Equity research: Career path and qualifications

Equity research analysts work for both buy-side and sell-side firms in the securities industry. They produce research reports, projections and recommendations concerning companies and stocks. Typically, an equity analyst specializes in a small group of companies in a particular industry or country to develop the high-level expertise necessary to produce accurate projections and recommendations.

These analysts monitor market data and news reports and speak to contacts in the companies and industries they study to update their research on a daily basis.

In a buy-side firm – such as a wealth management firm, a pension fund or a hedge fund – an equity research analyst typically supplies information and recommendations to the firm's own investment managers, who oversee client investment portfolios and make final decisions about what securities to hold. In a sell-side firm, such as a brokerage or a bank, an equity research analyst typically produces reports and recommendations for the firm's sales agents. The agents then go on to use the information to sell investments to their clients and the general public.

Most equity research analysts begin in entry-level research associate positions after completing bachelor's degree programs. Research associates work under the direction of a senior equity research analyst creating financial models and conducting research. New hires may work with a variety of analysts over the course of months as a general introduction to the job.

Most research associates are eventually assigned to a single working group covering a small group of firms. With more experience and good performance, associates can move directly into analyst positions, taking more active roles in the research process.

Analysts generally spend less time on financial modeling and more time writing reports and developing recommendations. After several years working in junior positions, some analysts return to school to earn master's degrees. High-performing analysts may continue into more senior research roles without returning to school. A senior equity research analyst who has a high degree of expertise in his or her specialty area can move into an investment management role overseeing a research team and an investment portfolio.

A portfolio manager is responsible for using the information supplied by equity research analysts and other staff to manage the mix of securities in a portfolio on a daily basis.

To work in equity research, a candidate must have a bachelor's degree, preferably in a relevant business discipline such as finance, accounting, economics or business administration. Undergraduate degrees that provide in-depth quantitative training are also good options, including degrees in mathematics, statistics, engineering and physics. However, non-business majors should consider taking some courses in finance and other business disciplines.

A master's degree is not required to advance into senior analyst positions. However, a master's degree in business administration or finance can help pave the way for career advancement, especially advancement into portfolio and fund management positions. 

The preeminent professional qualification for equity research analysts and others working in securities research is the Chartered Financial Analyst (CFA) designation, which is awarded by the CFA Institute. This designation requires candidates to have a minimum of four full years of qualifying experience. Consequently, it is generally considered a qualification for advancement into more senior positions in the field. The designation requires candidates to pass a series of three examinations.

Many equity research analysts require a license from the Financial Industry Regulatory Authority (FINRA), a national body charged with oversight of securities firms and brokers. The licensing process typically requires sponsorship from an employing firm, so most analysts complete license requirements only after hiring is complete.