Data Science



Equity Research vs. Investment Banking: Careers, Job Roles, Salaries, & More

Equity research and investment banking play a vital role in the capital markets by providing clients with analysis and recommendations about stocks, bonds, and other financial instruments. This article will help you decide which of these careers might be right for you.

Although bothwork in the security industry, their responsibilities are fundamentally different and diverse. 

Equity research analysts generate research reports, estimates, and recommendations concerning companies to a substantial extent. On the other hand, investment banking analysts advise their clients on how they can generate massive increases in profits by making deals with publicly- owned firms. . 

What is Equity Research?

Equity research is a form of financial analysis that involves forecasting and interpreting stock prices, studying market trends, conducting earning estimates, or monitoring important news about companies. 

Equity research can be divided into two categories:

  • Sell-side equity – research aimed at clients who provide capital to companies.
  • Buy-side equity – research aimed at investors seeking advice on how to invest their money.

The key task of an equity research analyst is to accumulate information about a company, its management, competitors, products, and financials to produce high-quality research reports for use by clients. These are used as a basis for making sound investment decisions.

What is Investment Banking?

Investment banking is a specialized division of banking concerned with capital creation, debt underwriting and equity for corporations of all types, assisting with the sale of securities and facilitating mergers and acquisitions, restructurings, and broker trades for both institutions and private investors. 

Investment banks assist in large and complex financial transactions. They can suggest how much the company is worth and how best it is to strike a deal if the investment banker’s client wants to make an acquisition, merger, or sale. 

It may also include issuing securities to raise capital for client groups and preparing documents required for a firm to go public.

Investment banks may employ bankers who can help firms, governments, and other groups plan and manage significant projects and save money and their clients’ time by identifying the risks connected with the project before advancing with the client.

Equity Research vs Investment Banking

When choosing your career path, knowing if you would be more comfortable working in a bank dominated by sales and trading or whether the research side suits you better is essential. Both sides have their benefits.

This guide will explain the significant differences between investment banking and equity research jobs.

Equity Research Analyst Investment Banking Analyst
Equity research analysts generally have a backend job  Investment bankers completely stay in the limelight 
Equity research analysts are independent of their clients Investment bankers work with one client at a time
To create an unbiased analysis of a stock that highlights its strengths, weaknesses, risks, and opportunities Provide a rating on stocks they are involved with
Work on both buy-side and sell-side Work on the sell-side
Provides analytical reports of shares, company, and profit-loss Provides broking and trading, underwriting, mergers, and acquisitions services
Capital control in an entity that is not publicly traded or listed Wealth generation for other businesses, governments, and other institutions
Low-pressure work investment High-pressure work investment
Average compensation as per industry standards  Lucrative compensation as per industry standards 
Needs good analytical mindset, decisive thinking, and great research ability Needs specific financial capabilities, statistical talents, and the ability to work extremely long and arduous hours

Similarities Between Equity Research and Investment Banking

While the two finance careers have several key differences, some similarities and links exist.

  • Both the fields deal with companies, stocks, and financial instruments such as derivatives that can be highly complex.
  • Both play an essential  role in capital markets by providing clients with analysis and recommendations about stocks, bonds, and other financial instruments. 

Career Prospects in Equity Research

Becoming an equity research analyst is a challenging proposition. Having a financial background and advanced knowledge of market research and the business world, is crucial. To become an analyst, it is important to specialize in finance, mathematics, and analytical reports.

Today, the demand for equity research analysts is increasing in every industry with the growing market. Therefore, their role in the stock market is also increasing. While these professionals study their target companies closely, based on the data, they also get to know about the likes and dislikes of their target customers.

Apart from this, they are also responsible for marketing a product, advertising, sales trends, and finding new possibilities in the market. And, based on all this, they prepare a report. Equity research professionals collaborate with data scientists and marketing professionals to accomplish the task.

 Average Equity Analyst Salary in India

 Source

Career Prospects in Investment Banking

 The Indian economy has witnessed steady growth in the past few yearsDue to this, the demand for investment bankers has increased a lot. 

In today’s time, commercial banks are considered to be the most significant job source of investment banking. You get many job options in this sector. You can search for jobs in the capital market or trading firm. Apart from this, there is a demand for investment bankers in various lending companies where you can work as a professional portfolio manager.

Investment bankers are in high demand in international corporations also. An Investment Banking consultancy is also a lucrative job prospect. 

Average Investment Banker Salary in India

Source

Roles and Responsibilities in Equity Research

The following are some of the best equity research positions to opt for in your career:

  • Market Research Analyst – This channel can provide vital information about any product or service. Market analysts gather and analyze data to forecast customer demand. Following the analysis, they submit input to improve products or services as much as possible.
  • Sector Research Specialist – Labor and employee relations information relating to specific industries is researched and analyzed by a sector research specialist. In addition to performing complex workshops and data collection techniques, research specialists design, interpret and execute research projects.
  • Senior Equity Research Analyst – Research reports are documents produced by senior equity research analysts after thoroughly analyzing a company. These reports advise investors on actions such as buying, selling, and holding for a particular security. Research reports also contain information such as company and industry overview, financial metrics, target price, period, and risk.  
  • Fund Manager A fund manager is a financial professional who works to provide customers with accurate information about mutual funds. He does this by continuously monitoring market movements to give the best mutual funds to his clients.
  • Chief Investment Officer – CIOs are in charge of maintaining an organization’s portfolios of assets. A team of qualified professionals is supervised by them and recommends investments, assists with implementing short- and long-term investment plans, and assigns assets.

Roles and Responsibilities in Investment Banking 

If you have a strong interest in banking, you can pursue a career in this industry. Some of the best job summaries are listed below:

  • Financial Analyst A financial analyst must study stocks, bonds, and other securities for banks, brokerage firms, wealth management firms, and other businesses. These financial experts often specialize in a specific type of stock or bond. They analyze internal financial data, create financial plans, revenue, and expense forecasts, and offer suggestions to help a firm’s management make budgeting and investment decisions.
  • Bank manager – A bank manager is the branch’s guardian or the head of the bank branch. A branch manager is in charge of the branch’s operations. Every task completed in the branch is under the branch manager’s supervision
  • Business Research Analyst – A research analyst is a professional whose job is to get all the information about any new product before bringing it to the market, such as how much is consumed in the location where the product is introduced and how much that product can be sold in that market. 
  • Chief Financial Officer – The primary function of the chief financial officer is to do financial planning for the company. It manages financial reports. The CFO maintains the balance sheet, cash flow, and profit and loss account of the company. Also, the CFO looks after the accounting, budget, financial reporting, taxes, etc., of the company.

  • Merger and Acquisition – Mergers and acquisitions is a vital department in every company. The responsibilities of a merger and acquisition expert include negotiating the purchasing and selling of a company.
  • Sales and Training – By going into this domain, you can help people invest their money in the stock market. For this, you need to know the share market.

Apart from that, an investment banker has the following job roles:

  • Equity research analyst
  • Account manager
  • Relationship manager

Skills Required for Equity Research

An equity researcher’s previous work experience should be related to equity interpretation. The required skills are:

  • Understanding of Financial statements – One should be able to read balance sheets, income statements, and other financial statements issued by publicly traded companies to value equity. 
  • Good business communication – It is  a key requirement of equity research positions, as the researcher needs to be able to project financial multiples to the portfolio manager and others.
  • Analytical skills – Equity researchers must also possess high analytical skills that provide an in-depth understanding of the meaning behind explained financial data and the ability to create new quantitative information that provides further understanding of the likely direction of prices.
  • Excel and SAP skills – Through consistent access and manipulation of financial data, equity researchers should be able to locate data from various sources and have literacy in the preferred data manipulation software such as SAP and Microsoft Excel used in storing data sets.
  • Reporting – Report writing is a core function of the equity research role, and you must be able to summarize information and key findings to be used in future references for equity firms.

Skills Required for Investment Banking

The following are crucial skills to have if you want to specialize in investment banking:

  • Financially and Technically Literate – To become an investment banker, you must be proficientn mathematics. You should also have knowledge of financial software, such as investment banking CRM programs.
  •  Analytical Skill – Analytical skills are a must for investment bankers to take an urgent decision under pressure and save a great opportunity. Sometimes deals happen at the last minute and with a short decision-making window.
  • Excellent Communication Skills – In addition to persuading high-profile clients to close a deal, an investment banker’s job includes presenting ideas to an uninformed and sometimes uninterested audience. That is where excellent communication skills come in.

Sometimes, what is important is not your understanding of the nature of the business, but how you can present it clearly to a wide variety of audiences. 

  • Mental Toughness – Being rejected is a natural part of the investment process. An investment banker does not let this get to their mind. And, whatever happens, they will keep pushing it. That persistence is essential for success.
  • Thinking Outside the Box – Investment banking is usually dominated by people who have been in the finance sector for decades. That is why every investment bank needs someone who can come up with innovative and creative ideas for a specific process in the deal flow or to improve the direction of a project.

Equity research analysts and investment bankers provide clients with financial analysis, recommendations, and coaching on their current portfolios. If you are interested in either of these careers, then Hero Vired’s Integrated program in Finance and Fintech would be the perfect first stepping stone. 

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