We’ve trained you well.
Wow, I didn’t expect such fierce responses concerning the industry. That’s good news.
Itera and others: What makes people so apprehenseive about the future?
I know I could try a google search, but most of what I could find is on WSO and has basically been summed up as: There are too many analysts per stock, the field will shrink and consolidate so that only BBs will be able to run ER shops.
Do you guys have any input as to why or how ER will look in the future and do you have any sources that I could read for any further insight into the industry?
I would assume that with a shrinking industry, there is more money to go around to the few ER analysts that stick around, no? So this means more money as long as you’re competent at what you do.
I am talking about the US specifically btw.
Yes, the more the fields gets cut, the more cream and money from fees will rise to the top. That makes it much more competitive and difficult to get in, or stay in. There’s already been a good amount of people that have left sell side research. A lot of sell side research is frankly garbage. I get over 100 emails each morning so I see who publishes what. At the end of the day, regardless of how fast or slow the industry shrinks, it’s great experience. So if anything, value and learn from it
Not just in ER, but in finance in general, headcount and compensation will taper off. This does not mean the field will be unattractive. Fact of the matter is there used to be, and still are, too many people in finance who are also too stupid and paid too much. Even if industry compensation decreases 25%, it will still be better than basically any other field. This sucks of course for old guys who thought they should get paid more and have locked in unreasonably high costs of living. But young people who just want to be “normal affluent” should still be able to make a good living.
As for ER to RIA transition - not that I know first hand, but RIA is probably mostly sales. You can make the transition if you know a lot of rich people who will entrust you with money, not because you went to good school, worked in a nice bank, etc.
It varies, but advising, and particularly as an RIA, is very scalable. Having more AUM doesn’t necessarily mean you need more analysts. Let’s say an RIA has $500mm under management and it’s all private client money. Most consultants will tell advisors they only need 8-10 models to meet the needs of all their clients. (A huge issue that nearly all advisors run into is using - literally - hundreds of different models for 400 clients. But I digress.)
So, no, those 2 analysts could easily do their due diligence on the funds/ETFs needed to build those models. However, I’ve also worked with RIAs that have more sophisticated research teams than some mid-sized broker-dealers. By then you’re getting away from private client money and the RIA has an investment banking arm or does PE…whatever.
I’ve said it many times, but if you can find a well run RIA that has $200+ million in AUM and a small team, go for it. It’s a better career path than going the ER route unless you’re dead set on becoming the next star PM at a MF or HF. Work hard and you’ll hopefully start to build equity in the firm or, at least, set yourself up to take over the practice when the pricinpals retire.
It’s a great living and awesome work/life balance.
I believe i posted a career summary and work life balance of my long time friend on AF.
Long story short - he is in his early 30s right now. Has own asset mgmt business. Works from home. Charges 1% of AUM no matter what you have- bonds, equities or index. he manages 30mm now. 300k a year and works no joke 5 hours a week
99% of the portfolio is index funds and only few are SMAs but even then he does not need to be glued to the market.
300k…maybe this is small chump change to all the market moving AFers with prestigious CFAs but hey i will take it. 300k a year and 5 hours a week. this guy goes to the gym with his wife at 11AM and plays golf afterwards. what a life. Of course he busted his ass to get here. Had some tough times and ups and downs but he made it in my books.