Finding a research job on Wall Street nowadays is no walk in the park.
Falling commission rates have slimmed Street's research coverage, while Eliot Spitzer's crusade against sell-side conflicts resulted in the Global Research Settlement, creating a an even playing field in the form of Regulation Fair Disclosure (more popularly known as "Reg FD") and competition from independent firms. As a result, the research business is consolidating and cutting costs. In the past 18 months Morgan Stanley and Deutsche Bank merged their equity and debt research divisions while Merrill Lynch eliminated investment grade credit research.
Simply put, there are fewer jobs in research than there were in 2000. Back then, a healthy stream of IPOs produced a stream of 10Ks and 10Qs that needed combing by Wall Street analysts. But while job growth in the sector is tepid, the industry isn't on its deathbed either. There's reason for optimism, believes Richard Lipstein, managing director at Boyden Gobal Executive Search in New York. In fact, he says research may be healthier today than it's been in the last four or five years.
That's not necessarily turning into a spate of hiring, however. "The business has changed. Firms are trying the drive down costs," Lipstein observes. Analysts on the sell side at banks like Merrill Lynch, JPMorgan and Lehman Brothers are staying put, leaving few vacancies for senior roles. With cost controls all but eliminating mid-level analysts, junior positions represent most of the new hires.
Pockets of Growth
However, pockets of growth do exist. UBS has developed a new research product, building a private wealth management research department of 120 analysts who provide global financial data to private investors. A research executive says Piper Jaffray and Bank of America, which is expanding across the board, are both on the prowl for research professionals.
While the sell side tightens its belt, the buy side is experiencing some buildup, specifically among long-only hedge funds, investment advisers and other asset managers. In October, for example, Fidelity Investments announced plans to invest $100 million in equity research. The company hopes to double its number of analysts evaluating U.S. stocks.
Consolidation among asset managers still looms as a dark cloud over any potential job growth. One reason is the recently announced merger of the Bank of New York and Mellon Financial, which has left smaller asset managers playing catch up.
Rating agencies have also entered the fray, fueled in large part by the explosive growth of structured products. Fitch Ratings, for example, recently launched Derivatives Fitch, a tool for analyzing the credit stability and market risk that characterize structured credit products. The company has previously said growth in its structured products business would increase by 30 percent or more this year. Deborah Seife, managing director at Fitch, said the company is adding research and analytical staff.
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