Equity Research Analyst Survey – Five Key Constraints to Productivity

Denny Ellison has published a report following a survey of sell side equity analysts, mainly in the UK.

Key findings show the importance of additional support from line managers, best practice examples, and time management for maximising both the quality of research and its effective delivery to clients.

Why can it take only three years for some equity research analysts to become truly productive and build their own franchise, while others need as much as seven years to accomplish the same thing?

Denny Ellison has found that analysts who are early in their careers can be grouped into three main categories:

Some analysts outperform their peers in almost all areas, from modelling, to presenting to sales and building a strong investment case. They allocate their time across the different activities appropriately and are constantly looking for ways to improve the whole set of their skills. We call them the “rising stars”.

Another group of analysts consists of those who are very good in only one or two activities. We call them “specialists”. They spend most of their time on these activities and tend to neglect the others.

Finally, the “improvers” are analysts who are average or below average in all areas, with no particular areas of expertise. They are likely to have poor time management and prioritisation skills.

We have identified five key factors that influence analysts’ productivity and performance: Time management, having best practice examples, support from their manager, having the right core analyst skills and motivation.

When asked about each of these factors in detail, nearly 70% of early-career analysts feel that they don’t get appropriate support from their manager. In particular, they would like to be given more exposure to sales people, clients and companies. More than 70% expressed an interest in having more best practice examples, particularly for research notes and modelling. In the area of time management, analysts clearly voiced that, among other items, they want to spend more time setting priorities and targets. Finally, the opportunity to learn had the strongest impact on analysts’ motivation level, whilst promotion and pay still had a strong but more limited role.

In terms of the support that analysts would value the most, mentoring ranked the highest. Having appropriate best practice examples, sharing ideas with peers, and having training classes were also valued highly. Within the training classes, a large proportion of analysts responded they would value more help on modelling, together with training on how to interact with sales people and clients.

A full report on the findings of the sell side equity analyst survey can be downloaded for free at https://training.dennyellison.com.

Denny Ellison Enterprises Limited is a research and training company based in London, UK.