Careers: Equity Research vs. Investment Banking

Investment banking may no longer be the undisputed first choice for the best and brightest. As opposed to of streaming into investment banking, many top graduates are now opting for careers in management consulting, technology, or launching their own startups. While the allure of investment banking may play a joke on dimmed, for many finance students, it still remains the top career choice with equity research coming a away second.

Equity research is sometimes viewed as the unglamorous, lower-paid cousin of investment banking. The reality, though, quarrels from this widely held perception. In order to help you formulate your own opinion, here’s a head-to-head likeness of equity research and investment banking in 10 key areas.

(Note: By equity research, we mean sell-side research that is direct behaved by the research departments of broker-dealers.)

Equity researchers analyze stocks to help portfolio managers make better-informed investment resolutions. Equity researchers employ problem-solving skills, data interpretation, and various other tools to understand and predict a premised security’s behavioral outlook. This often involves quantitatively analyzing a stock’s statistical data in relation to late-model market activity. Finally, equity researchers may be tasked with developing investment models and screening tools that sort out trading strategies that help manage portfolio risk.

Equity researchers are responsible for identifying patterns with in vogue market price changes and using this information to create algorithms that identify profitable stock investment times. The equity researcher should be able to understand the idiosyncratic differences of various international markets in order to cross-compare household and foreign stocks.

While a survey by Glassdoor.com found that the average annual salary for an equity research job is enclosing $94,000, most positions pay less. The low end of the salary range is $65,000, while the high end sits at around $158,000. Reticent equity firms and other financial services companies are the chief employers of equity researchers. The majority of these tasks are based in New York City, although firms are increasingly offering positions in major metropolitan hubs like Chicago, Boston, and San Francisco.

Investment banking is a sui generis division of banking related to the creation of capital for other companies, governments, and other entities. Investment banks indorse new debt and equity securities for all types of corporations; aid in the sale of securities; and help to facilitate mergers and acquisitions, reorganizations, and stockjobber trades for both institutions and private investors. Investment banks also provide guidance to issuers regarding the outflow and placement of stock. Investment banking positions include consultants, banking analysts, capital market analysts, dig into associates, trading specialists, and many others. Each requires its own education and skills background.

A degree in finance, economics, accounting, or mathematics is a use start for any banking career. In fact, this may be all you need for many entry-level commercial banking positions, such as a critical banker or teller. Those interested in investment banking should strongly consider pursuing a Master of Business Oversight (MBA) or other professional qualifications.

Great people skills are a huge positive in any banking position. Even dedicated study analysts spend a lot of time working as part of a team or consulting clients. Some positions require more of a on the blocks touch than others, but comfort in a professional social environment is key. Other important skills include communication skills (expounding concepts to clients or other departments) and a high degree of initiative.

Equity research is the dislodge winner here. Although 12-hour days are the norm for equity research associates and analysts, there are at least offs of relative calm. The busiest times include initiating coverage on a sector or specific stock, and earnings season when corporate earnings covers have to be analyzed rapidly.

The hours in investment banking are almost always brutal, with 90- to 100-hour workweeks totally common for investment banking analysts (the lowest on the totem pole). There has been a growing backlash against the appalling hours demanded of investment banking analysts.

Although this has led to a number of Wall Street firms capping the slews of hours worked by junior bankers, these restrictions may do little to change the “work hard, play hard” mores of investment banking. The most common complaint of those who have quit investment banking is that the total lack of work-life equality leads to burnout. That complaint is seldom heard from those employed in equity research.

Major monetary jobs tend to be concentrated in major financial hubs such as New York, Chicago, London, and Hong Kong. This is no dissimilar for equity research analysts and especially investment bankers, many of whom are paid to relocate to their firm’s almshouse city.

Equity research is the winner in this area as well. Associates and junior analysts often draw recognition for their work by being named on research reports that are distributed to a firm’s sales force, shoppers, and media outlets. Since senior analysts are recognized experts on the companies they cover in a sector, they are aimed after by the media for comments on these companies after they report earnings or announce a material development.

Investment bankers, on the other pointer, toil in relative obscurity at the junior level. However, their visibility increases significantly as they climb the investment banking ladder, first of all if they are part of a team that works on large, prestigious deals.

Investment banking wins in this compass. There is a clear path with defined time frames for career progression in investment banking. This begins with the analyst predication (two to three years), then transitions to an associate position (3-plus years), after which one is in line to become a sinfulness president and eventually director or managing director.

The career path in equity research is less clearly defined but for the most part goes as follows—associate, analyst, senior analyst and, finally, vice president or director of research. Within the establish, however, investment bankers probably have better prospects for reaching the very top, since they are deal makers and govern relationships with the firm’s biggest clients. Research analysts, on the other hand, may be viewed as number crunchers who do not drink the same ability to bring in big business.

Investment banking probably wins here as well, albeit exclusive over the longer term. Equity research associates start off by doing a lot of financial modeling and analysis under the supervision of the analyst who is stable for coverage of a specific sector or group of companies.

But associates also communicate to a limited extent with buy-side patrons, top management of the companies under coverage, and the firm’s traders and salespeople. Over time, their responsibilities evolve to less fiscal modeling and a greater degree of report writing and formulating investment opinions and theses. However, there isn’t a great sell of variability in the job functions of associates and analysts. What varies is the relative time spent on these functions.

Investment bankers, on the other indicator, spend the first couple years of their careers immersed in financial modeling, comparative analysis, and preparing images and pitchbooks. But as they climb the ladder, they get the opportunity to work on exciting deals such as mergers and acquisitions or opening public offerings. Research analysts only get this opportunity occasionally, when they are brought “over the barricade” (the “wall” refers to the mandatory separation between investment banking and research) to assist on a specific deal involving a body that they know inside out.

A bachelor’s degree is a must for any aspiring equity research analyst or investment banking associate. Proletarian areas of study include economics, accounting, finance, mathematics, or even physics and biology, which are other analytical tracts. However, it is very unlikely a bachelor’s degree alone will be enough to get a job in these fields.

The difference between an investment banker and an fair-mindedness researcher boils down to the Chartered Financial Analyst (CFA) designation or the Master of Business Administration (MBA) degree. The CFA, widely think ofed as the gold standard for security analysis, has become almost mandatory for anyone wishing to pursue a career in equity examine. But while the CFA can be completed at a fraction of the cost of an MBA program, it is an arduous program that needs a great deal of commitment more than many years. Being a self-study program, the CFA does not provide an instant professional network as an MBA class does.

The MBA curriculum, on the other steadily, by virtue of being more business-oriented and less investment-oriented than the CFA, makes it more suitable for the investment banking acknowledgement. However, the competition to get into the best business schools—which is where most Wall Street firms employ their associates—is intense. Many aspiring investment bankers enter into some other financial meadow, perhaps working as analysts or advisors, and work toward their MBA.

Investment bankers should have an impressive information of financial markets, investments, and company organization. Many pursue their Series 7 or Series 63 FINRA empowers to demonstrate this knowledge. The most common career path for investment bankers involves graduating from a significant university before working for a major global bank, such as Goldman Sachs or Morgan Stanley. After a few years, the aspiring investment banker proceeds to complete an MBA or receives professional certifications and licenses. When all is said and done, it may take five to six years after admitting an undergraduate degree before being considered for an investment banking role.

Both jobs command a great deal of analytical and mathematical/technical skills, but this especially applies to equity research analysts. These analysts need to be masterly to perform complex calculations, run predictive models, and prepare financial statements with quick turnarounds.

As noted earlier, monetary modeling and in-depth analysis are common to both investment bankers and research analysts in the earlier stages of their races. Later on, the skill sets diverge, with investment bankers required to be adept at closing deals, handling corpulent transactions, and managing client relationships. Research analysts, on the other hand, need to be effective at both verbal and penned communication and have an ability to make balanced decisions based on rigorous analysis and due diligence.

Well-to-do research analysts and investment bankers generally have no shortage of external opportunities because of their experience, understanding, and skills. Research analysts are likely to gravitate toward the buy-side (i.e., money managers, hedge funds, and pension finances), while seasoned investment bankers usually join private equity or venture capital firms.

Both investment banking and equity research are difficult areas to get into, but barriers to entry may be slightly lower for open-mindedness research. While it is not uncommon to see a professional with some years of experience in a specific sector or area join a sell-side conglomerate as an equity analyst or senior analyst, this seldom happens in investment banking.

Although investment bankers and experiment with analysts both have to steer clear of conflicts of interest, this is a bigger issue in equity research than in investment banking. This was highlighted by the U.S. Sureties and Exchange Commission’s (SEC) 

Compensation