Advice for Current Associates

Part I

Before I dive in, one point to make: Sell-side research entails a lot of figuring out things on your own. As much as I suggest finding a good senior analyst who can manage and be a good mentor for your career, most of them are terrible managers, because Wall Street rewards producers, not good managers.

General

  • Pass Series Exams ASAP: You cannot add value until you pass your exams. After passing, 1) your name shows up on research reports 2) you can talk to “external parties (Equity Salesperson and institutional clients) 3) you can build brand for yourself.
  • Triple-check your work: Build a reputation by having strong attention to details. That way, your senior analyst will give you more responsibilities.
  • Be super organized: Use folders in Outlook, OneNote tabs, etc.
  • Find ways to add value: Any work you can take away from your senior analyst frees up his/her time to serve more clients.
  • Don’t make it up, if you don’t know the answer. Say “I will get back to you,” and actually go find the answer and get back to them.
  • Understand things on a first principles basis: Don’t use jargons to fool yourself and your clients. Your clients will call you out: “what do you really mean by that (jargon)?”
  • This job is what you make of it: If you want to become a senior Wall Street analyst or exit to other high-caliber roles (eg. buy-side), hold yourself to high standards and put in the work. If you don’t work hard, don’t wonder why you don’t progress like your peers.

  • Even if you hate your covered sector, outsiders value an industry expert’s knowledge. Become an expert in your sector while exploring a move that suits your long-term interest.
  • Trust yourself: Don’t let your VP / senior analyst bully you, they are not always right.
  • Write things down: Most of us don’t have super-human memories.
  • Constantly refine your workflow: Time your core tasks and think about ways to automate. Small process improvements add up. So much time is wasted on this job because of disorganized bosses, information asymmetry and pain-in-ass Supervisory Analysts, control what you can control.
  • Learn to skim: There are many free / paid resources on how to read.
  • Learn one Excel shortcut a day
  • Be visible: cc your team on deliverables / updates on side projects

Single name / industry knowledge

  • Keep a diary of news / event on the covered companies:

    • What did the news mean for the company and its financial outlook?
    • How did the stock react?
    • How does it impact the other businesses in the value chain (“read-thru”)?
  • Read company / industry-related books: For oil and gas, for example, The Prize by Daniel Yergin and Rockefeller by Ron Chernow. Check out my industry book list (being built sector-by-sector).

  • Know every detail: You never know what information a client is looking for on your covered company. That client could be a return customer because you added value.

  • Pay attention to the change in guidance or any incremental data point given between quarterly earnings, clients value that

  • Know the bull / bear thesis: super easy, given you can be talking to a bull and a bear of a stock from the buy-side on the same day

  • If your analyst runs a “generalist model,” (ie. all associates need to know all companies covered by the team vs. a more traditional model, where an associate is responsible for a subset of companies.) be a specialist secretly. 

  • Clients value your depth of knowledge on names, not the number of names. It’s good for your brand building (and for a buy-side move if that’s your direction). Secretly follow fewer names and know them very well. It’s easier to “scale out” your knowledge to other subsectors later.

Financial Modeling

  • Document modeling assumptions: It will help you the next time you work on the model and during your client call.

  • Save before running an Excel macro: There is no undo after a macro run.
  • Don’t assume an inherited model is free of errors.

    Writing

    • Conclusion up front
    • Conform to your analyst’s writing style
    • Be concise (but expect to be overwritten by your wordy senior analyst)
    • Repurpose previous reports and exhibits
    • Unlearn all the creative writing skills: We are trying to communicate views to institutional clients, not trying to win the Pulitzer Prize.

      “System” knowledge

      So much of this profession is about knowing how your senior analyst and the team (“the system”) function day-to-day. If you master this, you will become very entrenched, and that helps your security.

      • Take your FIRST compliance trainings seriously: You need to comply with the regulations anyways.

      • When you are speaking with external parties, your senior analyst’s view and stock ratings are what you need to be messaging (the “house view.”)

      • This is a highly regulated industry: Always ask your teammates / senior analyst if you are unsure about how to proceed.

      • Document where things are stored on the shared drive: you will look like a hero during fire drills.

      Part II

      If you think sell-side research is all about generating alpha, you are in for a major surprise. The selling aspect of the job is very real. In this article, I discuss the constituents within the sell-side research ecosystem and how to build relationships (“the sell”) with them.

      General

      • Dress well.
      • Be good with names. Learn three things about a person, write it down.
      • Make friends relentlessly. Your friends provide best practices, industry knowledge and job leads.
      • Be proactive. This is NOT a “if you write it, they will read” type industry.
      • Answer client questions promptly – Every client wants to feel they are a top priority. Remember some small clients can become a big commission payer if they generate return and raise capital. Cultivate every relationship.

        Senior Analyst

        Your overlord and #1 customer

        • Remember their birthday at least. Some schmoozing doesn’t hurt.
        • Ultimately, the work should do the talking.
        • You are an extension of your analyst and the team, when you interface with external parties: Present yourself confidently, professionally, and know your stuff. Don’t bullsh*t.
        • Pay attention to their feedback on your deliverable, so that next time you prepare the products in as final form as you can, saving time for everyone.

          Teammates

          Your source of “system knowledge”

          • Make friends with them. They have been on the team longer and can resolve information asymmetry for you
          • They know where files are stored on the shared drive, why your analyst did certain analysis five years ago, etc.
          • They have the best tips on how to deal with the senior analyst.

            Equity Salespeople

            Your channel to institutional investors

            • Go hang out with them on Friday’s when things are slower.
            • After your analyst goes on the morning call, call salespeople you are comfortable talking to and ask to clarify their questions. It’s a good practice for you to defend thesis and share knowledge on companies. These calls are great touchpoints to help salespeople remember you.
            • Over time, salespeople should connect you to smaller clients (if your senior analyst is willing to groom you). That’s how you build your own brand.
            • At some shops, salespeople vote on research associates. They could vote for you because of your stock knowledge, but they could also vote because they like you. Your performance evaluation is partially based on these “internal client" votes, so it’s quite important.

              Institutional Investors

              Your true clients

              • Your long-term career prospect depends on them, regardless of whether you want to become a senior Wall Street analyst or go to the buy-side.

              • Be a normal person. Think before you speak.

              • There are always clients with questionable ethics who somehow still have a job in the industry. If they are probing for non-public material information, better to deflect than divulge.

              • If you respect a client (and you don’t have to respect all clients), understand their investment philosophy. Tailoring your answers during client calls will enhance the effectiveness of the conversation.

              Industry Professionals

              • You can only know that much about an industry from reading reports and playing with spreadsheets. There is nothing better than hearing from people who work in the industry. Build relationship with them to understand industry nuances.

              • Clients, particularly generalists, value your knowledge as the industry expert. Your deep industry knowledge can help you stand out.

              Colleagues Covering Other Industries

              Your “support group”

              • Another resource to learn how to deal with senior analysts

              • Also a place to get educated on trends and economics of other sectors

              • Worst case: If your analyst gets fired / laid off, you become an “orphaned associate” to be re-staffed. You will have to interview with other industry teams. If you already built the relationships, you have a higher chance of getting a placement. You never know when goodwill pays off.

              Sector Associates At Other Shops

              • Yet another way to learn how to deal with the overlords and best practices on how to be a star associate.

              • They are also good sources of intel on whether you are fairly compensated or which senior analyst is a good mentor.

              • Sell-side movement within the sector is a plug and play. You will have a good sense on where turnover takes place and make a move should you choose.

              Company Management

              • Don’t say anything stupid in front of them.

              • Don’t reveal confidential information.

              • Although you will not be the primary contact with management as an associate, you will need to build relationships with them as you progress. Robust management relationship has its foundation in being a pleasant person and knowing their business well.

              • Remember that sell-side is a relationship job. You are not the short-seller, so don’t ask hostile questions.

              Part III

              In this article, I discuss how to manage your own career in sell-side equity research. Most senior analysts (“Analyst”) are bad managers because Wall Street rewards producers (getting II votes and IPOs), not leaders (mentoring juniors and managing work flows effectively.) As a result, you are on your own.

              Becoming an Analyst is not for everyone, and that’s okay. You just need to figure out your long-term goal and when to leave the industry. I hope these tips will help you manage and grow a career in sell-side research and time your exit well. Please be aware there are always exceptions to my suggestions.

              Managing your performance

              • Keep a mistake log: We are all humans. You will make mistakes. With a log (on paper or in a spreadsheet), you shouldn’t make the same mistake twice.

              • Are you progressing?

                • One-year mark: You should have mastered the technical skills – modeling, writing notes, using proprietary software used by the team (Excel VBA, Tableau, SQL, etc.)

                • Year two and onward: You should 1) know the long-term industry trends 2) develop deep knowledge on major companies in your sector 3) know metrics that drive your stocks.

                • As time goes on, scale out your knowledge to smaller cap names in the sector to develop a more complete view of industry dynamics.

              • Year-end review: I knew plenty of Analysts who ask associates to write their own reviews, so it’s pretty useless. If your Analyst actually gives real feedback, note them down obviously. Be vocal about what you want out of your time on the sell-side: if you want more client exposure, or more autonomy on deep-dive notes, ask. Often Analysts are so busy that they don’t know you are not developing or getting recognition.

              Don't feel you are progressing in your sell-side career? Need guidance on how to prepare for the year-end review? I invite you to sign up for a free call with me. Let's connect!

              When to jump ship

              • When there are issues: The following situations warrant an introspection on whether to stick with your current Analyst.

                • Doing illegal or unethical things: This is no brainer. Leave.

                • Mean person: Tough one. as there are tons of verbal abusers out there. If they don’t make you better, leave. Otherwise, stick it out, learn, and gain access to their client base.

                • Too hands-on: If your Analyst hoards all client interactions and does all the technical work, it’s bad for your career development and brand building (for becoming an Analyst or going to buy-side). Bring up the issue. If they don’t change, leave.

                • Work-life balance: Also a tough one because ER is a grind – too many constituents to please, too many low-value tasks to do. It’s less acceptable to me, when the Analyst is:

                  • Creating fake work

                  • Excessively making associates do their personal tasks (booking restaurants, etc.)

                  • Forcing associates to stay late but leaving them idle

                • With that said, all Analysts have their quirks to deal with, so I don’t recommend jumping ship unless 1) things are just so unbearable, or 2) you are dealing with multiple issues above.

              • Two-year mark: Two years is a general rule of thumb to start thinking about your exit. From that point on, the job becomes repetitive if you don’t want to work toward becoming an Analyst. By the two-year mark, your technical skills are solid for many professions that require good business writing, financial statement analysis and modeling. You also should have developed some understanding of a particular industry to be perceived as an industry expert.

              What are your exit options?

              • Investor relations: your skills are very transferable to this profession – you know what Analysts are looking for, what the buy-side is looking for, how management wants to message their story, etc. It’s a natural transition.

              • Investment management (the “buy-side”): I took this route and have a lot to say about this path (So many more articles to come. Stay tuned). Are you ready for the buy-side? It depends of course. Some were always ready for the buy-side (I coined the term “closet buy-siders” for them) because they have been studying companies and investing on their own while consuming tons of podcast, books and investor letters to refine their game. Others will never be ready because their motives are wrong (my article tells you about the different types).

                • If you stay on the sell-side for long enough and make VP, things get tricky because you will likely have to take a pay cut as no buy-side shop will pay sell-side VP $$$ to fill a buy-side junior research role.

              • Business school: I have an MBA and plan for many articles on the subject as well. I will only make one point here: MBA students with clear post-MBA goals before starting the program got the most out of the program - know what you want before going (“I don’t know, maybe investment banking or consulting” is the worst answer here).

              • Corporate / Other: So many permutations here. If you frame your sell-side experience well, you can exit into corporate roles by self-teaching the requisite skills. It will take some convincing because outsiders don’t know what equity research is all about, but someone will give you a chance.

              If you are interested in learning more about sell-side equity research, I have two other great articles for you:

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