Moving from Buyside ER to Sellside ER

Hi everyone,

I’m an analyst in a >500B asset management firm. The working hour is decent, salary is good but not great, promotion opportunity is limited. I’m now thinking to move to a sell side to be a equity research analyst. Anyone has done this before? Was it hard to move and was it difficult to adjust to the change in lifestyle, working hour, culture?

Stay on the buy-side. I don’t really know many people that willingly want to go to the sell-side.

Yeah, I can’t think of why you would do that.

Hours are rough, you spend all of your time in peak earnings fielding talking points and introducing new jr analysts on the buy side to the space and accompanying sales teams to regurgitate a story. At the end of all of it, the buy side doesn’t really respect you and the field is dying.

I mean, I do see where if you build a lot of visibility you could eventually have some sort of opportunity on the buy side, but I’m just not really seeing how SS is the best way to get there. The only reason would be if you’re really young and want an early career boost from the brand name and industry introductions.

How old are you?

Also I would only even remotely consider it if you’re going from like some super sleepy buyside shop to like JPM, not some micro boutique.

Definitely a declining industry. Although there is not much room for promotion at your shop, what about a more senior position at a smaller buy side firm or family office?

I’m 32 years old. The shop I’m working now is decent. It’s not at the Blackrock, Fidelity level but we have a respectable AUM (over 400 Billion) and a strong market presence in where I work.

In terms of moving to SS, I will only consider top SS such as GS, MS or JPM… building visibility is exactly what I’m thinking about. My ultimate goal is to move to a top tier buyside such as Blackrock, Fidelity… do you think moving to a top SS and spend a few years there would help?

My ultimate goal is to move to a top level asset management firm. So I’m thinking about moving to a top SS as a first step. Moving to a smaller shop for a senior position sounds good, but I’m not sure it will help me to get to a big shop eventually.

That’s interesting. I’m actually not sure on that one, you might be best served tapping some alumni or other connections for informal informational interviews or meet and greets with a few people at each of the respective target firms (both SS and BS) and ask about thoughts on what you’re thinking and career goals.

Serious question (from somebody who has never been remotely close to that industry): What is “buy side”? And what is “sell side”? It seems that “buy side” is somehow preferable. Why?

Buy side is the investment side, hedge funds, mutual funds, pension funds, insurance co’s, etc with their own hierarchy loosely in that order. Their recommendations are directly part of an investment process. Both the thought process and recommendation are extremely important here, work life balance varies across sub-sector but is generally better on the buy side, in the cases it’s not the compensation is often very positive (ex. hedge funds). Here the end client are the PM’s making final investment decisions in collaboration with analysts. Here analyst is often a path to PM for that reason. The collaboration marries breadth (PM) with depth (analyst).

Sell side is issuing research as a service typically through brokers. So GS has their energy analyst for example. Here recommendation matters as a scorecard but is really not that important. It can drive trading bots intraday for rating changes on sensitive high beta names but buy side analyst typically ignore it completely. Sell side exists as a portal or service. They have great management access (sometimes buy side does depending on scale) as well as broad market dialogue across the investment pool. So they tend to aggregate and add context that way to research their models are often very detailed (with debate on the utility of that). The thought process and coverage of thematics matters a lot and the buy side will use them as a resource in compiling their own views. Because they are subject to public opinion and managing relationships, their research can be influenced by a news like need to maintain an audience and their recommendations are suspect. Ultimately the roles are somewhat salesy as a result with a lot of time interfacing with people and the motive centers around maintaining brokerage clients. Earnings period can be pretty crazy for the sell side as they juggle management team discussions, model updates, new information and client requests with the need to instantly publish takes on results.

What kind of analyst are you on the buyside? Are you an ER analyst or more middle/back office? If already in ER, build up your investment track-record and move up on the buy-side. Moving to the sell-side doesn’t make much sense; you’re going backwards.

OK. I think I understand the buy side. Basically, you’re doing analysis for your own company. You build models & make recommendations, present it to your boss, who takes it to the PMs who use it to manage the portfolio (the mutual fund, the insurance company, etc.).

I still don’t understand “sell side”. Who are these “sell side” analysts? Who do they work for? Can I become a sell-side analyst by writing up some ideas on a company and finding someone to sell it to?

Yes, you could there are a handful of small boutique shops from established analysts (sometimes a single analyst) although its super rare. The sell side is a tough business and there are increasingly fewer analysts across the industry even at the big firms with the smaller ones mostly folding.

The majority of the sell side exists with the bulge brackets. So Citi, GS, MS, BAML, JPM and others all have teams of industry and asset class specific sell side analysts (High yield metals and mining, equity aerospace and defense, etc). As a trading client of those banks, you gain access to the research platform and higher levels of sales and trading gain higher levels of access (they loop by your firm occasionally, pick up the phone for you, etc). So they are a cost center extension of the sales force. Hence the difference in motives and bias towards popular opinions. Their revenue pool is split among the various sales and trading functions based on commission. Mid sized firms include Stifel Nicolaus among others whereas smaller shops might include Wolfe Reserach, Sidote Stern Agee, etc. Smaller shops tend to get paid directly for research access, which for a lot of firms is tough to justify, hence the pressure on the business model.

So with that in mind, if you reread the first post, it should be relatively clear how the function of the roles could change,. let me know if further question.

Why don’t you consider a promotion as a portfolio manager in your shop? In mine, we need 2~3 years exp as buyside analyst before managing portfolio.

BS why do you think sell side work life balance is so bad? I haven’t worked on the buy side, but the sell side people seemed to work less hours (excluding maybe earnings) with way less stress. At least from what I’ve seen, pay was why people would leave sell side for buy side. On the sell side I had periods where I was working 15 hour weeks, but I was towards the tail of the distribution for sure.

I could have a skewed perspective, but my friends that went that route were doing a lot of 80-100 hour weeks particularly during earnings. It’s tough to balance those competing demands I think of sales clients, management teams and still modeling. I tend to take a workhorse approach to my stuff, but always take comfort when I see model updates and earnings recaps coming into my mailbox at 2:30am during earnings. I could be wrong through in my POV. Were you at a bulge bracket?

Not a BB, but I’ve had friends at them and those who transferred to them later. I think the BB can make a difference - just has more positive skew and seems rougher for the associates. Some of those BB guys are known for being awful, so it depends if you are talking about work life balance as an associate or analyst. It also depends on sector. I don’t think the restaurant analysts anywhere have to work particularly hard to be successful. You are right that it is different in the sense of having so many people to serve: sales, management teams, buy side. Often they want things the other group hates. But that is more politics than anything else. I heard once people want to be on the buy side during bull markets and sell side during bear markets. There may be some truth in that.

The sell side primarily sucks because it is in secular decline. Luckily a lot of the research produce is worthless, so it’s not extremely hard to shine. But the sell side analysts will probably never be as cushy as it was before I was of working age. One analyst I worked for said he could sense an immediate change after Reg FD.