Equity Research vs Sales & Trading
Equity research and sales & trading are two of the critical components to ensure the smooth functioning of markets and stand out as careers of choice for several finance graduates. It would be useful to explore what do these work areas have to offer along with the nature of work, compensation, career prospects, and work-life balance, among other aspects. That is precisely what we are going to discuss in the course of this article. However, before delving into any details, it would be necessary to get an idea of what these roles stand for.
Equity Research vs. Sales & Trading – Overview
Equity Research Analyst
Equity research involves undertaking comprehensive stock analysis, including financial modeling and valuation and Analysis of Financial Statements, which plays a critical role in deciding whether a specific stock represents a good investment or not. Typically, an equity research analyst focuses on selecting sector-specific stocks and studies a number of macro and microeconomic factors that could potentially impact the performance of these stocks. Investors rely on them for detailed analysis and assessment of stocks, which would form the basis of critical investment decisions. They could be working on either the buy-side or sell-side of the market.
Sales & Trading Analyst
They are responsible for marketing the securities to their clients by getting in touch with them to provide timely and relevant information necessary to make a decision. As traders, they take to buy or sell position and facilitate the execution of trades for institutional investors or their firm. It is quite a complex job that requires a trader to keep a close eye on market movements and identify the right opportunities to make a trading call with greater chances of bringing in a profit for the investor. A sales & trading analyst could be dealing in fixed income securities, commodities, currencies, or equities, which would require specialized knowledge of that sector.
Equity Research vs Sales & Trading – Education & Skills
Equity Research Analyst
A bachelor’s or master’s degree in business, finance, economics, or related fields, along with an avid interest in mathematics and a knack for number-crunching, would come in as a few handy skills to plan a career in equity research. It is important to remember that the security analysis undertaken by them holds the key to making critical investment decisions. To ensure a solid grounding in valuation, financial modeling, and other technical aspects, most employers prefer to hire CFA (Chartered Financial Analyst) certified professionals. CFA is indisputably the best certification program aimed at acquiring an in-depth knowledge of financial reporting and analysis, portfolio management, and equity investments, among other things.
Sales & Trading Analyst
To begin with, a bachelor’s degree in finance, economics, or business-related area would work just fine, along with excellent analytical abilities and an ability to think on your feet along with a highly disciplined outlook. It is a very competitive role that requires one to stay calm and composed and be able to make risky decisions with confidence under pressure situations. They should also have excellent mathematical skills and can benefit a great deal by completing CFA as their job also requires a detailed understanding of market functioning and investment instruments.
Equity Research vs. Sales & Trading –Employment Outlook
Equity research analysts play such a key role in markets that they are going to remain in demand for as long as markets continue to work. They could be working on either the sell-side or buy-side of the market, but their fundamental role remains the same. On the buy-side, they are engaged in advising individual and institutional investors about which equities are worth investing in. On the sell-side, their role becomes one of producing unbiased, detailed research reports, and analyses for a firm looking to market or sell its equities. At advanced levels, equity research analysts have to do relatively less of financial modeling and more of report writing and have to develop investment strategies. Fortune 500 companies are continually on the lookout for competent professionals for this role, and growth prospects are among some of the best.
Sales & Trading Analysts also play an essential role in the markets, but the late electronic trading platform is the place where things really move, and as far as giving a sales call is concerned, they are more focused on getting in touch with high net worth clients. Traders have a crucial role to play in large investment banks and with institutional investors, and higher performance enhances their growth prospects. They do not typically have a structured career path to follow, as in the case of equity research analysts or investment bankers. However, that does not take away much from its appeal as an attractive career option for finance graduates. On the whole, the role of sales and trading is getting reshaped with the advancement of technology, and electronic trading platforms hog the limelight as far as trading activity is concerned.
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As far as the employment outlook for both of these areas is concerned, the projected job growth rates for the financial industry are estimated at around 11% for the period of 2012 to 2022.
Equity Research vs Sales & Trading –
Equity Research Analyst
It is a competitive role, no doubt, but the compensation is among the industry-best as well. However, the pay package depends on market conditions as well, and the bonuses largely depend on the success of your recommendations.
According to the research done by Glassdoor in 2014, it is being seen that equity research analysts earn around the US $95,690 annually. As per the Wall Street Journal, the equity research analysts earn anything between the US $72,200 to $148,800. As per yet another estimate by the US Bureau of Labor Statistics, the average annual income is around US$ 85,240.
However, on senior levels, equity analysts can earn in the range of US$ 300,000 to US$ 700,000 annually.
Sales & Trading Analyst
Sales & trading are more of a performance-oriented area, but perks are not bad as well. The only thing that matters most is consistent performance and expert knowledge of the sector they are working for. There is minimal scope for error in s sales and trading jobs, which is why it is not everyone’s cup of tea.
The average base salary for this role is around $50,000 to $ 70,000 per annum, with a signing bonus of $10,000. The year-end bonus could come to around $20,000 to $40,000. Associates in equity cash sales and trading can earn around $200-250k per annum, according to Options Group, an executive search firm.
Career Pros & Cons
Equity Research Analyst
- It is a role that hogs a lot of limelight as compared to sales & trading people, and the compensation is great as well. Their security valuation and analysis helps institutional investors make critical decisions that could impact them in a big way.
- On the sell-side, they have a critical role to play for firms looking to market their securities with the help of a fair and reliable valuation. It can also potentially help attract investor funding sought by firms.
- They get to interact with the top brass of companies they cover for updated information on earnings estimates and reports. Due to the significance of their role, they are accorded a great deal of value in the industry.
- They can work as freelancers and work for their clients or find employment with leading institutions or companies that offer the best perks and work benefits. They have a choice in how to develop their careers.
- Work hours are fair about 10-12 hours a day or around 60 hours a week, common to the financial industry. It allows them to pay attention to other areas of life as well.
- One of the most significant disadvantages is that new entrants in the field of finance might find it challenging to get a good opening in equity research. The competition is stiff, and compared to that, the jobs available are limited.
- Even though they usually receive the credits for their reports and research work, it tends to be forgotten very soon in the fast-paced market environment, and there is little recognition in the long run.
- It is true they can work as freelancers. Still, not everyone would be up to that, and those who do succeed at working independently might miss out on the additional perks afforded to analysts working with large corporations.
- They have to maintain a delicate balance to be able to create fair and unbiased reports and valuation of a firm while at the same time try not to leave a negative impression on the management of the firm for which the valuation is being done. It becomes even more important for sell-side analysts.
Sales & Trading Analyst:
- It offers an exciting work environment for dynamic individuals with a flair for numbers and how they work in markets. It is one of the most fast-paced jobs in the financial industry and pays well enough for those who can stand the pressure.
- For those who are good at building client relationships, it is the perfect place to be. It is as close as it gets to doing finance with flair.
- In terms of compensation, there is enough scope to bag a hefty package if you are working for a large investment bank or a sought after role, including equity cash sales & trading.
- Work hours are among the best as sales and trading people do not need to work beyond the market hours, and when the markets are closed, they can enjoy their free time doing whatever they love to.
- It is an extremely competitive role, and you are either good at it or out of the job. It may sound a bit extreme, but consistently poor performance would do that to someone.
- Despite everything said and done about the remuneration, it is widely accepted that payment is on the rise in advisory functions, whereas it has gone down on the trading floor by 5-10%.
- Though there is no clear cut career path for sales and trading people by and large, if you start as a trader, you are most likely to end up as a trader, which is not a bad thing, although working with a large firm, one might rise the ranks, but their actual role remains the same. On the whole, there is very little recognition in sales and trading roles.
Both roles seem to be on par as far as working hours are concerned, but with a slight advantage to sales and trading people. Equity research analysts have to work for an average of 12 hours a day or 60 hours a week, whereas sales & trading personnel have to work during market hours, beginning with a little pre-market prep. This makes their working hours a little more manageable than analysts.
Apart from sitting behind a desk, there is little incentive for an analyst in terms of interacting or going out to develop client relationships; however, they are required to interact with top management of companies they evaluate though these are strictly formal interactions. On the other hand, salespeople might be required to go out and socialize with their clients and continue a level of informal interaction with regular clients. So, on work, salespeople seem to have some perks in terms of socializing that analysts don’t have typically.
Apart from that, people working in either of the roles can maintain a balanced lifestyle and spend enough time with friends and family or indulging in recreation activities in their spare time. On the whole, work-life balance does not seem to be a significant issue with these roles.
Also, check out the difference between Equity Research and Private equity.
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In the final analysis, it comes down to individual choices and possessing the right kind of skill set for a particular professional role. In general, those who have a more analytical bent of mind and like to work in isolation without much interaction, equity research analyst can be a suitable role. A keen interest in finance and a natural flair for mathematics are some other essential skills for the job.
Those who love working under pressure and would rather have an action-filled day at work with lots of interaction, the thrill of achievement than a quiet one, sales and trading is the right choice. An excellent grasp of mathematics, confident decision-making abilities, and self-discipline are some other skills critical to being successful at it.
Those seeking more of a structured career path and ability to work independently should rather go for an equity research role instead of sales and trading. The one disadvantage with the equity research role is that it offers less of an eventful day at work but better perks as compared with sales and trading in the long run.
It is always better to balance your choice against your skillset and capabilities and consult your peers while making a choice of career, which might help make a better decision.