Hi, I’m currently working as an engineer in the semiconductor industry, and I took the CFA Level I exam to gauge my interest in a career in finance (ER, AM etc). Financial analysis is a fascinating field in my opinion, however I just want to get some more perspective on:
Whether this is a realistic goal, for a career change into Finance at the age of 30?
Whether it’s advisable to start applying for jobs right now with just an Engineering degree and a Level I exam pass? Or should i continue on through Level III and also get something like an MFE before looking to change jobs?
What sort of career pathway should i go for? As in what would be a good role if i’m interested mainly in equity research related activites? Or what would be the most recommended role to apply to if I’m starting out?
What do you like about finance and equity research? The sector is quite broad and doesn’t have to be Wall Street type work. You can work for lenders in underwriting if you want to analyze financials, for example. Or work for rating agencies. You don’t have to stay in these jobs, but I view it as concentric circles where you just move closer to the goal.
In terms of strictly equity research, you’d probably have to target boutique and regional firms. Also if you have any technical skills like coding, that could make you attractive as finance is slowly moving away from Excel. Your best bet is to be an associate in an industry you understand well as a engineer (semiconductor). There is no specific hiring time for equity research. It’s based on turnover so I’d just set up job alerts
But equity research is in secular decline. I’d advise you to figure out what you actually like about equity research and find something else that has similar traits
If you don’t mind me asking, why do you say that ‘equity research is in decline’? If that’s true, then how do money-management firms, pension funds, and private equity funds make investment decisions?
Equity research typically refers to the industry, not the activity. You have sell side and buy side. Equity research is often short hand for the sell side. But both industries are declining, but sell side is declining much worse.
In general, money management firms and pension funds are going to other assets (like private equity) or ETFs. It’s slow but that is the trend.
Private equity is normally viewed differently than equity research. When someone says they want to work in equity research, I’ve never heard that mean private equity. Private equity is much more transaction focused and less company analysis.
Hi Codtrawler87 and rawraw, thank you very much for the insight! I am interested in data analysis and economics in general and there being such a wide possibility of industries to study, that really appeals to me. And i suppose ‘equity research’ stands out just because it’s what a layman like me would first think about when you talk about ‘finance’ or ‘analyst’.
And thank you for the suggestions for underwriting and rating agencies too, I’ll definitely keep those in mind and learn more about these jobs.
In terms of qualifications, would it be very helpful for me to go for a Master’s in something finance related?
Passive management has grown from 25% of assets to roughly half in a decade and the industry has significantly consolidated through several waves with duplicate research eliminated on the buy side. On the ss it’s tight fees and regulation.
I misspoke. I should have said “relative demand for equity analysts.”
In Vol. 16, No. 1 (pp. 43-46), of ‘Financial Analysts Journal’ in 1960, Edward Renshaw and Paul Feldstein published a paper entitled “The Case for an Unmanaged Investment Company” (link: https://www.jstor.org/stable/4468964). The essence of their argument was that it was easier, less expensive, and less risky to mirror market returns than to try to exceed them. The result was what we know today as ‘index funds’.
Such funds make investing decisions based on the components and relative market weights of the companies whose stocks comprise a particular index. I don’t know exactly what the numbers are, but the dominance of index funds has surely reduced the relative demand for equity analysts. More about index funds is here: https://www.getrichslowly.org/history-of-index-funds/. Again, the key phrase is ‘relative demand’.
Well there are fewer roles. It is in decline both on an absolute and relative basis. This isn’t as complex as you’re trying to make it. The number of roles in the industry is falling. It was already a small industry and turnover at the top is not high, so what this translates even more into is fewer and fewer entry roles as well as a highly competitive pool and a lot of forced exits. I mean MiFid alone took 20% off of European research budgets year over year.
It’s an industry in decline on any metric.
Will it perpetually decline to zero? Probably not for a lot of reasons that don’t require a jstor article followed by a blog post, but it does create an uncomfortable dynamic. Its fair advice above to follow the growth when making career choices.
I’d personally go for a data science graduate degree. Those seem like really high ROI at the moment. Last I checked they can cost much less than business school with similar earnings post graduation. If you like data analysis and economics, that’s the route I’d go. Last I was job hunting a lot of the equity research job postings included data science type skills anyway. So I doubt it Harms you if you want to try to go that route
What about for some one who just recently managed the transition to equity research? Do you recommend trying to look for a role out of ER or stay for a few years and continue the path (ER/AM/HF) if you enjoy the role?
What do you want to do long term? There are still jobs and if you don’t expect to make what your bosses make, then they will still be well paid jobs. I left equity research largely because I was bored working for my analyst. If I had another analyst, I would have stayed. Hedge funds tend to like analysts who provide unique datasets and management access. I’d just focus on getting good at doing both of those. I definitely encourage everyone to learn how to do what they do in Excel in python even if you don’t learn any formal computer science concepts at the start. As the datasets and models change, being able to code is very valuable
Thanks, I would ideally like to do value investing long term which I assume would be LO AM funds. I am interested in fundamental analysis and less so on the quant side of things. It is disheartening to see a shrinking industry however, coupled with the need for quant skills - which i assume is a different type of investment strategy to what I am interested in. Am also happy with decent (not amazing) pay.
If you’re in ER then I say stay but realize your job is not entirely secure and build your resume for that risk with things like data capability etc that boost your employability. Basically if you’re in a declining industry don’t make the mistake of complacency.
You don’t need to do quant to use coding skills. Any of the math you do in excel (downloading financial statements, calculating ratios, comparing to peers, incorporating credit card sales datasets, etc) can be done in code (and this allows you to scale your efforts more efficiently) . But learning that will make you more resilient for job changes if they come up.
Someone in this thread mentioned rating agencies. The job has a lot of the same characterictics that could appeal to someone who likes equity research; quantitative analysis, macro, qualitative analysis, micro, industry specific knowledge , you get to argue your point and work with people who view the company from a different POV. Very interesting!
