I don't want to boast but I work on the buy-side as an analyst in a hedge fund. If you work on the sell-side, you have my commiserations. You're missing out.
They say the grass is greener on the other side. This is true of the buy side vs. the sell side. The grass isn't really green on the buy side, but because the sell side has become dirt patch and a bunch of weeds, it pretty much looks that way by comparison.
As anyone who's managed to escape the sell-side will attest to, the buy-side is so much better is so very many ways. Most particularly it offers...
Pay for performance
When you work on the buy-side, it's very simple. If you can make money, you'll do well. If you do well, you will get paid.
If you can't make money, you'll have a short career.
On the sell-side, it's very different. When you're a sell-side analyst you're in more of a marketing role. To get paid on the sell side, you need broker votes. Broker votes can come from good analysis, but they also come from having good relationships with buy-side analysts and management teams. Therefore, if you're great at networking, being an analyst on the sell-side is perfect for you.
If you just want to make money in the markets, the buy-side is where you want to be.
An escape from MiFID II
Despite claims to the contrary, MiFID II is really hurting the sell-side. Because everything is now billed, from every research note to every call with analysts, buy-side analysts are consuming fewer resources. This means it's getting harder to make money on the sell-side. No one wants your output any more.
An opportunity to set my own schedule
I came from the sell-side. I've been there. When you work on the sell-side, your schedule is at the mercy of others. If one of the companies you cover is hosting an investor day or sales wants you to market, you need to get out there, whether you like it or not.
On the buy-side, nobody cares. As long as I make money I do what I want. If I don't attend an event, I get the summary from an analyst. I get to enjoy the summer: if I want I can leave early. You get to work 12 hour days and travel for work. I'm so sorry.
When you're making money on the buy-side, there's a lot you can get away with. I'm still trying to figure out how much I need to make before I can come into work wearing sweat pants.
The chance to do rather than just advise
Superficially, buy-side and sell-side analyst jobs have their similarities. In both, you follow companies. In both, you make investment recommendations.
They're actually very different.
On the buy-side, you make buy and sell decisions, with the intent to make money. On the sell-side, your job is to only provide advice and information.
Sell-side analyst are like caddies. They give you some color and provide advice, but at the end of the day, they're not pulling the trigger. Being a caddy can be rewarding and fulfilling job, but I doubt anybody sees that as the end goal.
Or if they do, they're missing out.
Margin of Saving was created by an analyst at a multi-billion dollar hedge fund to help others learn how to invest and save.
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