How much am I worth? European equity analyst, international City-based firm
A panel of specialist headhunters give their assessment of typical London pay packages: European equity analyst, international London-based bank: total compensation - 60,000 - 150,000
Few financial careers can have undergone such a roller-coaster ride as the equity analyst. Around 10 years ago they were the unknown face of the City of London, beavering away on reports that few read but which 'added value' and were seized upon by salesmen.
This all changed in the late 1990s bull market, as many followed star analysts Henry Blodget and Mary Meeker in the US to become - if not household names - respected and highly well-paid figures whose words of wisdom were keenly anticipated by those who hoped the IT boom would last forever. And today?
'As well as being investigated, perhaps sued, and generally pilloried by the angry investor, the average analyst also writes reports that contain 300 pages, of which the final 275 are a disclaimer filled with legal jargon that needs another analyst to translate it,' says Shaun Springer of Napier Scott.
Though European equity analysts have had an easier time of it than their US colleagues, the fall from grace for equity analysts generally has been reflected in the numbers employed by financial institutions, which have dropped dramatically.
Most bulge bracket banks cut equity research staff in Europe by 20%-25% last year, industry experts believe. ABN Amro closed nine of its 12 offices for European equity research, to focus on the UK, the Netherlands and the Nordic countries.
It would be no exaggeration to say that if a bank is making job cuts, equity analysts are among the first out. Most organisations see their analysts if not as a potential liability then as an extra and unnecessary cost.
The result: a dramatic slide in job security and salary, though those with a good track record can still expect reasonable compensation. A basic salary of 60,000-80,000 for someone with five years experience is not unusual, though some senior analysts are still managing to secure a basic of 120,000-150,000, according to Simon Vaughan-Edwards of Alexander Mann Global Markets.
Bonuses are - not surprisingly - thin on the ground. As long as equity markets remain weak they are likely to stay that way.
'Bonuses will be a percentage rather than a multiple of salary. However there are still some individuals attracting million dollar packages based on the revenue generated in their sector, corporate relationships and personal profile,' says Vaughan-Edwards.
Yet for every success story there seem to be many more analysts with rather more pessimistic prospects.
'How much an equity analyst is worth is dependant on how much is his or her work worth and who wants it. Frankly, not that many outside of the institution that publishes it,' argues Springer. He says more job cuts are likely in 2003, which will obviously impact on salaries in the short to medium term.
What is clear is that analysts who look at the old, real economy are in better shape than those who look at the high-tech sector - in other words, European financials, capital goods, the retail sector, pharmaceuticals and oil and gas are the sectors to be involved with.
However with financial regulators and clients growing more concerned at possible conflicts of interest, the writing seems to be on the wall for the old-style analyst working within a bank (and often on the same desk as the sales team).
The best-placed equity research analyst would appear to be one who works for an independent research company, rather than an integrated financial institution, where there can be no questions of impropriety.
With costs under scrutiny banks currently seems reluctant to use such services, but most observers believe that when the market starts to turn that will change.
'Growth in independent research...will eventually soak up and indeed seek new blood over the coming years,' says AMGM's Vaughan-Edwards.
Figures and commentary provided by Napier Scott Group and Alexander Mann Global Markets.
