What are Research Analysts?
Within the investment industry, there are two primary research analyst roles: Credit Analyst and Equity Analyst. The focus of both roles is to collect data about investable companies, analyze the material, and build earnings models to conduct valuations culminating in recommendations to Portfolio Managers and/or clients via evaluation reports and presentations. Credit Analysts focus on analyzing bonds and default risk, while equity analysts assess investment performance or management performance.
What does a Research Analyst do?
Both credit and equity analysis are also relevant for Financial Analysts. Financial Analysts and Research Analysts are different, because Research Analysts tend to be involved in a broader, more investigative data collection and interpretation process, while Financial Analysts are more likely to make investing recommendations using the data they analyze.
Types of Research Analyst jobs
Research analyst roles are typically broken into two camps:
- Buy-side research roles
- Sell-side research roles
Focus areas can include fixed income, equities, hedge funds, quantitative investing, multi-asset investing, real estate, private equity, and more. Analytical roles vary significantly based on the area of focus and the organization. For example, sell-side equity analysts cover fewer stocks than buy-side analysts do, but sell-side analysts cover their stocks in far more depth.
How to become a Research Analyst
Research analysis is essential to the investment process. Professionals who have advanced research skills, such as extensive knowledge of fundamental analysis, can pursue opportunities in all sectors of the investment industry. Research Analyst roles are one of the most common types of entry positions for professionals at the beginning of their investment careers, but the research function includes many positions with more seniority and a higher level of responsibility, such as Managing Director or Investment Strategist.
Historically, a conventional role as an Equity Analyst or Fixed-income Analyst was the typical starting point for an investment career. Today, however, professionals with research skills have diverse opportunities. In addition to the traditional analyst roles, research and analyst positions can be found in all types of investment industries and organizations, including:
- Portfolio construction
- Investment strategy
- Private wealth
- Investment banking
- Commercial banking
- Hedge funds
- Corporate finance
- Data science
- Quantitative investing
- Regulatory entities or standard setters
- And practically every other type of organization in the investment industry
If you are looking for a position with a firm controlled by a member organization of FINRA (Financial Industry Regulatory Authority), you may need to take additional exams. Applicants who have passed the CFA® Level I and Level II exams are eligible for exemption from Part I (Series 86), the Analysis section, of the Research Analyst Qualification Exam.
Is Research Analysis right for me?
If you have analytical skills and enjoy developing investment decision ideas, undertaking detailed analysis, applying your programming or modeling skills, and using your critical judgment to perform valuations and make stock calls based on market conditions, this type of role may suit you. Professional business and interpersonal skills, such as communication and report writing, are also critical for this role. You will need to make sure your views are heard, and your report is read.
Key skills
The following are the key skills and competencies needed for success as a research analyst and in other analytical roles:
Data analysis
Industry and company analysis
Financial analysis
Financial modeling
Valuation
Qualifications
Organizations typically look for research analysts with a Bachelor’s degree with coursework in finance, business administration, economics, accounting, data science, or related fields. Continuing education, such as pursuing a CFA credential, can help you stand out in the job field by demonstrating a deep understanding of the investment management industry.
Typical Research Analyst salary
A 2019 CFA® Institute compensation study* of charterholders and members found that Research Analysts reported a typical, global total compensation of US$140,000 (US$100,000 base salary).
Other possible career tracks in analysis
The investment management process includes many different types of analytical roles. Focus areas include macroeconomic analysis, valuation, analyzing relevant data, implementing relevant algorithms, and analyzing and attributing investment performance. Other financial analyst roles include:
- Data Scientist
- Economist
- Investment Strategist
- Financial Analysts
- Securities Analysts
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