Have equity researchers been protected from redundancies so far? If you were a researcher at RBS or Unicredit, you would probably argue that they haven’t.
However, equity research headhunters say these unfortunate equity researchers are the exception: a lot of research professionals have, indeed, been kept from harm.
"At many houses, research has been pretty much protected from the cuts until now," says Jonathan Evans Chairman at equity-focused search firm Sammons Associates. "Research has always helped to support corporate finance efforts, and most firms have held onto researchers in the hope that capital markets activity comes back."
“In sales and trading, around 15-20% of people have been let go so far,” agrees another equities headhunter. “In equity research it’s more like 5-10%.”
Research has been protected because it’s product, he explains. “Equity research departments are at the core of what banks are trying to offer. It’s all about product and content. If you get rid of research, you’ll have no product to sell.”
Headhunters are, however, pessimistic that researchers can remain ‘protected’ in future. Unless current revenue trajectories change, there are three likely outcomes for everyone working in the sector: more redundancies, lower pay, higher workloads.
"Unless corporate activity picks up soon, equity researchers will find themselves in the crosshairs," predicts Evans. Already, recruiters say research teams are focusing on a few hot sectors: if you’re a researcher specialising in telecoms, banks, metals and mining, utilities, or oil and gas, you’ll be fine. If you’re a researcher specialising in leisure, business services, or autos, you won’t.
Equity researchers took big pay cuts ten years ago after the dot com bubble burst and their partiality to fee paying clients became apparent. If researchers are to retain their jobs, they may need to take further pay cuts in future. They may also have to work harder. We’ve already observed that the life of an equity researcher is akin to the life of a touring rock star, in a bad way. This will continue.
“Analysts are being paid less than in the past,” comments one research headhunter. “They are also being worked harder and expected to run more product.”
Much the same could be said of the rest of the industry. Unfortunately, equity researchers are no different to everyone else.