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So, you won equity research interviews by networking aggressively…
You presented 2-3 well-researched stock pitches and passed your interviews…
…and despite MiFID II and rumors of the industry’s demise, research teams still exist at banks.
What happens when you start your equity research career, how much will you work, and what exit options will you get?
All good questions – so we’ll answer all of those and more here:
What To Expect In An Equity Research Job
Similar to other public-markets roles, you might arrive at work a couple hours before the market opens. In New York, that means “around 8:00 AM.”
Once you arrive at your desk, you’ll spend some time catching up on emails from traders and salespeople, reading the news, and monitoring overnight market developments.
The rest of the day is a mix of keeping things up to date (e.g., financial models), researching companies, and finding new companies to initiate coverage on.
The best and most experienced Associates also interact with clients and set up management meetings between companies and buy-side firms, and these are the real moneymakers for equity research careers in the post-MiFID II environment.
Doing the work required to initiate coverage and building the initial model can take months, so teams need to balance that with other tasks, such as client summits and conferences.
Professionals in equity research careers are best-known for insightful reports, but these reports do not necessarily take up the bulk of staff time.
That said, if the group is working on a detailed “thought piece” that reaches counter-consensus conclusions, that can consume a lot of time and effort. But it can also be worth it if it results in more viewership and client interactions.
Your time allocation during the day depends heavily on the industry you’re covering and how the Research Analyst (read: your boss) likes to run things.
In some teams, Associates spend 75% of their time modeling, but in others, it might be closer to 25% – and that percentage often changes over time.
Often, junior team members get tasked with modeling or grunt work, especially in larger teams, and senior members spend more time talking to investors and companies.
In equity research internships, you’ll assist the full-timers with data gathering, industry research, model updates, and more.
Equity Research Hours
If it’s a normal day, you might leave around 8:00 PM, which means ~12-hour workdays.
However, hours get significantly worse during earnings season, which happens once per quarter, and during industry conferences.
Unforeseen news events and developments, such as regulatory changes, M&A deals, earnings pre-announcements, or Amazon entering your space, can also make the hours worse.
Earnings season is busy because you have to update all your models and issue new reports with new estimates, and industry conferences are busy periods because you run around meeting people during the day and then do your actual work at night.
In both those periods, the 12-hour days can easily turn into 16-hour+ days, so the job will approach investment banking hours.
If you experience consistent mid-intensity stress levels in banking, equity research careers give you low-intensity stress most of the time, with occasional spikes to high stress.
As with any other public-markets roles, your schedule can be tough if your time zone doesn’t match the time zone of the major financial center in your region.
For example, if you’re on the West Coast of the U.S., you can look forward to waking up at 4 AM and arriving at the office by 5 AM each day.
Finally, the hours can get worse as you advance because Analysts have to travel and interact with clients while still assuming responsibility for published research.
Equity Research Careers: Example Reports and Other Deliverables
The published reports represent the “deliverables” that most people associate with equity research.
We linked to a few examples in Part 1 of this series on equity research recruiting:
You can divide these reports into three broad categories:
- Initial Opinion / Initiation of Coverage (IOC): This one is the first report ever published by the team on a specific company. It tends to be long (dozens of pages or more), and it has a lot of industry/market data, detailed rationale for the projections, information on competitors, the company’s valuation, and more.
- Industry Overview / Primer: This type of report also tends to be long (dozens of pages) because it covers an entire industry, such as U.S.-based pharmaceutical companies or European ground transportation companies (read: trucking). There will be sections on trends and key drivers/metrics, risk factors, legislation, and overall valuation levels, followed by shorter sections on specific companies.
- Company Note: This report is shorter (5-10 pages) and is issued when a company reports earnings, hosts an investor day, presents at a conference, or makes an announcement that impacts its strategy, such as an acquisition or the launch of a key product.
The “Initiation of Coverage” and “Industry Overview” reports consume a lot of resources, so teams must weigh the benefits carefully before deciding to invest the time and effort in creating them.
A typical research team covers around a dozen companies, so if your sector is “Large-Cap European Airlines,” your coverage list might include the Lufthansa Group, Ryanair, IAG (British Airways, Iberia, and others), Air France-KLM, EasyJet, Turkish Airlines, Aeroflot Group, Norwegian Air, Wizz Air, Pegasus, Alitalia, and TAP Air Portugal.
You focus on names that buy-side investors are interested in – in Europe, they’re paying you directly for the research, and in other regions, they’re making trades through your bank and generating commissions, and you encourage those trades with research.
Some boutique and middle-market firms focus on lesser-known names because they can add more value when they’re not team #37 covering the same company.
Your team might decide to initiate coverage on a new company when a firm you cover is acquired or gets de-listed, or because the company’s strategy or business model changes, or because your team gets additional headcount.
When that happens, you can expect to do a deep dive on that single company and its sub-industry for weeks or months until you have a detailed projection model and qualitative research to back up your assumptions.
The Equity Research Hierarchy and Promotions
In research, the most senior team member is the “Analyst,” and below that are the “Research Associates.”
Each team usually has one Analyst and 2-3 Associates, with one Associate for every 7-10 names under coverage.
This system is a bit confusing because “Analyst” and “Associate” are just the titles used on published reports.
Internally, the hierarchy is still similar to the one in the investment banking career path, where you advance from Associate to VP to Senior VP/Director to MD.
The difference is that Analysts can be different levels: VP-level Analysts vs. MD-level Analysts, for example.
The total headcount across equity research at all banks in the U.S. is an order of magnitude smaller than the investment banking headcount: Hundreds of professionals rather than thousands.
That smaller industry size and the historically lower turnover mean that it’s often difficult to advance in equity research careers by staying at the same bank.
Sometimes you may get lucky and find an opportunity if your Analyst suddenly leaves, but you’re more likely to get promoted by joining a different bank.
To advance, you must build a reputation instead of burying yourself in Excel all day. No one cares how fancy your model is – they care how good your insights are.
Many Associates struggle to move up because they don’t take the time to get to know management teams and institutional investors.
If you don’t perform well enough to advance, you won’t necessarily be fired dramatically; research professionals are cheaper than bankers, and there’s no fixed 2-year or 3-year program.
That said, it is not unheard of for entire research verticals to be eliminated during cost-cutting season.
At the junior level, people tend to stick around for 2-4 years before moving to another firm or leaving their equity research careers behind.
Equity Research Salary and Bonus Levels
As of 2018, Associates in major financial centers tend to earn between $125K and $200K USD in total compensation, with about 75% of that from their base salaries.
Post-MBA and graduate-level hires earn in the middle-to-high-end of that range, and possibly slightly above it.
As with investment banking compensation, you’ll probably earn below this range in London for a variety of reasons (GBP/USD, Brexit, MiFID II, pay is almost always lower in Europe, etc.).
VP-level professionals earn between $200K and $300K, again with 75%+ from their base salaries.
However, at smaller banks, VPs could earn below this range – something closer to the Associate compensation range is possible at the lower end.
Directors might earn between $300K and $600K, with 50-75%+ of that in base salary. At this level, the year-end bonus starts to make a huge impact on total compensation.
Finally, MDs could earn between $500K and $1 million, with base salaries in the $250K – $600K range.
Back in the dot-com boom of the late 1990s, some Analysts earned $10 million+, but these days, it’s a great outcome if an MD-level Analyst clears $1 million.
To earn in the low millions (say, $1.0 – $2.5 million), you’d likely have to be one of the top few Institutional Investor-ranked Analysts.
With MiFID II, these numbers will almost certainly fall – especially in Europe.
Equity research careers have always paid less than ones in investment banking, and that difference is likely to widen over time.
Historically, bonuses were based on 1) Analyst rankings such as the Institutional Investor Poll (II) Greenwich Poll; 2) the performance of Buy/Hold/Sell calls; and 3) revenue indirectly generated via trading commissions and investment banking fees (e.g. from companies going public or public companies issuing follow-on offerings through the bank).
With MiFID II, the basis of compensation will presumably shift to the amounts buy-side firms are spending directly on research.
The research reports themselves are not necessarily that expensive, but interactions and management meetings, non-deal roadshows, and conferences add up, and in some cases, buy-side firms end up spending more and consuming less.
Buy-side firms spend this money because many of their professionals cover breadth rather than depth, and sell-side Analysts might know specific companies in more detail.
Research compensation is likely to become more lopsided, with the top-ranked groups garnering the bulk of the fees and lower-ranked firms fighting over the scraps.
Equity Research Exit Opportunities
The bad news is that it is almost impossible to break into private equity directly from equity research.
Yes, a few people have done it over the years, but it’s far easier to transfer into investment banking first if you want to go that route.
You do not work on mergers, acquisitions, or leveraged buyouts in equity research, which makes your skill set not-so-useful for PE roles.
It’s far more common to move to hedge funds or asset management firms since there’s a direct skill set overlap – you analyze public securities and make investment recommendations in each one.
Within that category, long/short equity funds are the most natural fit for equity research professionals, while global macro funds are the worst fit because you work on the “micro” level in most equity research groups.
Other types, such as merger arbitrage and event-driven funds, could be a good fit depending on the sector you covered and the importance of deals, news, and events in that sector.
For more about this topic, please see our articles on hedge fund careers and private equity vs hedge funds.
Another option is to start your own fund eventually, which we cover in our “How to Start a Hedge Fund” article – but the key word there is “eventually” since you won’t be able to do this directly out of an ER role.
You could also move into the corporate finance career path at normal companies, investor relations, or potentially even corporate development – your industry expertise may compensate for less deal knowledge there.
Some professionals also leave their equity research careers and move into corporate strategy because their coverage and analysis of companies is typically higher-level, which fits right in with strategy.
In those roles, you might also be in charge of competitive intelligence, monitoring your firm’s peer group, and publishing internal reports.
Some research professionals also decide to attend business school, and if they do, they’re viewed similarly to other high-performing financial professionals.
One challenge is that it can be harder to get solid recommendations in equity research because team sizes are smaller, and the Analyst calls all the shots.
So, if your Analyst relationship isn’t great, you may have to request recommendations from other groups or people outside the firm.
It’s not uncommon to ask another Associate, a salesperson, or a trader for a recommendation for this reason.
Are Equity Research Careers Still Worthwhile?
Going back to that question we posed in Part 1, our most frequent query about equity research careers goes something like this:
“Everyone says the industry is dying! Should I still go into it? Won’t the new regulations, falling commissions, and passive investing destroy everything?”
And the answer remains the same: The industry won’t go away overnight, but it is less appealing than it once was.
However, that matters a lot more for Senior Analysts with 10+ years of experience whose business models are being pulled out from under them.
If you’re at the undergrad or MBA level, you could still make a solid case for working in equity research for a few years and then using the skill set to move into another industry.
You’ll do more interesting work than in investment banking.
You’ll have more of a life, with saner, more predictable hours and occasional stressful periods.
You’ll build a solid network of buy-side professionals and company managers.
And you might even be able to sneak in through the side door – like an undervalued stock.
Numi Advisory has provided career coaching, mock interviews, and resume reviews to over 600 clients seeking careers in equity research, private equity, investment management, and hedge funds. With extensive firsthand experience in these fields, Numi offers unparalleled insights on how to ace your interviews and excel on the job.
Numi customizes solutions to each client’s unique background and career aspirations and helps them find the path of least resistance toward securing their dream careers. He has helped place over 150 candidates in leading buy-side and sell-side jobs. For more information on career services and client testimonials, please contact [email protected], or visit Numi’s LinkedIn page.
About the Author
Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. He earned his B.A. in economics from Stanford University where he was a member of the varsity fencing team.
How much does an Securities and Equity Research Analyst make in the United States? The average Securities and Equity Research Analyst salary in the United States is $89,190 as of September 27, 2021, but the range typically falls between $75,690 and $107,290. Salary ranges can vary widely depending on many important factors, including education, certifications, additional skills, the number of years you have spent in your profession. With more online, real-time compensation data than any other website, Salary.com helps you determine your exact pay target.
Take just three simple steps below to generate your own personalized salary report
Step 1 of 3
Understand the total compensation opportunity for a Securities and Equity Research Analyst, base salary plus other pay elements
Average Base Salary
Average Total Cash Compensation
Includes base and annual incentives
These charts show the average base salary (core compensation), as well as the average total cash compensation for the job of Securities and Equity Research Analyst in the United States. The base salary for Securities and Equity Research Analyst ranges from $75,690 to $107,290 with the average base salary of $89,190. The total cash compensation, which includes base, and annual incentives, can vary anywhere from $79,390 to $118,890 with the average total cash compensation of $95,390.
2. What Do Equity Research Analysts Do?
A person who engages in the equity research division can be called an equity research analyst or equity research associate. In sell-side equity research at an investment bank, the main work of an equity research analyst is to analyze small groups of stocks or public companies within particular industries or geographic regions.
Based on these reports, the bank’s salesforce (the Sales and Trading division) can have a foundation for their investment pitching presentations and the bank’s traders shall make informed decisions on whether to sell, buy, or hold a particular stock investment.
Their work process can be categorized into three main tasks:
Step 1: Gather information
Equity research analysts in investment banks are responsible for keeping up with the most recent news that affects the stock markets. Both internal and external data should be researched and carefully analysed. Business information can be gathered from a variety of sources, including both public (Google, news, annual reports, etc.) and private (companies’ financial statements, site visits on “analyst days”, for instance) ones.
Analysts must be able to keep an eye on and quickly digest the global economic condition, competitors’ activities and market price changes. They have to make sure that they cover all the dynamics in the industry, often using frameworks like “Porter’s Five Forces” or PESTEL analysis.
Step 2: Analyze information
After doing enough industry research, equity research analysts will start analyzing the information they have gathered using different types of financial models, algorithms and screening tools. Some examples of Equity Valuation models are DCF, Relative Valuation, SOTP valuation, P/E EV/EBITDA methodology, while other handy metrics include: P/E Ratio, EPS, ROE, ROA, and more.
After they are done with the analysis, ER analysts start the process of writing the equity research reports, which consist of market updates, analysis (economic, company, and industry analyses), and long thought pieces. Comprehensive and detailed examination of the data would be of great help to ER associates and analysts when it comes to the next step, making recommendations to market participants.
Step 3: Make recommendations
An analyst’s job basically concludes at the report writing stage, where institutional clients will pay directly for these reports. However, junior equity research analysts in investment banks also spend a great deal of their time on building and managing relationships and generating market sentiment. Research professionals provide value by arranging meetings with investors to communicate new perspectives or developments which clients have never taken into account before.
Average Equity Analyst Salary
Avg. Base Salary (USD)
The average salary for an Equity Analyst is $80,840
What is the Pay by Experience Level for Equity Analysts?
An entry-level Equity Analyst with less than 1 year experience can expect to earn an average total compensation (includes tips, bonus, and overtime pay) of $59,413 based on 17 salaries. An early career Equity Analyst with 1-4 years of experience earns an average total compensation of $75,425 based on 55 salaries. A mid-career …Read more
What Do Equity Analysts Do?
An equity analyst oversees a company's investments, tracking investment data and making recommendations to managers. The nature of these investments vary from industry to industry, but could include real estate, stocks, or material goods. An equity analyst must analyze market trends, identify investments that hold good return-on-investment potential, and ensure that current investments are performing as desired. These investments may be spread over a wide company portfolio, and an equity …Read more
Equity Analyst Tasks
- Manage upside/downside price targets with the portfolio manager.
- Perform technical analysis and charting, volume trends, liquidity analysis of trading volumes, short interest, days to cover.
- Perform due diligence on current positions including valuation analysis, industry research and company specific fundamental analysis.
- Analyze company valuation models, cash flow/income/balance sheets and earnings.
- Work with Portfolio Manager to ensure best execution of trades.
Job Satisfaction for Equity Analyst
4.1 out of 5
We currently don't have any reviews for this job and need at least 5 ratings before we can calculate a satisfaction score. Are you an Equity Analyst? Take our survey to help us meet this goal.
This data is based on 60 survey responses. Learn more about the gender pay gap.
Common Health Benefits
Compensation analyst equity research
Careers: Equity Research vs. Investment Banking
Equity Research vs. Investment Banking
Investment banking may no longer be the undisputed first choice for the best and brightest. Instead 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 have dimmed, for many finance students, it still remains the top career choice with equity research coming a distant second.
Equity research is sometimes viewed as the unglamorous, lower-paid cousin of investment banking. The reality, though, differs from this widely held perception. In order to help you formulate your own opinion, here's a head-to-head comparison of equity research (sell-side research that is conducted by the research departments of broker-dealers) and investment banking in 10 key areas.
- A career in finance can take many paths, including investment banking and equity research.
- Investment bankers help on M&A deals and issue new securities to the market.
- Equity researchers conduct thorough analysis and research of companies and their share price to issue investment recommendations.
Equity researchers analyze stocks to help portfolio managers make better-informed investment decisions. Equity researchers employ problem-solving skills, data interpretation, and various other tools to understand and predict a given security’s behavioral outlook. This often involves quantitatively analyzing a stock’s statistical data in relation to recent market activity. Finally, equity researchers may be tasked with developing investment models and screening tools that identify trading strategies that help manage portfolio risk.
Equity researchers are responsible for identifying patterns with current market price changes and using this information to create algorithms that identify profitable stock investment opportunities. The equity researcher should be able to understand the idiosyncratic differences of various international markets in order to cross-compare domestic and foreign stocks.
The low end of the salary range is $47,000, while the high end sits at around $136,000. Private equity firms and other financial services companies are the chief employers of equity researchers. The majority of these jobs 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 specific division of banking related to the creation of capital for other companies, governments, and other entities. Investment banks underwrite 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 broker trades for both institutions and private investors.
Investment banks also provide guidance to issuers regarding the issue and placement of stock. Investment banking positions include consultants, banking analysts, capital market analysts, research associates, trading specialists, and many others. Each requires its own education and skills background.
A degree in finance, economics, accounting, or mathematics is a good start for any banking career. In fact, this may be all you need for many entry-level commercial banking positions, such as a personal banker or teller.
Great people skills are a huge positive in any banking position. Even dedicated research analysts spend a lot of time working as part of a team or consulting clients. Some positions require more of a sales touch than others, but comfort in a professional social environment is key. Other important skills include communication skills (explaining concepts to clients or other departments) and a high degree of initiative.
1. Work-Life Balance
Equity research is the clear winner here. Although 12-hour days are the norm for equity research associates and analysts, there are at least phases of relative calm. The busiest times include initiating coverage on a sector or specific stock, and earnings season when corporate earnings reports have to be analyzed rapidly.
The hours in investment banking are almost always brutal, with 90- to 100-hour workweeks quite common for investment banking analysts (the lowest on the totem pole).
There has been a growing backlash against the atrocious hours demanded by investment banking analysts. Although this has led to a number of Wall Street firms capping the number of hours worked by junior bankers, these restrictions may do little to change the "work hard, play hard" culture of investment banking. The most common complaint of those who have quit investment banking is that the total lack of work-life balance leads to burnout. That complaint is seldom heard from those employed in equity research.
Major financial jobs tend to be concentrated in major financial hubs such as New York, Chicago, London, and Hong Kong. This is no different for equity research analysts and especially investment bankers, many of whom are paid to relocate to their firm's home city.
Equity research is the winner in this area as well. Associates and junior analysts often receive recognition for their work by being named on research reports that are distributed to a firm's sales force, clients, and media outlets. Since senior analysts are recognized experts on the companies they cover in a sector, they are sought after by the media for comments on these companies after they report earnings or announce a material development.
Investment bankers, on the other hand, toil in relative obscurity at the junior level. However, their visibility increases significantly as they climb the investment banking ladder, especially if they are part of a team that works on large, prestigious deals.
Investment banking wins in this area. There is a clear path with defined time frames for career progression in investment banking. This begins with the analyst position (two to three years), then transitions to an associate position (three-plus years), after which one is in line to become a vice president and eventually director or managing director.
The career path in equity research is less clearly defined but generally goes as follows—associate, analyst, senior analyst, and, finally, vice president or director of research. Within the firm, however, investment bankers probably have better prospects for reaching the very top, since they are deal makers and manage relationships with the firm's biggest clients. Research analysts, on the other hand, might be viewed as number crunchers who do not have the same ability to bring in big business.
4. Job Functions
Investment banking probably wins here as well, albeit only 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 responsible for the coverage of a specific sector or group of companies.
But associates also communicate to a limited extent with buy-side clients, top management of the companies under coverage, and the firm's traders and salespeople. Over time, their responsibilities evolve to less financial modeling and a greater degree of report writing and formulating investment opinions and theses. However, there isn't a great deal 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 hand, spend the first few years of their careers immersed in financial modeling, comparative analysis, and preparing presentations and pitchbooks. But as they climb the ladder, they get the opportunity to work on exciting deals such as mergers and acquisitions or initial public offerings. Research analysts only get this opportunity occasionally, when they are brought "over the wall" (the "wall" refers to the mandatory separation between investment banking and research) to assist on a specific deal involving a company that they know inside out.
5. Education and Designations
A bachelor's degree is a must for any aspiring equity research analyst or investment banking associate. Common areas of study include economics, accounting, finance, mathematics, or even physics and biology, which are other analytical fields. 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 equity researcher boils down to the Chartered Financial Analyst (CFA) designation or the Master of Business Administration (MBA) degree. The CFA, widely regarded as the gold standard for security analysis, has become almost mandatory for anyone wishing to pursue a career in equity research. 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 over 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 hand, by virtue of being more business-oriented and less investment-oriented than the CFA, makes it more suitable for the investment banking profession. However, the competition to get into the best business schools—which is where most Wall Street firms hire their associates—is intense. Many aspiring investment bankers enter into some other financial field, perhaps working as analysts or advisors, and work toward their MBA.
Investment bankers should have an impressive knowledge of financial markets, investments, and company organization. Many pursue their Series 7 or Series 63 FINRA licenses to demonstrate this knowledge. The most common career path for investment bankers involves graduating from a prestigious university before working for a major global bank, such as Goldman Sachs or Morgan Stanley. After a few years, the aspiring investment banker returns to complete an MBA or receives professional certifications and licenses. When all is said and done, it may take five to six years after receiving an undergraduate degree before being considered for an investment banking role.
6. Skill Sets
Both jobs require a great deal of analytical and mathematical/technical skills, but this especially applies to equity research analysts. These analysts need to be able to perform complex calculations, run predictive models, and prepare financial statements with quick turnarounds.
As noted earlier, financial modeling and in-depth analysis are common to both investment bankers and research analysts in the earlier stages of their careers. Later on, the skill sets diverge, with investment bankers required to be adept at closing deals, handling large transactions, and managing client relationships. Research analysts, on the other hand, need to be effective at both verbal and written communication and have the ability to make balanced decisions based on rigorous analysis and due diligence.
7. External Opportunities
Successful research analysts and investment bankers generally have no shortage of external opportunities because of their experience, knowledge, and skills. Research analysts are likely to gravitate toward the buy-side (i.e., money managers, hedge funds, and pension funds), while seasoned investment bankers usually join private equity or venture capital firms.
8. Barriers to Entry
Both investment banking and equity research are difficult areas to get into, but barriers to entry may be slightly lower for equity 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 firm as an equity analyst or senior analyst, this seldom happens in investment banking.
9. Conflicts of interest
Although investment bankers and research 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. Securities and Exchange Commission's (SEC) enforcement actions against 10 leading Wall Street firms and two-star analysts in 2003, relating to analyst conflicts during the telecom/dot-com boom and bust of the late 1990s and early 2000s. Under the settlement, the firms paid disgorgement and civil penalties totaling $875 million, among the highest ever imposed in civil securities enforcement actions. The 10 firms also had to agree to undertake a host of structural reforms designed to completely separate their research and investment banking arms.
Both investment banking and equity research are well-paid professions, but over time, investment banking is a much more lucrative career choice.
Investment bankers are famous for their high pay and large signing bonuses. According to the online finance community "Wall Street Oasis," summer interns earn the equivalent of around $70,000, plus a signing bonus of around $10,000. First-year analysts at major banks earned an average salary of $80,000, plus bonuses, according to PayScale.
The real moneymakers, however, are investment banking associates, who earn an average salary of $138,000 and $77,000 in bonuses, with first-year associates likely making less and third-year associates making more. And it is not unusual for total compensation for a vice president or managing director to exceed $400,000 annually.
The average equity research analyst earns about $79,000 in annual compensation, according to PayScale. Research analysts also indirectly generate revenues through sales and trading activities that are based on their recommendations. The reputation of a firm's research department may be a significant factor in swaying a company's decision when selecting an underwriter when it has to raise capital. But even though the investment firm may make a substantial amount through underwriting fees and commissions, research analysts are prohibited from being compensated directly or indirectly from investment banking revenues.
Instead, research analysts are compensated over and above their salaries from a bonus pool. These periodic bonuses are determined by a number of factors including trading activity based on the analysts' recommendations, the success of such recommendations, the profitability of the firm, and its capital markets division and buy-side rankings.
Nonetheless, entry-level investment bankers may receive total compensation that may be anywhere between 20% and 50% higher than their research counterparts, and this gap may widen markedly over time.
The Bottom Line
Overall, if one has to make a choice between embarking on a career in equity research versus one in investment banking, factors such as work-life balance, visibility, and barriers to entry favor equity research. On the other hand, factors like prospects for advancement, job functions, and compensation tilt the scales in favor of investment banking. Ultimately, however, the choice comes down to your own skillset, personality, education, and ability to manage work pressures and conflicts of interest.
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