A research analyst is a specialist who conducts thorough investigative reports on securities or assets for the benefit of in-house or client use. Often known by titles such as securities analyst, investment analyst, equity analyst, or rating analyst, a research analyst delves into the nuances of financial instruments, gathering critical data and presenting actionable insights.
The intricate work of a research analyst involves delving into, studying, uncovering, and sometimes re-evaluating facts, principles, and theories. This is done to provide valuable information either for a financial institution’s internal operations or for external financial clients. The reports that an analyst creates usually include an examination of public securities records of companies or industries, often culminating in recommendations like “buy,” “sell,” or “hold.”
When a research analyst is affiliated with an investment bank or a securities firm governed by self-regulatory organizations, like the Financial Industry Regulatory Authority (FINRA), additional steps such as registration or exams might be mandatory.
Key Insights
- A research analyst performs extensive investigative work on securities or assets aimed at providing valuable insights for either in-house or client consumption.
- Reports generated by research analysts scrutinize public securities records of companies or industries and typically include buy, sell, or hold recommendations.
- A fundamental difference between buy-side and sell-side analysts lies in their places of employment and the audiences receiving their recommendations.
The Essence of Being a Research Analyst
In the realm of research analysts, there are two main categories: “buy-side” and “sell-side” analysts. A buy-side analyst typically works for an asset management company and suggests investment securities to the fund’s money managers. Sell-side analysts operate differently, usually offering their research for sale to buy-side analysts or providing it to clients for free to entice business opportunities.
Distinctions Between Buy-Side and Sell-Side Analysts
- Buy-Side Analysts: Commonly employed by institutional investors like hedge funds, pension funds, or mutual funds, buy-side analysts are believed to be more advanced, scholarly, and trustworthy compared to their sell-side peers.
- Sell-Side Analysts: Often considered akin to marketing specialists, sell-side analysts’ roles involve providing stark investment recommendations such as “strong buy,” “outperform,” “neutral,” or “sell.” Sell-side positions frequently offer higher remuneration due to their impactful roles.
Research Analyst Qualifications
The preparation for a career as a research analyst may necessitate a master’s degree in finance or achieving the Chartered Financial Analyst (CFA) designation. Regulatory requirements might also compel analysts to sit for specific exams like the Series 86/87. Essential licenses often include the Series 7 General Securities Representative License and the Series 63 Uniform Securities Agent License.
Comparing Financial Analysts and Research Analysts
Financial firms generally lack a unified definition for financial analysts and research analysts, creating a hazy distinction between the two. Typically, financial analysts focus on evaluating investments and tracking market performance based on economic principles. Conversely, research analysts emphasize creating mathematical models to provide objective insights on historical data.
Prerequisites for Becoming a Research Analyst
Aspiring research analysts should have strong mathematics and statistics skills, a bachelor’s degree in a business-related field, and possibly a master’s degree in finance or CFA certification. Depending on the specific job requirements, obtaining securities licenses might also be necessary.
Understanding Research Analyst Salaries
As of 2024, the average base salary for a research analyst hovers around $90,838, with a range spanning from $68,000 to $125,000.
Is Research Analyst a Stressful Profession?
Absolutely. The fast-paced nature of the role, constant learning and problem-solving, and the necessity for robust communication skills can generate pressure and lead to stress due to tight deadlines and high expectations.
Conclusion
A research analyst’s role is indispensable in the financial sector, analyzing and interpreting securities data to make educated recommendations. These professionals can work as either buy-side or sell-side analysts, fetching substantial salaries and needing considerable educational qualifications. Becoming a research analyst calls for a convergence of analytical prowess, critical thinking, and robust financial acumen.
Related Terms: investment banking, asset management, insightful reports, market trends, financial institutions.
References
- FINRA. “FINRA Rules: 1220. Registration Categories”.
- Corporate Finance Institute. “What’s the Difference between the Buy Side vs Sell Side?”
- Glassdoor. “Research Analyst Salaries”.
- FINRA. “Qualification Exams”.
- CFA Institute. “CFA Program”.
