What Equity Researchers Do
People who want a high-power finance career typically aim for one of two career paths; investment banking or equity research. Though the two paths share similarities, such as modeling and analytics, equity researchers tend to have better work/ life balance and have a slightly lower barrier to entering the field.
In this career, individuals are responsible for performing in-depth research on a small grouping of public companies and then generating reports about their findings. The reports are often used internally within an institution or brokerage, but may also be distributed to the public or organization’s clients, and comes with a recommendation as to whether stock should be bought, sold, or held.
Who would enjoy a career in Equity Research?
Skilled equity researchers become experts on the companies they research, to the point where journalists may ask them for their insights on company happenings. They’re dedicated to finding out as much as they can, and keep their information current so the most accurate advice is always available. Naturally, they do a lot of modeling and analysis, and must have excellent writing skills for the reports they create.
In terms of finance careers, it may also be a better choice for someone who doesn’t want the extensive hours required in investment banking. Though 60-70 hours per week is still normal, it’s 10-20 hours per week fewer than the average investment banker.
Who mightn't like the career?
Moving beyond the entry-level positions can be more difficult for someone in equity research, and the pay is less than it would be in investment banking too. So, although the salaries are still excellent, it might not be a good choice for someone hoping to climb the ladder quickly or take home the highest paycheck. It’s also not an ideal career for someone who may feel tempted to act on insider information.
Most people who get into the field have at least a bachelor’s degree in business or finance, though an MBA is more ideal. Earning the Chartered Financial Analyst (CFA) credential is also beneficial; sometimes it is even more important to firms than having an MBA.
Interviewees are often asked to pitch stocks, as well as explain various methodologies and philosophies. It’s important to review common questions ahead of time and prepare elevator pitches that explain why the candidate is best.
- Equity Research Interview Questions
- Buy, Sell, or Hold: How to Break Into Equity Research and Pitch Stocks Like a Pro
- Equity Research - Interview Questions
Moving into Equity Research from another career
It can be easier to break into equity research as a second career than it might be to get into something like investment banking or private equity. Having a business background is beneficial, especially if a firm needs to hire a researcher for an industry related to one’s own work history, such as a specific niche within the tech sector. It may also be beneficial for candidates to join professional networks and make connections before trying to transition. For more information, see: “How to Make a Career Change into Equity Research: The Best Path for Older Candidates?” and “Career change to equity research field.”
Equity Research Associate
Role: In most finance careers, the analyst position comes before associate, but not so in equity research. Associates work below analysts and typically research companies as part of a team.
There may be 2-3 associates working with a single analyst, and the group, as a whole, will be responsible for 10-15 related companies. Each associate will be given specific companies to monitor and research, and this, paired with team meetings and talking with investors, accounts for about two-thirds of an associate’s workload. The rest of the work is divided almost equally between report writing and, to a slightly lesser degree, modeling.
Equity Research Analyst
Role: Analysts oversee the work of associates. They typically generate ideas and then have the associates handle the modeling, research, and create reports, though they may do some of this on their own as well. However, analysts spend most of their time speaking with investors and developing stock insights.
Positions after analyst vary greatly based on the organization one works for. In some cases, there are equity VPs, though it’s also common for people to remain in a senior analyst role or move into investment banking where they’ll use the knowledge they’ve gained, paired with recent insights from equity researchers, to handle the buying and selling of securities.
Most people in equity research don’t travel for work, though their salaries make leisure travel a possibility when they’re able to take time away.
Associate: According to PayScale, associates in the United States earn an average of USD$78,000 per year, while those in the UK earn £61,750, Canadians earn CAD$69,209, and Australians earn AU$113,003.
Analyst: Equity research analysts in America average USD$85,000, with experienced analysts coming close to USD$118,000 before bonuses. In the UK, the average is ₤56,000, with seasoned analysts reaching ₤84,000. In Canada, the average analyst earns CAD$72,414, with salaries topping out at about CAD$123,000. In Australia, the average is AU$83,353, with experienced analysts exceeding AU$224,600.
Bonuses and profit sharing combined can double an equity researcher’s salary.
Why Equity Researchers move on
Because requirements for licensure and education are reduced for those going into equity research, as opposed to careers like private equity and investment banking, those who want to climb higher after reaching the analyst level often have to obtain additional licensure and/or attain an MBA. However, the deep knowledge equity researchers amass regarding the niche they serve makes them a valuable business asset to other companies within the same niche. Equally, the salaries and bonuses also make it possible for equity researchers to invest well for themselves and many become entrepreneurs too.