A career in investment banking remains one of the top career choices for aspiring finance graduates to date. These days, equity research is coming as a distant second choice to graduates seeking a career in capital markets.
Well, though both are related to finance and capital markets, there occurs a lot of difference between these two. Let’s have an overview of these two finance careers here.
Investment Banking vs Equity Research: Definition
Investment bankingis a banking function that delivers financial services to individuals and companies as well and helps them to raise capital.
Equity research is a mechanism where the financial status quo like assets and liabilities are analyzed to make decisions concerning an investment.
Investment banking analyst vs Equity research analyst
An investment banking analyst –
- researches financial deals
- coordinates with the dealers
- finalize the deals
- assists companies to raise capital through debt/equity
An investment banking analyst is a decision-maker in the financing industry.
An equity research analyst –
- studies the behavioral patterns of the finance market
- analyses the business environment
- prepare equity search reports
- help clients to make well-informed financial decisions
An equity research analyst prepares valuation models for clients.
Let’s move forward with their roles to understand these two domains in detail here.
Investment banking analyst vs Equity research analyst: Roles and responsibilities
An investment banker holds a degree in finance, accounting, economics, or mathematics. Many experienced professionals seek MBA in a later stage if not done at the start of their career. Also, they keep updating their knowledge and skills by earning an investment banking certification.
The major responsibilities of an investment banker include:
- Mediating between the investors and the businesses who need financing
- Underwriting new debt and equity securities
- Creating Pitchbooks
- Performing ad hoc financial analysis
- Helping in the sale of securities for a good market value
- Facilitating mergers and acquisitions, restructuring, and Initial Public Offering (IPO)
- Broker trades for private investors and institutions
- Guiding issuers regarding stock placement and related issues
A degree in finance, economics, accounting, or mathematics is a good start for an equity research analyst. The difference between an investment banker and an equity researcher is the Chartered Financial Analyst (CFA) designation and the MBA program. CFA is considered mandatory for an equity researcher, which requires a strong commitment of many years.
The major responsibilities of an equity researcher include:
- Performing industry research
- Building financial models
- Updating excel spreadsheets and word documents
- Conversing with the management of the companies
- Writing equity research reports
- Communicating investment updates to the concerned investors and the public as well
Equity research demands 12-hour days. The peak schedule includes initiating coverage on a specific stock or sector and earning seasons.
Work hard, play hard is the investment banking culture. It calls for a 90-100-hour work week.
People quit investment banking due to a total lack of work-life balance leading to burnout, which is seldom heard in equity search.
Career Pathing and Salaries:
Investment banking has a clear path with defined timeframes. One can begin their career as an analyst which lasts for 2-3 years, then level up to an associate position, and in line to become a vice president and then the director or managing director. Many start their business or move to private equity after working as an analyst.
The average salary for an Investment Banking Analyst is $122,286 per annum in the United States
The career path in equity research is less clear. Though they step up their career ladder as Analyst, Associate, Senior, and Vice President or Director, they might be viewed as number crunchers. They may not bring big business as the investment bankers do.
The average salary for an Equity Research Analyst in the United States is $98,500.
To conclude, both careers deserve a close look given the benefits and career interests.