Equity research .

If you're considering a career in investment banking, you should

definitely consider banking's slightly less glamorous cousin, equity
research.

Equity research analysts closely analyze small groups of stocks in order to

provide insightful investment ideas and recommendations to the firm’s
salesforce and traders, directly to institutional investors and (increasingly)
to the general investing public. They communicate formally
via research reports that place "Buy," "Sell," or "Hold" ratings on the
companies they cover.
Since equity research analysts generally focus on a small group of stocks
(5-15) within particular industries or geographic regions, they become
experts in the specific companies and industry or “coverage universe” that
they analyze.

Analysts need to know everything about their coverage universe in order to

make investment recommendations. As such, analysts constantly
communicate with the management teams of their companies under
coverage and maintain comprehensive financial models about these
companies. They quickly digest and respond to new information that hits
the tape. New developments and ideas are communicated to the
investment bank’s sales force, traders, directly to institutional clients, and
directly to the general investment public over the phone, and directly to the
trading floor via an intercom system or over the phone.

Am I a good fit for equity research?

 If you enjoy writing, financial analysis and getting home at
a reasonable(ish) hour, equity research might be for you.

If you enjoy writing, getting involved with clients and management

teams, building financial models and conducting financial analysis all while
getting home at a reasonable hour (9pm vs. 2am), equity research might be
for you.

Research associates (that would be your title coming in as an undergrad)

go through similar training to that of sales and trading analysts. After 2-3
months of corporate finance, accounting and capital markets training,
research associates are assigned to a group led by a senior analyst. The
group is made up of zero to three other junior associates. The group starts
off covering a group of stocks (usually 5-15) within a specific industry or
region.
Equity research compensation
Investment banking bonuses range from 10-50% higher
than equity research bonuses at the entry level.

At larger investment banks, both IB analysts and ER associates start with

the same base compensation. However, investment banking
bonuses range from 10-50% higher than equity research bonuses at the
entry level. The difference at some firms is even more acute. There are
rumors that equity research bonuses at Credit Suisse were 0-5k this year.
Additionally, IB becomes more lucrative at senior levels.
The compensation difference is rooted in the economics of an investment
bank vs. that of an equity research firm. Unlike investment banking, equity
research doesn't directly generate revenue. Equity research departments
are a cost center that support sales and trading activities.
In addition, despite a regulatory separation between equity research and
investment banking ("Chinese Wall"), it also serves as a way to maintain a
relationship with corporations — the very clients that use the investment
bank to help raise capital, acquire companies, etc. Nonetheless, research's
indirect role in the generation of revenue makes compensation generally
lower.
Edge: Investment Banking
Equity research lifestyle
Research associates arrive to the office at 7am and leave sometime
between 7-9pm. Working on weekends is limited to special situations like
an initiation report. This schedule is very favorable compared to investment
banking hours. Analysts can work up to 100 hours per week.
Edge: Equity Research
Equity research quality of work
Investment banking analysts spend a large portion of their
time on monotonous formatting and presentation work.

If they're fortunate, investment banking analysts are exposed to non-public

situations such as IPOs and M&A deals from the beginning to the end of
the process. This provides real insight as to how a transaction is done from
start to finish as well as how deals are actually negotiated. In reality,
however, for the first several years, the analyst's role is somewhat
limited. They spend a large portion of their time doing monotonous
formatting and presentation work. The most interesting and rewarding work
is financial modeling.

Equity research associates find themselves almost

immediately interacting with portfolio managers and hedge fund managers,
the firm's internal sales force and traders, and communicating the senior
analyst's investment thesis after a company reports earnings. In addition,
they develop modeling skills by constantly updating and analyzing their
companies' operating forecasts.

Another equity research benefit is that grunt work is limited to the creation
of research notes and the updating of senior analysts' marketing material.
However, unlike investment banking analysts, research associates are
usually not exposed to the M&A, LBO, or IPO process from start to finish,
as they are only privy to public information. As a result, they don't spend
nearly as much time building those types of financial models. The modeling
focus is primarily on the operating model.

Edge: Equity Research
Equity research exit opportunities
Equity research associates usually aspire to switch over to the "buy
side,"  i.e., to work for the portfolio managers and hedge fund managers
that sell-side researchers disseminate reports and ideas to. The buy side
offers the allure of an even better lifestyle, and an opportunity to actually
invest (to put your money where your mouth is).

That said, the buy side is extremely competitive, even for research
associates. Many associates must enhance their profile by obtaining a CFA
charter and/or hitting business school before moving on up into the buy
side.

Deep Dive: Equity Research buy side vs sell side →

Investment banking analysts typically pursue MBAs, start their own
business or try to move directly into private equity after their analyst stints.
Generally, equity research is looked at as favorably as investment banking
for certain buy-side firms, whereas transaction-focused firms like private
equity and VC firms generally prefer investment bankers. MBA programs
generally look at investment banking and equity research equivalently,
if perhaps a slight edge for investment banking.

Edge: Investment Banking

Scorecard
 Compensation: Investment Banking
 Lifestyle: Equity Research
 Quality of Work: Equity Research
 Exit Opportunities: Investment Banking

Conclusion
While equity research is less glamorous than investment banking, it
deserves a close look.