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Equity Research vs Investment Banking: Which Job Profile to Choose after MBA in Finance?

Education

Investment Banking and Equity Research are the two lucrative job profiles after an MBA or a PGDM program for a career in the field of finance management. While both careers offer excellent work experience and competitive pay, the decision-maker becomes the skill sets and personality. That's why it's important to understand the key differences to make an informed decision about your career

In this detailed blog, we will understand in-detail about equity research as well as investment banking domains as finance career options. We will also check out the major differences between the two job profiles based on 10 vital factors like job functions, career opportunities, and salary prospects. So, let’s dive right in!

What does an Equity Research Analyst do?

Broadly speaking, equity research analysts’ primary responsibility is to analyze stocks to make informed investment-related decisions. They write and publish detailed reports suggesting to investors whether they should buy, sell, or hold stock to maximize their profit gains. MBA or PGDM finance graduates are best suited to make a successful career in the field of the equity market.

The key roles and responsibilities of an Equity Research Professional are:

Building financial models
Conducting in-depth industry research
Preparing research reports (Initiating coverage, quarterly results, news updates, recommendation changes, etc.)
Communicating investment strategies to respective clients

What do Investment Bankers do?

Generally, investment bankers advise their clients on ways to raise capital and underwriting for capital raising, IPOs, etc. In addition, they help clients with deals like mergers and acquisitions, corporate finance, and general advisory mandates. MBA graduates from top MBA colleges in finance possess the requisite skills and expertise to carve a career path in investment banking in India as well as foreign countries.

The key roles and responsibilities of an investment banking professional are:

Building financial models
Crafting pitchbooks and presentations
Performing ad hoc requests for financial analysis
Creating documents for transactions (Prospectus, Confidential Information Memorandum, Teaser, Letter of Intent, etc.)

Both profiles are highly popular among students opting for finance placements from top MBA colleges in India. Now, that you have a general idea about both the profiles, let's dig deeper to understand the key differences between Equity Research Analysts and Investment Bankers.

Key Differences: Equity Research vs Investment Banking

Job Functions
Investment bankers enjoy a wide array of functions over the long term. Beginning with financial modeling, comparative analysis, and preparing pitchbooks; investment bankers make progress in working on high-profile deals such as mergers and acquisitions and IPOs.

In sharp contrast, equity research associates start their careers with financial modeling and analysis. They also work closely with senior analysts, covering specific sectors or companies. Additionally, they also create financial forecasts and assist with the company’s IPO, working on stock valuation, capitalization, and more.
Education and Designations
At the graduation level, both equity research analysts and investment banking associates study bachelor's degrees with common subjects like economics, accounting, finance, mathematics, or even analytical fields.

However, the difference lies in postgraduation. Most often, investment bankers pursue an MBA course as it matches the needs of the investment banking profession. That said, one must do an MBA from the top MBA colleges in India to develop a strong foundation. For those eyeing a degree in MBA, PIBM’s MBA in Finance provides training on investment banking to help you develop the skills to ace the investment banking market.

Equity researchers commonly pursue a CFA, considered the gold standard for security analysis. Moreover, MBA graduates who pursue CFA, get into high-paying equity research careers. You can pursue PIBM’s CFA training that not only trains you for the CFA exams but also offers you MBA proficiency.
Skill Sets
Early in their careers, both investment bankers and research analysts engage in financial modeling and in-depth analysis. As they progress, the skills diverge. With an MBA background, investment bankers must be proficient in leadership, communication, analytics, and excellence to close deals. In contrast, research analysts require effective verbal and written communication skills, balanced decision-making, and a knack for rigorous financial analysis and due diligence.
Career Advancement
Both investment bankers and equity researchers have promising career prospects to establish themselves in the finance field and climb up the ladder of success. An investment banker's career trajectory begins with analyst positions lasting for 2-3 years, followed by associate roles for another 2-3 years. Subsequently, individuals are in line to become vice presidents and, ultimately, directors or managing directors.

In equity research, the career path begins with an associate role, followed by senior analysts, and finally vice president or director of research. To speed up the career trajectory, an MBA finance degree is a smart choice. Pursuing an MBA from a top MBA college in finance can be highly beneficial for the career growth of a researcher.
Visibility
Talking about visibility at the work front, in the field of equity research, there is more visibility from junior profiles like associates and junior analysts. Their research reports are distributed to the sales force, clients, and media outlets-providing better visibility.

On the other hand, junior-level investment bankers work very hard. As they gain experience, their visibility increases and consequently they climb up the ladder in their career roles and work on large-scale deals.
External Opportunities
There are a plethora of external opportunities available for both equity research and investment banking. That is because both profiles offer exceptional experience, knowledge, and skills. The research analysts are more inclined to transition to buy-side roles, like money managers, hedge funds, or pension funds. Due to their deal-making expertise, investment bankers usually join private equity or venture capital firms.
Barriers to Entry
Both fields have their share of challenges for entry into the finance industry. We compared, equity research may have slightly lower barriers.
Equity professionals with years of experience in a certain field frequently work as senior analysts or stock analysts at sell-side firms. This transition is less common in investment banking.
Salary
Broadly speaking, both finance job profiles offer lucrative salaries, but investment bankers generally get a bit better compensation over time. The average salary of an investment banker analyst is ₹8,33713 in India, while that of an equity research analyst is ₹7,50,000 per year in India. Both the salaries may double as you grow in your career and pursue master courses like MBA or PGDM.
Work-Life Balance
Comparing the two for work-life balance, equity research wins the game by just a small margin. On average, the work of equity research analysts might demand 12-hour workdays sometimes, investment bankers may require strenuous 14-hour workdays or more on some days. While burnout is a common issue in investment banking, there are relative phases of calm in equity research careers.
Software Expertise
Conforming to the standards of the tech-driven world, both investment bankers, as well as equity researchers, rely on numerous software to carry out their work with greater efficiency. Investment bankers usually use tools like Excel, Word, Adobe Acrobat, Firmroom, Pitchbook, slack, etc to improve collaboration and increase productivity. On the other hand, equity researchers are required to be more proficient at AlphaSense, YCharts, Greta, S&P Capital IQ Pro, and more!

Conclusion

Choosing between a career in equity research vs investment banking is entirely based on your personality, skills, and career aspirations. A lot of factors come into play here. If we look at factors like work-life balance, visibility, and barriers to entry, equity research is a better option for you. On the flip side, factors like career advancements, high compensation, and job functions favor investment banking careers.

In the end, it's all upon you and your career aspirations, with an equal say on your education, skillset, and ability to manage work pressures and conflict. Consider your strengths and weaknesses to make an informed career choice.

FAQs

What is Equity Research?

Equity research holds the roles and responsibilities of analyzing stocks. They also make recommendations to investors to buy, hold, or sell equities for better profits.

What is Investment Banking?

Investment banking is a special division of banks that deals with clients and companies. It helps them to raise capital and offer financial consulting services, which involves deals like mergers and acquisitions, IPOs, etc.

Can you go from equity research to investment banking?

Yes, you can do it. Both investment banking and equity research have many common skills like financial modeling, communication, and analytics. So, you can make a career shift from equity research to investment banking.

Does investment banking require research?

Yes, investment bankers research financial data, company history, and more as they have to execute the best deals possible for their clients and companies.

Which is better: equity research vs investment banking?

Both equity research and investment banking are excellent career choices in the finance domain. While investment bankers earn higher salaries and better career prospects, equity researchers enjoy better work-life balance, visibility, and fewer entry-level barriers.