Research analysts see a future in boutiques

Gloom about prospects at large banks has deepened with the expectation that Schroder Salomon Smith Barney plans to axe up to 20% of its equity research team in Europe in the next few weeks.

Martin Lorigan, a consultant at the London recruitment firm Shepherd Little Asset Management, says the smell of fear is now strong and many people are keen to get out before they are pushed.

Lorigan says he received a pile of CVs six inches high within a few days of placing an advertisement for equity researchers to work in a niche research boutique.

'I have been overwhelmed by responses from equity researchers who have been made redundant, or who think they're about to be made redundant,' he says. 'Three years ago there was no way that I could have got anyone to move from the research department of a bulge bracket investment bank.

'The worm has turned: small organisations are suddenly very attractive.'

Independent research boutiques look set to be the beneficiaries of US legal action accusing large banks of producing less than objective research. In future the banks might fund research by small, independent firms.

If this happens, equity researchers within investment banks could prove suddenly superfluous.

Pay at boutiques in London often compares favourably with investment banks, says Lorigan, especially at those that provide research for hedge funds..

'Boutiques are paying market-level basic salaries. Juniors will receive 40,000 basic, plus a bonus; associates with three years' experience will receive 60,000-65,000 basic, plus a bonus; seniors will get around 85,000 basic, plus a bonus,' he says.

Because performance is simple to assess by comparing forecasts to reality, Lorigan says bonuses can be generous for those who are successful.

Not all small firms pay quite so well. Equity Growth Research, an independent boutique set up in 2000, offers research services to corporate mid-cap clients trying to raise funds. The business model appears less lucrative; pay is lower accordingly.

Fraser Thorne, managing director of Equity Growth Research, says researchers are typically paid 30,000 on a pro-rata basis. Many of its staff are former top-ranked equity analysts employed on a freelance basis, he says.

Many are women who retired from the City when they had their first child. The firm says it is currently recruiting.

Thorne says: 'If you want to earn big bucks, you will have to stick with the big firms. We offer our staff a lifestyle change.'

Btu such vacancies are too few to mop up the hundreds of equity research staff currently employed at investment banks, headhunters say. Other options include working as a researcher for asset management firms, or private equity funds.

Petra Rickmeyer at search firm Hoggett Bowers says asset managers are recruiting junior research staff with a couple of years' experience. Base pay is typically only 80% that at sellside institutions and bonuses have traditionally been substantially lower.

However, Rickmeyer says the buyside offers researchers a more stable career.

Some areas of sellside research may hold more promise than others.

One is European utilities research. Jürgen Merkel at MB Consulting in Frankfurt says utilities hiring there remains relatively strong. Thomas Nalder, a recruiter at Finance Professionals in London, says banks in London may also be hiring utilities researchers during 2003.

Nalder says there is demand for candidates with between 2 and 10 years' experience of utilities research in Germany, France or Iberia. Basic pay is likely to be between 70,000 and 90,000.

Bonuses are likely to be modest. But with many research positions looking tenuous, who is complaining?