Investment Banking Research Associate...

Question

Can anyone give feedback on the these positions in comparison to other functions such as M & A and Sales and Trading in reference to pay, hours worked, etc? Thanks for the help.

jb32 · Answer

A little bit about Research Associates...

I would say unless you have a huge desire to do research, cover companies, and write reports, then stay far, far, away from research. A few reasons why I say this: one, if you are expecting a glamarous job at an investment bank, then research is certainly not it. I would put research near the syndicate desk as far as status and prestige in a bank, well below M&A and Sales and Training. Two, among the first people to be fired at the sign of a downturn are the research analysts. They are a nice add-on service to provide to institutional investors, but they are also a cost center. Finally, the glamour days of research are gone. In the late 90's research analysts were called over the wall to provide insights on M&A deals and capital raises. After Elliot Spitzer, this was outlawed and research is kept far away from any transactions.

As far as pay is concerned, it will be less than on the deal and trading side of the house. Probably $130K-150K total compensation for a first year associate. Top Research Analysts at bulge bracket banks can make $2+ million a year, but that is pretty rare. The hours an associate keeps are probably 60-70 hours a week, more during earnings season when earnings reports have to be turned pretty quickly.

I hope this doesn't dissuade you from becoming a Research Associate, but rather lets you know that it's not the glamarous world of M&A or Sales and Trading. I personally want to move into M&A and do not consider research as an alternative.

agold · Answer

There are very different exit opportunities as well. If you want to exit to a private equity fund, for example, you will not be able to do so out of the Research department. You may be able to exit to a Hedge Fund, but I think even this is somewhat rare. Once you go into research, you are somewhat pigeon-holed into research capacity roles and the future is not looking hot for research in general.

However, like jb said, the quality of life is a bit better and if you're one of the top analysts on the Street you can pull down 7 figures.

However, like jb said, the quality of life is a bit better and if you're one of the top analysts on the Street you can pull down 7 figures.

lanter1 · Answer

I have heard a very differing opinion as far as exit positions in research from various other investment bankers saying that hedge funds are very interested in hiring away research associates. How about mobility within a firm?

The main reason I want to know is that my wife is going start a business after I get out of B school. I think the equity research will allow me to not work 90 hours per week and get the business started. It seems that the pay for research is not much different than M & A initially.

agold · Answer

It is different, from my understanding. I think a first-year post-MBA in investment banking may make 300-350K, and a first-year in research may make 200-250K.

I could see research associates getting hired away by hedge funds who rely on fundamental analysis more so than quantitative analysis - however I believe that hedge funds employing this model are somewhat rare. I think the more common buy-side exit opportunities would be into traditional investment management (mutual funds, pension funds, etc.).

Research hours are very cyclical from what I understanding. They work banking hours (70-100 hrs/week) during earnings season and 60-70 during non-earnings season.

Futuristic · Answer

Don't mean to disagree, but I'm trying to educate myself a little more about this. Could you post a reference for the following information:

"I think a first-year post-MBA in investment banking may make 300-350K, and a first-year in research may make 200-250K."

With the recent state of the financial sector, does this still hold true? Or is the key word in your statement 'may'?

agold · Answer

Everything in the financial services industry fluctuates with the state of the economy. Bonuses are expected to be down 10-20% this year in I-Banking, which is less of a hit than expected. I have no idea about research. I also have no idea about hiring for the next couple of years in either banking or research.

Futuristic · Answer

Could you answer my primary question as to the source of your information?

Thanks

jb32 · Answer

Check this out from Vault, it should answer your questions.

https://www.vault.com/nr/newsmain.jsp?nr_page=3&ch_id=240&article_id=16127146

kidderek · Answer

I've heard, first hand, that research people work hellish hours.

lanter1 · Answer

thanks for the help everyone....with all the conflicting info, i am starting to wonder if research is more firm specific than M & A in terms of hours and/or pay.

agold · Answer

It's not published in a book or a case study. It's mostly just hearsay. You can take it with a grain of salt if you'd like

Bases on both jobs will be $95K and that can be verified by any career services employment report from any major school. Bonuses will vary quite a bit due to the hours worked and value of the work.

89nk · Answer

Good link. Cleared things up for me. Thanks.

Futuristic · Answer

It's not published in a book or a case study. It's mostly just hearsay. You can take it with a grain of salt if you'd like

Makes sense, thanks for clearing it up.

maverick2011 · Answer

108-p419751?t=58490&hilit=investment+bank+salary#p419751 Scroll down to pelihu's post with attachment.

lanter1 · Answer

I have seen that but it does not break down per function. I am almost certain that research does not make the same as M & A after 2 or 3 years.

jb32 · Answer

Not even close...

If you think about M&A, where there is such a tiny capital cost for such a huge potential revenue upside. I mean for a $1 Billion Sell-Side M&A deal the bank fee would be around 1% of the total deal size, or around $10 million. It might take two analysts, an associate, maybe a VP, and an MD to run the auction for 5 months before the deal closes. The percent of the fee that is required to pay all the banker's salary is probably 10%. (Almost) All of the rest is profit for the bank. Subtract fixed costs, etc.

Look at research for a major bank. Where's the revenue? Analyst reports bring in a pretty small amount of direct revenue. They are simply a tool used by the Sales and Trading department to get more business. Sales says to the institutional investors that we have the top research guy in X sector. We will provide you free reports if you trade with us. Of course, the investors all have research departments of their own doing the same work, but the Wall Streat Analysts usually do a really good job with their models/analysis. They also know the companies in their sector in-depth. However, no serious investor actually takes an analysts buy/sell/hold recommendation seriously.

So in summary: M&A department, high revenue, high value, low cost. Research, marginal cost, medium value, low revenue. That is why M&A guys make the big bucks and most research guys make a lot less, but still get paid well.

maverick2011 · Answer

Oh OK...just thought it would be a decent data point if you haven't seen it. That is the only data I've seen too. I'm not sure about research analyst positions, but I am pretty sure your assumption is correct.

maverick2011 · Answer

deleted

lanter1 · Answer

Yeah, I saw that before and it was helpful. thanks for the input.

Investment Banking Research Associate...

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