Investment Banking vs. Equity Research vs. Sales & Trading | A Former J.P. Morgan Analyst Explains

TL;DR

This video provides an overview of the roles, hierarchy, work hours, compensation, exit opportunities, and tips for choosing between investment banking, equity research, and sales and trading careers.

Transcript

three of the most common fields in finance are investment banking equity research and sales and trading and if you're not really sure what the difference is between these three fields then you've come to the right place if you're new to the channel welcome to red liquid my name is ben and from 2015 to 2018 i worked as an investment banking analyst ... Read More

Key Insights

• 📌 Investment banking involves M&A and fundraising, providing financial advice to clients, building financial models, creating pitch books, conducting research, and participating in meetings.
• 🎯 Equity research focuses on creating reports on companies and industries to sell to institutional investors, including initiating coverage reports, industry overviews, and company update reports.
• 💼 Sales and trading is divided into sales and trading functions, with salespeople building relationships with clients and traders executing trades. Flow traders help execute large trades and ensure liquidity.
• 💡 Investment banking offers opportunities in private equity, hedge funds, investor relations, and more. Equity research analysts often transition to hedge funds. Sales and trading has limited exit ops primarily in the financial markets. ⏰ In investment banking, analysts put in long hours (70-100 per week), while associates work 60-90 hours. Hours become more manageable as you progress. Equity research analysts work 60-70 hours, with occasional high-stress periods. Sales and trading hours mirror equity research.
• 💰 Compensation in investment banking, equity research, and sales and trading can exceed six figures in the first year. At senior levels, earnings can exceed a million per year.
• 🚀 Exit opportunities in investment banking include private equity, hedge funds, industry firms, and more. Equity research analysts often transition to hedge funds. Sales and trading primarily offers exit ops in the financial markets.
• 🔍 Tips for choosing between these careers: choose investment banking if you value building financial models and want to go into private equity; choose equity research for reasonable hours, research, and potential hedge fund work; choose sales and trading if you love the markets and seek work-life balance.

Questions & Answers

Q: What is the main role of investment bankers?

Investment bankers provide financial advice to clients regarding mergers and acquisitions and help them raise funds through debt or equity transactions. They also build financial models, create pitch books, conduct research, and participate in meetings.

Q: How do equity research analysts create reports?

Equity research analysts create initiating coverage reports, industry overviews, and company update reports. They conduct research, build operating models, and provide analysis on companies. These reports help investors make informed investment decisions.

Q: What is the difference between sales and trading?

In sales, professionals build relationships with clients to encourage them to buy and sell securities. In trading, professionals execute trades by getting clients the best possible prices. Salespeople earn commissions, while traders earn money from commissions and the bid-ask spread.

Q: Are the work hours in investment banking extremely long?

Yes, for junior analysts, the work hours can range from 70 to 100 hours per week. However, as you progress in your career, the hours become more manageable. Associates work around 60-90 hours, VPs work 50-80 hours, and directors work 40-60 hours per week.

Q: What are the exit opportunities for investment banking?

Investment bankers have various exit opportunities, including joining private equity firms, hedge funds, industry firms in operations or corporate development, and more. Private equity and hedge funds are popular choices for investment banking professionals.

Q: How do equity research analysts compare to investment bankers in terms of work hours?

While equity research analysts also have intensive periods, their average work hours are lower at around 60-70 hours per week. They have brief intense periods when analyzing and preparing reports during events like earnings season or significant transactions.

Q: What are the best exit opportunities for equity research analysts?

Equity research analysts have similar exit opportunities to investment bankers, except for private equity. Many equity research analysts transition to roles in hedge funds, where their research and analysis skills are highly valued.

Q: Why is sales and trading shrinking as an industry?

Sales and trading divisions are shrinking due to the rise of electronic trading and increased accessibility to market data through the internet. However, it still offers career opportunities for those who have a passion for the markets and strong trading skills.

Summary & Key Takeaways

• Investment banking involves advising clients on mergers and acquisitions, as well as fundraising through debt or equity transactions.

• Equity research focuses on creating reports on companies and industries for institutional investors.

• Sales and trading involve building client relationships and executing trades in the financial markets.