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What Are the Major Differences Between the Different Financial Analyst Roles? - YouTube
Channel: Chris Haroun
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I'm gonna talk about ten differences
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between the following financial analyst roles.
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Now, I'll kick it off with the investment stage involvement.
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All the way on the left hand side
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you'll see that the venture capital analyst
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deals with companies very early in their life cycles
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and then the investment banker will help
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to take the underlying company public.
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Then the sell side analyst will launch coverage
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on that company and what that means is
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they will help to sell that company to buyers of that stock
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which includes the buy side which are mutual funds,
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as well as hedge funds.
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And then when the underlying company
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that's publicly traded now is quite large
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and the executives within that firm are very wealthy,
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then a private wealth analyst will approach them
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and try to manage their money and preserve their capital.
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And then lastly, we have the big company analyst.
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The bigger that companies get,
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the more that they need to hire people to help out,
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close the books, or do rudimentary accounting.
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And then, oh, looks like there's one more here.
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Wow, what is that? Is that a shark?
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So when a company gets too big and it dies
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or it should be taken out of circulation
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and restructured, then we have sharks
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and we refer to these people in the financial sector
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as private equity analyst or activist investors.
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And we don't know who this shark activist investor is,
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but it's a mystery what we'll find out later in the course.
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I hope you enjoy this.
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Alright, next up number two: Experience Needed.
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So at the left end of the spectrum
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we have the big company analyst.
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You don't need that much experience
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to work at a large company as an analyst.
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Okay, and that means a nonfinancial services firm.
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Next up we have the private wealth analyst
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and you just have to have good personality skills there
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because what you're trying to do
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is to get a lot of high net worth investors to let you
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and your team of private wealth analysts manage their money.
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I'll talk about that in a lot more detail later.
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Next up we have investment bankers.
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You don't really need to have that many skills to get hired
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except for how to understand very basic
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financial analytical skills and how to create models.
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Then we have the sell side analysts
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that require a little bit more experience
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because they're preparing financials
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and dealing with a lot of clients, meaning the buy side.
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And the buy side you can see there
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are the mutual fund analysts and hedge fund analysts
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and these people buy stocks
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and so you need a little bit more experience
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to be able to have a sophisticated investment mindset.
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And a hedge fund analysts role is a bit harder,
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and you need a little bit more experience than a mutual fund
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because you're not only betting on stocks that will go up,
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but you're betting on stocks that will go down.
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And then on the right end of the spectrum
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you've got the private equity or shark analyst
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that tears apart deals and restructures companies if needed,
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And then the venture capital analyst.
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In both of these roles you need a lot of experience,
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especially venture capital,
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where you might be sitting on a lot of boards.
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And so you need to have a lot of experience
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when you're giving entrepreneurs advice
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when you're sitting on boards,
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so you tend to do this later in your career.
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Number three we have stress.
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On the left hand side you can see the big company analyst
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has the least amount of stress.
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They also have a very long life cycle
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working at the respective companies they're at.
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Then we have the venture capital analyst
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which is long term as well in focus
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and so it's less stressful.
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And I've worked in venture capital,
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I've worked on the sell side,
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I've also worked in hedge fund industry,
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and I can tell you which ones are the least stressful
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and VC is not that stressful.
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Next up we have the sell side
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and the sell side gives advice, as we know, to the buy side
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but they don't buy stocks themselves
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so its not that stressful
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'cause they don't get investments wrong
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or lose money personally if they do.
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Then we have the private wealth analysts
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and I put the stress a little bit higher up here
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because in private wealth management
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you're dealing with a lot of abrasive sometimes,
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high net worth investors
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and that can get pretty stressful at times.
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Then we have the mutual fund analysts
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where it can be stressful around earning seasons,
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getting earnings right.
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And then we have the investment banker analyst
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that works a hundred hours a week
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and that's pretty darn stressful.
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Then we have the private equity analyst
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that works crazy long hours around deal time.
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And then the hedge fund analyst
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which is the most stressful
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of all financial services professions
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because of the very short investment time frame.
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And quite often, hedge fund analysts
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are wrong for the wrong reasons
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or they're what I like to refer to as fooled by randomness,
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Which is unfortunate.
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And then politics.
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Private wealth analysts have the least amount of politics
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because they can pick up and go.
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They can take their whole teams
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and leave the bank they're working at
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and go to another bank if they want to.
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So it's less political.
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Similarly, venture capital firms are not that political
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because there's only a couple of partners at each firm.
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They're very small personnel-wise.
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The same can be said for private equity shops.
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Hedge funds are a little bit political,
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maybe not as much as mutual funds
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because hedge funds are a lot smaller.
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And then we have sell side.
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Sell side is a bit more bureacratic
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'cause there are just a ton of employees there.
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And then the big company analyst
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sees a lot of politics as well
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because it's, well, a big company
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just like governments are political.
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And then lastly, we have the investment banking analyst
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where it gets very political
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because there's a lot of compliance rules
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and you can get into trouble easily
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and break the law easily.
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Number 5 we have: Are you being micromanaged?
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Which is the worst.
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On the left hand side we have private wealth analysts.
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They're not micromanaged because, heck,
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they work in small teams.
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The same can be said for venture capital analysts
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where they are lone wolves.
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They're not really micromanaged at all.
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Same can be said for private equity analysts.
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And then in the middle there we've got hedge fund analysts
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that can be micromanaged by their portfolio manager,
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but not as often.
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They're on their own a lot.
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Mutual funds are a little bit more micromanaged,
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Although it is debatable, than hedge funds.
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And then we have the sell side
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where you are a bit more micromanaged by compliance,
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as well as your chief information officer or CIO.
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And then we have the big company analyst
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who gets micromanaged all the time
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because they work for a big company
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and then the investment banking analysts
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who get told silly little things like: move that bubble over
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on your PowerPoint slide one millimeter or
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change the font on this Excel spreadsheet.
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You get micromanaged a lot there.
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Travel.
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The big company analyst doesn't travel very much.
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The private wealth management analyst
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doesn't travel much either
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because she or he tends to cover a territory
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close to where they live.
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Usually your territory is the state you live in.
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The venture capital analysts usually invest in companies
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that are close to home,
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especially here in the San Francisco Bay area.
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And then we have the investment banker analyst
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who has to travel around deal time.
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And the same thing with the private equity analysts
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and the hedge fund analysts.
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They invest in companies all over the world,
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so they travel a lot.
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Same can be said for the mutual fund analyst
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and the sell side analyst who holds
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conferences for the buy side,
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usually out of town at really cool places
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that are a lot of fun.
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Number seven: How Much Can You Learn?
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Unfortunately, the big company analyst
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doesn't really learn that much.
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Except for how to navigate politics
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in the firm they work for.
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Next up we have the private wealth analyst
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who doesn't learn too much either
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because they're focused more on relationship management
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than they are on portfolio management.
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And then we have the sell side analyst
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that has a very repetitive job.
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And again I'll explain what that means later.
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Then we have the private equity analyst
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who actually learns a bunch.
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Same can be said for the investment banking analyst.
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You learn a lot when you work on origination
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or the creation of deals.
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It's pretty exciting.
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Venture capital you're creating industries
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or you're investing in people that are creating industries.
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It is fascinating, you learn a ton.
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Mutual fund analysts are actually very fortunate
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'cause they get to meet with the top CEOs in the world
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and learn from them because they invest in those companies.
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And the same can be said for hedge fund analysts.
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Now in terms of the number of hours,
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all the way on the left hand side,
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you can have a great quality of life
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working at a big company as an analyst,
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although it can be boring as well.
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Then you've got private wealth management
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where the hours are pretty good,
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but sometimes it's hard when you're going out
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and gripping and grinning with new clients,
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having dinner with them, et cetera.
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Then venture capital the hours are not that long.
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Same can be said for private equity.
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But in both of those respective roles
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if you're working on a deal,
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then the number of hours can be very long
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for a short period of time.
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Deal time's stressful as well.
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And then we've got the mutual fund analyst
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that works very long hours only
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four times a year around earning season.
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Same can be said with the hedge fund analyst
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and the sell side analyst that works very long hours
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around earning season and non-earning seasons
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because they're traveling a lot,
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meeting with tons of clients.
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And then the investment banker analyst
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works a hundred hours a week almost all the time,
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which is unfortunate.
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Let's move on to marketable skills.
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The big company analyst doesn't really have
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that many marketable skills.
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All they've really learned
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is how to navigate politics at their firm.
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The same can be said with the private wealth analyst.
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There's not that many marketable skills.
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But what I will say is that in private wealth management,
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as in all industries, relationships are often more important
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than product knowledge.
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It's a cliche.
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It's not what you know but whom you know.
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Then you have the hedge fund industry
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where you don't have that many marketable skills
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because if you get fired a couple times
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which happens to a lot of analysts,
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then you're no longer marketable.
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Now the private equity analyst
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is a little bit more marketable
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because you're doing very sophisticated financial analysis
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and restructuring.
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Mutual fund analysts and venture capital analysts
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are a longterm focus,
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which is always more of a marketable skillset.
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And the sell side analyst is usually very affable.
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They can present incredibly well.
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They understand finance,
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they understand qualitative and quantitative topics,
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and they're marketable and quite often,
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some of the best sell side analysts
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become CFOs or CEOs in companies.
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It happens out here a lot in the San Francisco Bay area.
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And then lastly, the investment banking analyst
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is incredibly marketable
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because she or he works on origination,
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or they create financial products
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and so it's easy for them to get a job selling
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or marketing financial products as well.
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Or trading them for that matter.
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Lastly we have teamwork.
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On the left hand side here,
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we have the venture capital analyst who is a lone wolf.
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The same thing with private equity analysts.
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They work on their own.
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They try to get deals or source deals,
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especially the more senior they get.
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And then we have the hedge fund analyst
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who is out of town a lot trying to understand companies.
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Same can be said for the mutual fund analyst,
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but there's a lot more teamwork
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when it comes to investment banking
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where you're working together hard on deals always.
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The sell side role is much more team oriented
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than other roles within an investment bank
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because they partner with, sometimes,
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investment bankers called equity capital analysts,
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which I'll explain later,
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as well as salespeople and other people at investment banks.
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Then we have the big company analyst
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who does a lot of teamwork because it's a big company.
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And then lastly, private wealth management.
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They tend to work together in their teams
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and again they can pick up and leave
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and quit as a team as well.
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