Junior Equity Research Roles Face Increased Pressure
Junior roles in sell-side equity research now come with greater responsibility amid tighter headcounts and budgets, according to a recent analysis. New analysts face steeper learning curves and higher expectations for independence and technical output, as senior analysts are asked to do more with less support.
- The average annual pay for an Equity Research Analyst in the United States is approximately $137,600, with the majority of salaries ranging between $120,000 and $145,000. Entry-level analysts (1-3 years of experience) earn an average of $81,294, while senior analysts can earn over $130,000 in base salary, with top performers at bulge bracket banks receiving bonuses between $100,000 and $300,000. - Regulatory changes, particularly MiFID II in Europe, have led to the "unbundling" of research costs from trading commissions, forcing asset managers to pay for research directly. This has caused a decrease in overall research budgets, with a CFA Institute survey showing an average budget reduction of 6.3% since MiFID II's introduction. - The implementation of MiFID II has resulted in a reduction in the number of sell-side analysts covering European firms, with one study noting 334 firms lost all analyst coverage. However, the quality of research from remaining analysts has reportedly improved, with forecasts becoming more accurate and stock recommendations more profitable. - Automation and AI are significantly impacting the role, handling repetitive tasks like data collection from financial statements, earnings calls, and news articles. This allows analysts to save time and expand their coverage capacity, with some increasing their company coverage from 10-20 to over 60. - While AI can automate parts of the analysis and generate reports, it cannot yet replicate the nuanced judgment and thesis formulation of a human analyst. The current trend is toward AI assisting analysts by enhancing their efficiency, not replacing them entirely. - Key skills for junior analysts include a strong foundation in finance, accounting, financial modeling, and data analysis. Proficiency with tools like Excel and Bloomberg Terminal is essential, and progress toward a CFA certification is highly valued. - The career path in sell-side research typically starts at the Associate level, focusing on updating models and summarizing news, before advancing to an Analyst role with more client interaction and responsibility for a portfolio of covered companies. Subsequent progression can lead to Senior Analyst and sector head positions. - In response to sell-side pressures, there is a trend of buy-side firms, like hedge funds and asset managers, increasing their in-house research capabilities. This is creating more buy-side research opportunities for individuals with a sell-side skillset.
