Equity Research Careers, Salaries & Exit Opportunities - M&I (2024)

Definition of Equity Research: Equity Research is the division of an investment bank responsible for producing analysis, reports, and recommendations to buy, hold, or sell equities (individual stocks) that institutional investors and individuals may be considering.

A long time ago, these reports were intended to generate moneyindirectly by encouraging clients to trade certain stocks (the sales & trading division of the bank would then earn commissions on these trades).

Over time, partially as a result of regulations such as MiFID II in Europe, this has shifted, and most research groups now earn money by charging clients directly for their research.

While the reports are the best-known part of Equity Research, most of a Research Analyst’s “value add” comes from the relationships they maintain with company executives and institutional investors.

Related to Equity Research is Fixed Income Research; many of the work tasks are similar, but professionals there focus on analyzing bonds and other debt issuances and making investment and pricing recommendations.

Equity research professionals are best known for the reports they publish, but the senior staff (“Research Analysts”) in these groups spend most of their time developing relationships with executives and investors and presenting their insights to both sides.

The junior team members (“Equity Research Associates”) are more likely to devote a higher percentage of their day to research, financial modeling, and report writing.

Equity Research Reports

As stated above, many decades ago, research reports were intended to generate trading commissions for banks, so “Buy” ratings were very common, while “Hold” and “Sell” ratings were very rare.

Even though that has changed, with most groups now charging directly for research, “Hold” and “Sell” ratings are still quite rare.

The stock market as a whole generallydoes increase over time, so it’s not necessarily wrong to assign many “Buy” ratings – but this approach often misses cases where specific companies might be overpriced or set to fall as a result of specific events (catalysts).

You can read our article on equity research reports for some examples and the differences vs. hedge fund stock pitches. The full video tutorial is below as well:

In equity research, recruiting is more random and unstructured than in investment banking.

The large banks may do some undergraduate and MBA-level recruiting, but they fill many of their spots “as needed”.

Equity research internships do exist, but they’re somewhat different from IB and S&T internships and do not necessarily lead directly to full-time offers.

It’s hard to pin down the timing of the ER recruiting process, but it’s safe to say that it’s not quite as hyper-accelerated as the IB recruiting process.

You’ll still go through first-round interviews, often on the phone or via video, and then proceed to Superday interviews at the bank.

Read more about Equity Research Recruitment in our in-depth article.

• Associates in major financial centers tend to earn between $125K and $200K USD in total compensation, with about 75% of that from their base salaries.
• Post-MBA and graduate-level hires earn in the middle-to-high-end of that range, and possibly slightly above it.
• VP-level professionals earn between $200K and $300K, again with 75%+ from their base salaries.
• Directors might earn between $300K and $600K, with 50-75%+ of that in base salary. At this level, the year-end bonus starts to make a huge impact on total compensation.
• Managing Directors could earn between $500K and $1 million, with base salaries in the $250K – $600K range.
• To earn in the low millions (say, $1.0 – $2.5 million), you’d likely have to be one of the top few Institutional Investor-ranked Analysts.

Equity Research Career Path

In research, the most senior team member is the “Analyst,” and below that are the “Research Associates.”

Each team usually has one Analyst and 2-3 Associates, with one Associate for every 7-10 names under coverage.

Internally, the hierarchy is still similar to the one in the investment banking career path, where you advance from Associate to VP to Senior VP/Director to MD.

The difference is that Analysts can be different levels: VP-level Analysts vs. MD-level Analysts, for example.

The total headcount across equity research at all banks in the U.S. is an order of magnitude smaller than the investment banking headcount: Hundreds of professionals rather than thousands.

That smaller industry size and the historically lower turnover mean that it’s often difficult to advance in equity research careers by staying at the same bank.

Sometimes you may get lucky and find an opportunity if your Analyst suddenly leaves, but you’re more likely to get promoted by joining a different bank.

Read our full article on Equity Research Careers here.

The bad news is that it is almost impossible to break into private equity directly from equity research. It’s far easier to transfer into investment banking first if you want to go that route.

It’s much more common to move to hedge funds or asset management firms since there’s a direct skill set overlap – you analyze public securities and make investment recommendations in each one, but you do so in slightly different ways.

For more about this topic, see our articles on hedge fund careers and private equity vs hedge funds.

Equity research is a highly competitive field to break into, but it’s also much smaller than investment banking and private equity, and the recruiting process is more random and unstructured.

If you’re a go-getter willing to learn a lot independently and put in the time and effort required to network and win offers, that’s good news – because you can succeed without competing against quite as many students who are just “along for the ride.”

But thebad news is that you will have to put in a good amount of effort to learn the skills on your own.

The courses offered byMergers & Inquisitions andBreaking Into Wall Street are not specifically geared toward equity research, but many of the courses do feature case studies that are highly applicable to ER, including sample research reports and stock pitches.

We recommend the following as the most relevant starting points:

• Core Financial Modeling – You’ll gain an excellent foundation in 3-statement modeling, valuation, and DCF analysis in this course, and you’ll get a simple example of an equity research report
• BIWS Premium – This package combines the Core course with Excel and PowerPoint training to maximize your on-the-job efficiency
• Advanced Financial Modeling – This course goes into much greater depth on 3-statement models and valuations and covers trickier industries, such as airlines and pharmaceuticals; again, you’ll get a sample research report and stock pitch
• BIWS Platinum – This package includes all our courses at a substantial discount (50%+), and it has examples of valuations and research reports in other industries