Posted By: Kaplan Schweser
Updated: August 6, 2020
While the research analyst job title is frequently seen in the investment field, the job duties for a research analyst can vary considerably. One key area of variance is whether the position is on the sell side or the buy side of the industry. While both types of positions involve spending time researching companies and industries, the types of research conducted and advancement path is different. Read on to get a better understanding of buy side vs sell side and the career paths available in each.
Buy side research analysts work for firms that purchase securities and other assets for the purposes of managing money.Sell side analysts sell stocks, bonds, foreign exchange, and other financial products. That’s the very basic difference. But the differences go deeper when you take a look at the day-to-day work and responsibilities of buy side and sell side analysts.
Sell-side workers and firms create service products that are made available to the buy side of the financial industry. Individuals on the sell side are generally investment bankers, sell-side researchers, or traders.
Sell-side research analysts do a great deal of in-depth research on companies within a specific sector of an industry. A key difference between sell side and buy side is that sell-side individuals go into a lot more depth in their research on a particular sector of an industry. They are narrow in focus and develop strong expertise, and then they provide reports to the public with recommendations and opinions. Buy-side research analysts often develop a list of go-to sell-side analysts in relevant sectors to get reliable reports and information.
Buy-side individuals work for institutions that buy investment services. Typical buy-side entities include private equity, life insurance, trusts, hedge funds, prop trading, venture capital, or pension funds.
Buy-side research analysts do many of the same tasks as sell-side research analysts (e.g., reading news, reports, building models, etc.), but they focus on a broader knowledge area of responsibility to make the best recommendations possible for what stocks and financial products to buy. Buy-side research analysts are compensated more for the quality of recommendations they make, whereas sell-side research analysts are paid more for the quality of information they provide.
Both buy-side and sell-side careers can be lucrative, prestigious, and rewarding. The right path for you depends entirely on what is most important to you in a finance job.
These do not vary considerably at the beginning of a career between the buy side and the sell side, but they do begin to vary significantly more as individuals move up in the ranks. On the sell side, the job functions remain focused heavily on financial modeling and analysis, but also incorporate report and investment opinion writing. Buy-side jobs, in contrast, vary widely as individuals move up. Investment bankers, for example, get more opportunities to work on mergers and acquisitions and other deals.
If this is something that is important to you, a sell-side career may be a better fit. While both sides require hard work and long hours at times, a sell-side career has more phases of calm. Burnout is a common reason that individuals on the buy side leave the industry, but this is considerably less common on the sell side.
There is more potential opportunity for recognition at the beginning of your career on the sell side than the buy side. Getting your name on research reports can help you build a strong name for yourself because they are often publicly distributed to clients and media outlets. As you become more senior on the sell side, you may become a go-to expert in your niche for the media.
On the buy side, there is generally little opportunity for recognition at the beginning stages of your career. However, as you climb the ladder in your firm, there is opportunity to receive visibility later, particularly if you work on large, newsworthy deals.
There are opportunities for advancement in both buy-side and sell-side jobs. However, buy-side jobs generally have a clearer path with timeframes. On the buy side, the path often goes analyst (2 to 3 years), associate (3+ years), director or managing director, or VP.
The sell-side career path generally goes associate, analyst, senior analyst, and VP or research director. The timeline and path is less defined on the sell side, however. It can be more difficult to move up in these analyst roles because they are not making deals with clients and managing relationships like individuals on the buy side do.
There are perks and downsides to both buy-side and sell-side jobs in the financial industry. Now that you have an idea of what each side is about, learn more about the steps to becoming a research analyst.