Like many people on the buy-side, I started my finance career working in research for an investment bank(on the sell-side). When I got my first sell-side job, I was so happy! I thought I was going to get paid lots of money and learn a lot about investing.
If you know anything about the sell-side, then you know I was completely wrong on both counts.
Comp just keeps getting worse
There was a time when people on the sell-side made a lot of money. Many senior analysts were making low seven figures, and top analysts were in the mid-seven figure range. If you’re hoping for these kinds of payouts, you’re a few decades too late.
Over the years, increased regulation, like MiFID II, has made the sell side a less glamorous and lucrative job. Banks make much less from research now, as there are fewer IPOs and much less differentiation between research due to disclosure restrictions. This translates to lower senior analyst comp. And that lower comp flows down, which means associates don’t get paid as much as they used to either.
Fewer advancement opportunities
Before, sell-side analysts were making so much money they’d end up retiring early, or they left the sell side for another lucrative career.
You’re not seeing that anymore. In the past, banks on the sell-side were promoting 25 or 26-year-old associates to become analysts because they couldn’t find enough people to cover stocks. Now, you have senior analysts that have been covering a space for 20+ years and they have no intention of leaving.
Why are they staying even though they’re getting paid less than before?
Because career prospects aren’t great for senior analysts anymore. The only way to improve your comp as an associate is to get promoted, but how can you move up when nobody is willing to make space for you?
Be prepared for a lot of writing
Nobody really cares about associates. I should re-phrase that. Almost nobody cares about associates. There are some really good senior analysts that care about associate development. I’ve never worked with them, but they do exist.
Most senior analysts treat associates like tools. Basically, something that does the dirty work so they don’t have to. When they’re talking to clients, going to meetings, and visiting management teams (all the fun stuff), the associates are writing the notes and updating the models. Many analysts still equate the length of a report to its quality, so if you get on the sell-side, be prepared to do a lot of writing.
Analysts on the buy-side generally have much better hours, so it’s rare to find them sitting at their desks after 7 pm. Since the senior analyst spends most of his time talking to clients, there’s not much for him to do past 7 pm either.
But do you know what late nights are great for on the sell-side? Of course, it’s updating models and writing notes! I can’t tell you how many times I’ve had a senior analyst take off for the night and expected everything to be done and published by the morning.
Despite the pain and suffering, my experience on the sell-side was worth it because it got me to the buy-side. This, my friends, is the main purpose of a sell-side role now.
Margin of Saving was created by an analyst at a multi-billion dollar hedge fund to help others learn how to invest and save.
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