Difficulty of going from sell-side to buy-side?

I’m sure I’m not the first person to ask this question, but since I don’t see it recently in any of the other recent posts I’ll go ahead with it. I am trying to find out how hard it into get into the buy side of the finance industry working at say, a mutual fund or hedge fund, when all of your experience is on the sell side? I know that things are sometimes glorified and the grass is always seems greener so I am really trying to get a realistic look at what the other side if this business is like too. Any thoughts on these questions would be greatly appreciated, thank you.

@Nick, this going to be a digression… anyways lemme ask you… I am in IT and hv completed all 3 Levels. I am planning to get into finance… Buy or sell doesnt matter to me at this time. I was seriously thinking abt FA position. Do you suggest me to get in? And if I do get in what can i realistically get to take home in a couple of years when the salary is gone and am on 100% commission?

@ v.raghaven, The first 3-5 years is all about meeting people and building your business, most of your time should be spent on the phone or out in person cold calling on people. It starts to transition to more of a referral business after that initial period depending in how much work you put in initially. As far as the money you can make, it really varies a lot, but there is a lot of potential to make very good money if your willing to stick with it. One thing I will stress though, this job takes a ton work, and most of the work is doing things that make you uncomfortable most of the time (ie. cold calling, meeting new people, networking). If your good at getting out there meeting people and don’t mind working 60-70 hours a week for your first few years in the business, it can be a great career. The great part about this career is you can make a considerable amount of money in your later years and have very very flexible work hours if you choose. Hope this had some useful info for you and feel free to come to me with more questions as well if you have any.

Numi would be able to give you advice on the transition.

buy side is where many sell-siders hope to go to. Let’s face it you want to be the client, not the slave of the client (which many sell-siders basically are). Either for votes, or commission ( research). And or doing free pitches to company mgmt for (bankers) and pray they like your idea enough to give you the deal.

also agree with above buy-siders is probably slightly higher risk. Any asset manager that has a couple bad track record years tend to find themselves out of jobs with big client outflows.

Competition is more fierce on the buy side…

Buyside = Boxers

Sellside = Briefs

former trader, thanks for the shout-out and heads-up about this thread…

Nick82, I’d say it’s very difficult to move from the sell-side to the buy-side, and more so from anywhere else other than the sell-side. There just aren’t that many open positions on the buy-side these days, and as the sell-side is going through a major secular contraction, there will continue to be too many people gunning for too few buy-side positions.

You do learn a lot of applicable skills from the sell-side, but the thing about the buy-side is that you have to orient your mentality towards looking at stocks by managing your downside first, and then thinking about upside catalysts later. Both value and growth investors think about “margin of safety.” You certainly use skills such as financial modeling, valuation, interviewing management teams, and other stuff that you developed on the sell-side for the buy-side, so skills are transferable. But the mental paradigm is a big difference. Probably the best way I can encapsulate this is, while I was on the sell-side, people often called me to either ask me very specific information about companies I covered, or what my top stock picks were. They never asked me which stocks I would avoid, or what could go wrong with my worst picks. On the buy-side, you constantly need to think about managing downside and also just have a genuine passion for investing.

The best way to show your passion for investing is having a few good stock ideas to talk about, and having the intellectual curiosity to constantly read and think about investing. Luckily, you can develop these attributes from any walk of life – there’s no single formula of getting into the buy-side, other than that the people that are most passionate about investing are the ones that generally make it. The way you make yourself stand out is just communicationg your passion for investing with conviction and clarity.

Assuming right out of undergrad, you have the opportunity to do it again, would you choose to start out in sell-side or buy-side? Now I know this is very subjective, and many things vary, but I’m curious to what you more experienced folks would have done differently. Assuming the pay is the same, ibanking vs equity research, what do you pick?

Are you saying boxers are better than briefs? I used to be a boxers guy before women told me briefs are sexier.

Boxers -> BSD

Brief -> LSD

Numi, I agree with almost everything, except on my SS job, I always got asked which to avoid and what could go wrong…

^ makes sense. I did get asked that on occasion too, but it just seemed that the preponderance of questions asked of me had to do with very specific details of companies I was covering, or which com panies I liked most. It does seem that a savvy buy-side investor would ask an analyst which companies to avoid, because within a band of neutral-rated companies will be some companies that are total dogs but where the analyst doesn’t want to destroy the relationship with company management teams, and as such keeps a neutral rating.

Numi, thanks for the info on my questions about getting to the buy-side of this business, it helps to get a perspective from someone who is already there. I’ll keep checking back for more comments and thanks again.

Nick, I’m a little confused. The posts here respond to your question of making the leap from sell-side (meaning working at a bank or brokerage firm trying to “sell” institutional investors your ideas about stocks you cover), but you use the phrase “financial advisor”, which typically has very little in common with research positions (on the buy- or sell-side). Are you presently working as a sell-side analyst (my definition above) or a financial advisor?