Investment Banking vs Equity Research

investment banking vs equity research

Investment Banking vs Equity Research. There is a significant difference between these two famous professions. One remains typically in the dark, whereas another enjoys all the limelight and importance of the world. If you want to choose one of these careers, you need to look within yourself and find out what do you want, how you communicate and how important work-life balance is for you. If you are among those who love to work in the dark, doesn’t care much about limelight, then you should go for equity research. But if you enjoy being the centre of the crowd and doesn’t care much about work-life balance, investment banking is the right option for you. There is an incredible demand of investment banking profile among young finance professionals as they enjoy the limelight, significance and glamour.

Investment Banking vs Equity Research -Conceptual Differences

If you are new into the finance field and wondering what to choose among these two, there is one perception which needs to be busted. Equity research is often viewed as the less paid, unglamorous job. But in real sense the things have been changing lately. People are tending more toward equity research and the recognition and the pay is not as bad as it is perceived. We will analyse critically what works and what doesn’t. But before that, let’s see the conceptual differences between these two finance domains.

Roles of an investment banker

Investment bankers are the major decision makers of the industry. Their job is to do an extensive research on various financial deals, co-ordinate with the deal makers and execute major financial deals. Their job in real sense is acting as a mediator between the investors and the businesses who need financing. They work on Initial Public Offering (IPO), Merger & Acquisitions (M&A) and restructuring. In a sense, they add tremendous value to the businesses and investors and earn handsomely as a result.

Role of an equity researcher

Equity research analysts are the real financial heroes who create the valuation models, research reports on the basis of which major decisions are being made. They are experts in financial modelling, financial statement analysis, valuation of the companies, how economy and currency works and they concentrate on a small group of stocks and constantly give information to the team members about any data that seem critical for decision making. Many equity research analysts try to go to the “buy side” of the industry. As it seems the most lucrative and competitive of all equity analyses and provides lucrative compensation and much desired limelight.

Pre-requisites to the Investment Banking and Equity Research Career

There are some pre-requisites if you want to pursue any of these two, most hyped finance domains. Let’s look at those –

Generally speaking, a mere graduation will not help you to fetch a career in equity research or investment banking. But yes, it’s the minimum requirement. If you are brilliant in maths, communication, finance, accounting and economics, you can get a job; but you need to think for further qualification to reach higher levels in your domain.

Education & Skills sets of Equity Research Analyst

In case of equity research analyst, the right course to do is CFA. CFA is very affordable course compared to MBA (have a look at CFA vs MBA). But it is very tough to complete. CFA has three levels which you need to complete to get the certification. As equity research analyst has to do all the calculation and create all the research reports, it is of utter importance that they should be good in security analysis. And CFA is a gold standard course for security analysis. So, it’s a given. If you want to pursue a career in equity research, you must do CFA.

For equity research analysts, researching and analysis skills are of vital importance. All big financial deals are done on the basis of their calculation and analysis. Thus, without these two particular skills it is difficult for an equity research analyst to thrive in her career.

If you want to learn Equity Research professionally, then you may want to look at 40+ video hours of Equity Research Course

Education & Skills sets of Investment Banker

As already mentioned investment banking career is more about closing big deals than sitting in front of the laptop and analysing the latest valuation models of a start-up. A mere graduation will not seal the deal for investment banking professionals. You need more to be an investment banker. CFA is a good option if you consider the knowledge and the acquisition of needed skills; but MBA seems to be the better option as MBA offers an incredible opportunity to network which CFA doesn’t provide. If you see the curriculum, MBA is more business oriented and less investment oriented. As an investment banker has less to do with research and more to do with closing deals, it’s of utter importance that they know how business works along with an incredible knowledge in finance domain.

Three most important skills an investment banker must possesses are ability to create great client relationships, being able to manage large transactions and finally to be able negotiate a deal with maximum success.

Investment Banking vs Equity Research -Employment Outlook

There are many people who have predicted that the positions of equity research analysts would get decreased as we move ahead, but that’s not entirely true. But to be able to work well, equity research analysts have to depend on equity capital markets bankers whose business is much more profitable. But as equity research analysts are the vehicles through which all the financial deals are being done, they are going to stay in the market as long as the businesses exist. Equity research analysts concentrate on specific market segments, value companies on a periodic basis and write reports. All fortune 500 companies hire equity research analysts.

As market leaders say that investment banking and the opportunity have been booming.

According to the Bureau of Labour Statistics (BLS), the growth for financial industry would be around 11% in between 2012 to 2022.

That means, there will be a reasonable expanse of the investment banking jobs as well.

Wall Street has been hiring investment banking professionals for years. And all fortune 500 companies select students from top MBA schools for offering lucrative career opportunities in investment banking.

If you want to pursue equity research analyst profile, don’t think that this is the option left when people don’t get any investment banking profile. Investment banking is not for everyone and should not be pursued by everyone. If you have natural tendency toward critical thinking, analytical ability and you love to dig deep, equity research analyst profile is the right option for you. Whereas, if you have knack toward closing the deals, interacting with clients and building a client portfolio and you love to network extensively, then investment banking profile is the right option for you.

Investment Banking vs Equity Research Salary

It’s being seen that equity research analysts get paid lesser than the investment banking professionals. But that doesn’t mean equity research analysts get paid lesser than the market standards.

According to the research done by Glassdoor in 2014, it is being seen that equity research analysts earn around US $95,690 annually.

As per the Wall Street Journal, the equity research analysts earn anything between US $72,200 to $148,800.

On the other hand, investment bankers are the real money makers. As interns they earn anything between US $70,000 to $80,000. Once they join, their salary becomes US $115,000 to $130,000 with around $30,000 in bonuses. Once they have some experience (maybe around 3 years), they earn anything around US $175,000 to $200,000.

But decision of a career should not only be based on compensation. There are other sides too – personal preference, work life balance and professional aspirations.

Investment Banking vs Equity Research Analyst –  Career Pros & Cons

Both of these careers have their pros and cons. Let’s look at each of them, one by one –

Equity Research Analyst:

Pros –

  • Equity research analysts are the backbones of any security analysis companies. Without the expertise of equity research analysts, the companies cannot help their clients make big decisions in specific areas of the market.
  • Equity research analysts can work independently with the skill-sets they have. They can work directly for clients as a freelancer or can run their own businesses.
  • Clients pay millions of dollars to get the valuation of their businesses to get financed. Equity research analysts have a direct role to play here.
  • Equity research analysts work 12 hours a day or 60 hours a week which seems to be a normal scenario in finance domain. It is an advantage if we compare the work hours with hours put in by investment bankers per week. 

Cons –

  • Equity research analysts often need to depend on equity capital markets bankers to get things moving. Thus, it’s said that ERA can earn their breads, but for jams and butter, they need to depend on others.
  • The compensation for equity research analysts is not as lucrative as for investment bankers.
  • Finally, equity research analysts need to work in dark and get little or no limelight as compared to investment banking professionals.

Investment Banking Professional:

Pros –

  • The demand for investment banking professionals is always booming. Investors and businesses love them as they execute the deals and help both parties connect with each other.
  • They are compensated extra-ordinarily well. They are the highest paid workers in the market (even if you compare with other fields like computer engineering and chemical engineering).
  • Investment banking professionals enjoy glamour, a great lifestyle and incredible reputation.
  • Investment banking professionals are one of the most sought after professions in the world. Many young students look up to this profession as an eye of the fish.

Cons –

  • The major issue with investment banking profession is the work hours. Most of the investment bankers work 75 to 100 hours a week which is too much for a human being to bear. Thus, even if they earn a lot, they don’t get the time to enjoy what they earn.
  • Many students choose investment banking as a profession by looking at its glamour and ultimately fail to make their mark. This profession needs authority-level knowledge in finance which often becomes hard for students to acquire.
  • Investment banking is not about knowing only, but executing bigger, sometimes huge deals. Yes, there is huge bonus for the execution; but often the responsibility also lies on the investment bankers as they connect the businesses with the investors.

Investment Banking vs Equity Research –  Work-life balance

You can imagine that there should be a work-life balance. Yes, work is important. But the person who does the work is important too. So, if you are an equity research analyst, you will be sane and not give in to work. You will have a better life and clear head. You will work 60 hours a week, receive an above average compensation and maintain a healthy lifestyle.

On the other hand, an investment banker doesn’t see his watch. He sees clients. That’s a good thing to do. Even he will earn much more than anyone in the industry. But like everybody, every body needs rest. Without rest and a proper balance, working would be just an obligation. If you don’t sleep for last seven days, you will not be able function properly, let alone the art of thinking for clients. So, even if you choose investment banking profession; set a limit and don’t work till you fall and lose yourself. Life is precious. Do checkout Investment Banker Lifestyle

What should you choose – Equity Research or Investment Banking?

There is no one-size-fits-all formula. Some are good researcher, but better deal makers. You know what to choose in that case. Some are good negotiators, but excellent with numbers; guess what they should choose. Being great in a specific thing is important, but more important is the willingness to work in a particular domain. Not everyone will choose investment banking profession even if the compensation and standing of the profession seem lucrative. Not everyone will choose equity research analyst profile even if there is better work life balance and room to grow and get better in other things in spare time.

Thus, it’s your call between investment banking vs equity research. Know the market. Moreover know yourself. Once you know both of these things, it would be easier to find a sweet spot where you can belong and thrive. Don’t choose any career just because you want more money or glittering glamour or better work-life balance. Choose something because you love it. And it would definitely be the right choice.

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  1. By Siddharth Pathak on

    Hi Dheeraj, this is a very well put article. Thanks for the info.
    But I have one concern regarding the future of ERA’s and would like to know your opinion.
    As we move closer towards automation of jobs, which provide a near 100% accuracy, I feel the ERA’s would become redundant. Although full automation may take another 30-40 years, but it is bound to happen. Don’t you think?


    • By Dheeraj Vaidya on

      Hi Siddharth, I agree your though about automation in Equity Research. However, Automation works on the quality of data and then the results can derived and simulated going forward. For Equity Research Analysts, there is never a complete set of information available from the management. No two companies have a similar model or accounting practices. Given the uniqueness and data quality issues, my take is that Equity Analyst will continue to “survive”.



  2. By Jay on

    Hi Dheeraj,

    Thanks a bunch for all the information you’ve provided. These write-ups are very helpful for those who are new to ER. That being said, I had a few quick questions. Does Equity Research recruiting work the same way as Investment Banking recruiting? Is it more/less competitive or about the same? Coming from a “non-target” school, would it be possible to reach out to ER professionals for networking/informational interviews?


    • By Dheeraj Vaidya on

      Hi Jay, You have some interesting questions here. My take is that Equity Research is relatively less competitive than Investment Banking. Equity research skills weigh more towards financial modeling, report writing, valuations etc. However, Investment Banking is a mix of intangible skills like presentation, communications as well as tangible skills like valuations. Therefore the recruitment work related to these may differ a bit.

      It is surely possible to get into equity research with networking. Clearing CFA level 1 should help you with this goal.

      Good Luck!


  3. By Kiran Patil on

    Nice peice of Information Dheeraj.Your blog is awesome platform for the people who want to make their careers in Finance..really helpful..


  4. By Harsh Upadhyay on

    This is the article which I was looking for.
    Thanks and very well written.
    This is going tho help me out with my confusion really well.


  5. By Ashwit on

    Hello, I am MBA finance graduate from Mumbai University, I have good knowledge in capital markets, finance and accounting. I have about 18 months experience in capital markets as an equity advisor. I wish to be an investment banker. Where should I start with?.
    Like for getting an interview first of all.


    • By Dheeraj Vaidya on

      Hi Ashwit,

      You need to somehow include keywords in your resume that show your focus towards finance and investment banking.
      Suggested keywords – CFA, Financial Modeling, Investment Banking, Pitch Book, M&A, LBO Modeling, Master in Excel, Powerpoint.
      If you are missing some from the above keyword list, then you need to work towards it. Take the CFA level 1 exam, Learn financial Modeling, Master Excel and Powerpoint etc.

      Hope this helps,


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