment bank. Although it might not get as hierarchical as the one discussed here. Many times it is restricted only to associate and analystand the vice president position.
In equity research jobs the associate position is for those who are fresh graduates right from college. Their academic credentials would be given due weight-age and also intern-ship experience if any. Typically a candidate with 1-2 years of work experience or someone who has cleared CFA level 1 or 2 would be recruited for this position. This is like a starting point where you would learn about the companies that are covered by your boss or the team you are part of.
- You role revolves around updating the earnings model, industry models using spreadsheet and database software’s such as Excel and Access
- You will have to summarize news and recent developments that can affect the valuation of the companies
- You need to script research notes on company news and earnings regularly
- You would have to prepare quarterly earnings report which is one opf the important research reports.
- You would be involved into conversations with clients once your manager feels that you are comfortable with the work
- Discuss deals with clients and try to build reputation by performing well on behalf of your team
- After spending few years as an associate you would be promoted to the next level in line which is the Analyst.
This position can be achieved depending upon how quickly you are able to get hold of the companies under study, discussing the industry of the stock that you have analyzed, your way of communicating ideas and give formal presentations. To become an analyst you would need an advanced degree in business administration and prior work experience as an associate.
- You would be allotted a set of companies/industries to work upon and would be responsible for their research.
- As an analyst you would have to maintain relations with clients and company management and other industry experts. You would discuss the expected changes in the industry that could affect the stock prices of the companies you are covering.
- You would have to monitor trends in particular industries, conduct research on those industries and recommend a buy/sell/hold recommendation on the stock. Such research of course has to be backed up by reliable research.
After having served as an associate or an analyst the next position that you will be promoted to is that of a senior analyst. As a senior analyst you would be an expert on certain industries such as consumer goods, automobile manufacturing, pharmaceuticals etc. The senior analyst level positions would need atleast 5 years of work experience, MBA or finance based degree from a reputed college or the CFA charter. Useful comparison – CFA or MBA
- Analyze the activities and earnings of companies under research of a particular sector.
- As a buy side analyst you would be producing research for hedge funds, mutual funds or investment management companies. By “buy-side” we refer to the clients who are buying the securities and making investment strategies.
- As an sell side analyst you would be working for investments banks where the sales people recommend the individual and institutional clients on investments through tge research they produce. See the key differences between Sell side vs buy side
Who provides you with equity research jobs?
Equity research is used in many areas. Primarily, these are the companies that need Research Analysts:
- Stock Brokerage
- Mutual Funds
- PE firms
- Venture Capital Firms
- Credit Rating Firms
- Media Companies
- Data Base Firms
- Accounting firms
Below is an exhibit of a job description to an Equity research job opening
- As Research associates/analysts you would usually be in office at around 7 am and leave by 7-9 pm. The average number of working hours are somewhere between 60-70 hours per week. This can be considered favorable as compared to investment banking jobs, where analysts could work up to 100 hours a week but do expect it to be a 9-5 job.
- The working hours get worse during the earnings season as the financial models need to be updated and issue new reports. You might have to stretch the hours up till 12-14 hours every day then.
- There are also conferenced which you need to attend. They can get hectic because you are constantly interacting with people all day and then get back to your desk and work till late night.
- Working weekends are limited to situations like preparing an urgent report/earnings period.
- Work culture at an equity research firm is generally reserved in nature. You are expected to be cool and composed, keep an eye on the market events and how the stock will perform in the coming future.
Equity research jobs salary
You could expect equity research career as financially rewarding. The salary would increase with good experience and credentials. Your salary would include an element of annual bonus based on your performance. The bonus is small at the start but as you are established and work gets published the bonus can be a pretty hefty figure.
Below is the excerpt from the Financial-Salary-Guide-2014 by Robert half. It shows the average salary for financial analysts which include equity research analysts.
Quality of work
- You would get to continuously interact with sales force and traders, portfolio managers, analyst’s investment summary when the company earnings are reported. This helps you to learn a great deal.
- You could develop your financial modeling skills by constantly updating and analyzing companies’ financial forecasts. Although your work would be focused mainly on the operating model.
- Research associates are usually not exposed to live transaction and its negotiations, hence you do not get complete insights as against the investment banking division.
- In reality the initial years the role would be restricted in performing monotonous tasks of creating research notes and the updating of the senior analyst’s marketing material.
You may have to work as an associate for 3-4 years and then work as an analyst for several other years before getting promoted.
The below picture explains the exit options/career paths one has after being a sell side research analyst.
- After you have worked as an associate/analyst, the next opportunity could be found within the same equity research firm by moving up in the hierarchy. We have already discussed the same above while we saw various positions and their role in equity research.
- Next best would be to switch over the buy-side. Here you would be basically working for the hedge fund managers or the portfolio managers. The skill set for both are similar as you are analyzing investments and making recommendations. The buy-side offers even better lifestyle, and actually investing. Having said that, the buy-side is extremely competitive, even for research associates. One tip here could be that the associates should enhance their profile by receiving the CFA charter and or going to business school before getting into the buy side.
- Working on the sell side you would analyze a lot of company financials and understand its effects. Hence you can get into typical corporate finance roles which perform similar financial analysis jobs.
- Getting into private equity (PE) could be another exit option. Although this can get tough as you are not working on transactions at equity research jobs and hence the profile differs a bit. That does not mean it is impossible to get into PE. As an Equity research analyst you would be well versed with investment research only that this will be respect to private companies and not public.
Tips for getting hired
- Preferably it is better to have an MBA specializing in finance or a CFA charter
- Invest your initial years in understanding the markets and practising technical & fundamental analysis.
- Basic knowledge of stock exchanges and how they work.
- Go in for internships to practically understand what happens at equity research jobs.
- In case you lack an MBA from the top institutes or do not have enough experience try and build your own research reports. There are various courses that can teach you how to perform financial analysis. You can then apply the same and prepare research analysis.
- Exhibit your ability to think and support your intangible skills with appropriate situations where you have used them successfully
- You need to be not only analytical but also creative. You should have your own opinion on the events that affect the market and should be in a position to explain them well when an interviewer gives you a situation.
- Read investment scripts, research reports, economics texts, merger and acquisition analysis and everything that affects the market. Needless to say you should read news every day and understand and develop opinion on how it would have micro and macro-economic effect.
- Know yourself It is important you know your strength and weakness areas. This will keep you away from any frustrations that come with poor profile match as against your personality.
- You will have to be patient as not everyone is able to crack an equity research job right away. Prepare well and make informed decisions towards your journey in equity research.
Other useful article –
- Equity Research vs Private equity
- Equity Research vs Sales & Trading
- Equity Research vs Investment Banking
Your success at equity research jobs will depend upon how intuitive you are and how well you come up with investment ideas. If you wish to advance in this field, make the most out of the opportunities to meet people, build a reputation and make informed decisions. Also, learn tangible skills like excel, financial analysis, financial modeling, writing skills etc. Although compared to investment banking, equity research is a less “glamorous” field it will be a great for you if you fit well in the discussion we had through this write up. I hope this helps you get a job in equity research. Wishing you all the best! 🙂