I’ve been on the buyside and sellside research, the sellside plays a very important role on the buyside. Funds would need at least twice as many analysts if the sellside vanished. Having said that, still not sure how the sellside gets compensated moving forward. I think it would make the most sense if they were allowed to run a retail mutual fund and write research, that way their track record of stock picking would be real and if you wanted exposure to a certain sector you could invest in the fund operated by the best analyst in that sector. The best analysts would make millions from the fees of their fund, the bad analysts would find new jobs.
Maybe I’m easily amused because I didn’t get dumped… Too soon? needhelp Wrote: ------------------------------------------------------- > artvandalay Wrote: > -------------------------------------------------- > ----- > > SkipE99 Wrote: > > > -------------------------------------------------- > > > ----- > > > Senior Bailout Managers are banking this > year! > > I > > > am an associate BM right now and hope to make > > > senior soon. > > > > > > Ha ha, you just said you’re a BM…ha ha ha > > > > > > (BM = bowel movement) > > Dude, you need to get out more. You are easily > amused. > > Thats for being happy during the holidays when I > have the blues. Sucka!
bchadwick Wrote: ------------------------------------------------------- > lkwan4 Wrote: > -------------------------------------------------- > ----- > > Speaking of which, sell-side research is > nothing > > more than spam. > > > dumbest thing ive heard. buy siders come to us b/c as generalists that have no clue how to ramp up on names. ever heard of primers or teach ins? who do you think does em? sell side. Boutiques will hold up and take share from bulgies blowing up
Take share from a shrinking pie called commission dollars? Feel free to do that. As a buy-sider, i do appreciate a good initiation of coverage report, but then the quarterly notes and the “lunch with management” notes are just spam. Sell-side research is dead, not because of utility but rather value-add to the bottom line.
If sell-side is dead, thats an absolute statement, not a relative statement. We’re all dead. 1/2 the money coming into banks and half the equity in the world = many less jobs than before in all areas. I can think of many jobs besides sell-side research that can easily disappear in banks. Its easy to pick on sell-side research because its the logical first step in the trimming process. but the rest will come in similar ways after strategies are adjusted and banks consolidate further.
daj224 Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > lkwan4 Wrote: > > > -------------------------------------------------- > > > ----- > > > Speaking of which, sell-side research is > > nothing > > > more than spam. > > > > > > > dumbest thing ive heard. buy siders come to us b/c > as generalists that have no clue how to ramp up on > names. ever heard of primers or teach ins? who do > you think does em? sell side. Boutiques will hold > up and take share from bulgies blowing up ^^^ Yeah that. I wouldn’t say buy-sides “have no clue” how to ramp up on names. I think more accurately, buysides have “no time” to ramp up on names. I used to work on the buy-side and had to cover a universe of 80-100 names which would have simply been impossible without the sell-side doing a lot of the leg work for me. Now I’m on the sell-side and that is what I have done for the past 4 years…Leg-work for buy-side guys. Most of our research is fluff so people see we are following the names and to give our retail brokers something to read. Our real value comes from client interaction and value-added projects we do for top-tier clients. There will always be sell-side research because companies who are ultimately the banks clients need analysts to follow their companies and pick their stocks. The companies typically do banking with the firms that do the best job covering their company and promoting their shares. Sure research can’t “technically” be compensated for their banking work but the truth is that is bull. When banking says jump research still says how high and banking leverages research relationships with management to generate deal flow. So maybe research pay can’t directly come from banking but its all being mixed into the same capital markets pot at the end of the day.
Thanks for all the encouraging posts. I guess most of you already work in Research.But, for someone like me who is trying to get a foot in the door,it is incredibly frustrating to hear all this talk of Research going away or the impossibility of breaking in due to the extreme glut of qualified candidates etc… BB’s are surely not going to be hiring in Research for a long time.I hear people on this board talking about boutiques hiring etc… Any names that anyone can provide will be helpful. Thanks.
bchadwick Wrote: ------------------------------------------------------- > lkwan4 Wrote: > -------------------------------------------------- > ----- > > Speaking of which, sell-side research is > nothing > > more than spam. > > > > > I’m not so sure this is true… It would be really stimulating to me if bchadwick would just once tell someone something like “You’re an idiot and you’re full of %^&$”. Sometimes we have polite, erudite discussions on AF, sometimes not. The difference is important.
Finance is dead? Be serious. It seems like some of the posters here need to go back and review market cycles.
%^&$ looks painful. I wouldn’t want to be full of that. Yeah Chadwick, rep the SS.
JoeyDVivre Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > lkwan4 Wrote: > > > -------------------------------------------------- > > > ----- > > > Speaking of which, sell-side research is > > nothing > > > more than spam. > > > > > > > > > I’m not so sure this is true… > > > It would be really stimulating to me if bchadwick > would just once tell someone something like > “You’re an idiot and you’re full of %^&$”. > Sometimes we have polite, erudite discussions on > AF, sometimes not. The difference is important. It can happen… just not often. I don’t chew people out for generalized silly comments, but I can do it if I feel there’s a stupid comment directed at me. 
For example: http://www.analystforum.com/phorums/read.php?1,664474,664994#msg-664994
Bchadwick - The buyside will be searching for new analysts in the CFA community IMO. I’m not kidding. Without the sell-side to weed people out, they will need other screening mechanisms. The default will be to pick people with the CFA, top tier MBA, and banking/credit experience. People with risk management experience and the ability to fundamentally assess companies will be in demand. Over the next 3 years, anyone with distressed/restructuring experience will clean up.
double post…whoops
One thing I forgot to add that SeanC mentioned: This downturn will be good for people with the talent and dedication to stick with banking/research. All the wannabes who wanted to break in for the $$$ will now have to really earn it. No more $160K packages to first year analysts who don’t know diddly. The money will be given to people who actually add value and have a proven track record.
DirtyZ Wrote: ------------------------------------------------------- > One thing I forgot to add that SeanC mentioned: > This downturn will be good for people with the > talent and dedication to stick with > banking/research. All the wannabes who wanted to > break in for the $$$ will now have to really earn > it. No more $160K packages to first year analysts > who don’t know diddly. The money will be given to > people who actually add value and have a proven > track record. I think you’re right. I hope you’re right. This is certainly what I’ve been telling myself, so I need you to be right. Interesting point about the CFA curriculum. I think it will be an important differentiator. There are only about 100,000 CFA charterholders in the entire world right now - the 100,000th charter was issued this summer (mine is about 100k + RFR) and probably another 100,000 - 125,000 candidates (judging by the number of exams given, plus 25% attrition for candidates who don’t show up). I read somewhere that the number of people axed in this industry over the last year is about 100,000. If that’s 20-25% of the financial sector jobs in the US, we can guess that there were were 1/2 million financial jobs in the US before the sh*t hit the fan. The industry will shrink, but the industry won’t disappear. I think (not sure) about 1/2 of the charterholders in the world are in the US, so that’s maybe 50,000, compared to 400,000 or 500,000 positions. 10x as many positions as charterholders. A bunch of those positions are things like compliance, admin staff, maintenance. Maybe 30%. Another 25% is probably sales and general management. So maybe we’re down to 4x as many positions as charterholders. I argued to someone that in downturns, the value of talent is especially visible, whereas in good times, you just want more people in seats to increase turnover - in hard times, you really need to figure out how to maximize profit margins. Put another way, if you think about the Dupont Model: in good times, you can get away with increasing total asset turnover or financial leverage to provide returns. In hard times, it really comes out of profit margins, and in this industry, talent is key to profit margins. The real question is how to distinguish talent from experience. Especially at the mid-career: experience may not be as relevant, because it was all gained in an environment that could be unrepresentative of the future. And yet, how do you measure talent independently of experience? There are ways, but it takes a lot more effort. Ooops, I’ve babbed a bit too much here.
daj224, all I can and will say is good luck… daj224 Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > lkwan4 Wrote: > > > -------------------------------------------------- > > > ----- > > > Speaking of which, sell-side research is > > nothing > > > more than spam. > > > > > > > dumbest thing ive heard. buy siders come to us b/c > as generalists that have no clue how to ramp up on > names. ever heard of primers or teach ins? who do > you think does em? sell side. Boutiques will hold > up and take share from bulgies blowing up
Equity research will always have a function and place in the investment world. As others have already highlighted, it is something that sales, trading, and investment banking divisions will leverage in order to draw in business. Whether or not it directly contributes to revenues isn’t particularly relevant, as there are operations in every business that are not directly responsible for the top-line yet are equally essential to keeping the business running. Some of you that disagree have referenced things like shrinking trading commissions, migration to the buy-side, competition among research analysts, and the Global Settlement or “great wall” separating research from banking. While these are relevant barriers and hurdles to the research industry, NONE of this is new information – the Global Settlement and Sarbanes-Oxley changed the equity research world and there’s no question about that, but this stuff happened several years ago. What we’re seeing now is continued evolution of the industry and increased competition on Wall Street – after all, any industry in any sector that has lucrative payouts will attract more participants, thereby making things more competitive. What we’re also seeing is pressure on margins, but that’s true across EVERY aspect of finance except those that are countercyclical, or that have begun to reap the benefits of participating in attractive restructuring deals or the acquisition of undervalued debt (yet, even so, it can be argued that the latter group won’t actually reap what they’ve sown for several months because it’ll take time for the market to reverse itself). Where am I going with this? Well, here are a few conclusions: (1) I don’t post here often enough anymore so I have time to think about things over the span of hours or even days before I write about them; (2) there’s no question that the value of equity research and the CFA charter are under pressure, as can be expected in any competitive or oversaturated market; (3) the sell-side is unquestionably a turbulent place to be and you will have to have a real stomach for a dynamic environment (i.e. “employment risk”), and one where job opportunities may be very volatile in the coming years especially as the economy continues to go down south. As such, it would be very prudent NOT to imagine yourself having a career as a sell-side analyst; in fact, a similar argument can be made that it’ll be just as challenging to be a buy-side analyst as evidenced by the number of funds that have blown up this year. That being said, if you look at the sell-side as a way to build a fundamental skill set in finance, it’s still a good place to be. And I do believe that if you can survive the sell-side long enough to learn a few things and then move on to greener pastures, you’ll be all that more prepared for the rest of your career. My three years of experience on the sell-side at bulge bracket firms were fairly turbulent, and were highlighted by all types of trials and tribulations. However, in the end it has prepared me well for my current role and I learned a lot about financial analysis, writing, and how to deal with stressed out people in a stressful environment – and I’ve learned a lot more about myself and my career prospects than I ever thought I would in my mid-20’s. In the end, it all comes down to whether you think you have the appetite to handle the sell-side – it’s not the land of milk and honey, but there are good points and bad points to every job. That said, I hope this gives you guys a balanced perspective on things. Now, it’s time for me to enjoy my time back in NYC. I’m out – happy holidays!
Another idea that I’ve heard tossed around is to have retail (i.e. brokers, FAs, etc) share some of the cost of supporting a bank’s research platform. After all, buy siders aren’t they only ones reading sell side research. You’d probably have to allow the brokers to interact directly with analysts for this to fair–so more work for analyst/associates for less/same pay. Additionally, this would only make sense for banks with large retail arms i.e. Citi, Merrill (BofA), UBS, Wachovia, and others. People insisted sell side research was dead post Spitzer and independent research would quickly take over. Yes, the industry did change and comp was cut across the board, but the “explosion” in independent research never materialized. Meanwhile, sell-side research continued to function (some thrived–i.e. Meredith Whitney) and senior (director+) analysts would still took home $1+MM. Granted for the next few years comp will be lower, but I think this is more of a broad based shift related to banking culture as a whole and not something unique to research.
what exactly did he say?
The bottom line is that sell-side is a cost center. So, while I don’t think it will go away completely, I do strongly believe it will be outsourced from the U.S. and Europe to labour cheap countries like India. Minimal operations will remain in the US and Europe. Sell side research is a dying business in the U.S. People can be passionate about it and defend it all they want – its end is inevitable. The final countdown had begun when the Chinese Wall came into play.