Optimistic 2017 Bank and IRP Research Staffing Plans


Consistent with the optimistic revenue expectations we picked up in our proprietary 2016/2017 Research Pricing Study, close to 40% of all investment banks and independent research firms we surveyed expect to increase their analytical staff by the end of 2017.

Current Analyst Staffing & Productivity Levels

Last Monday, Integrity Research Associates published its third annual 2016/2017 Research Pricing Study, including the results of a proprietary survey of 161 investment banks and independent research firms from around the world.

According to our study, the median number of analysts employed by the firms in our study was 7 analysts while the mean was 24 analysts (with results ranging from 1 to 250 analysts).  Independent research firms employed an average of 14 analysts while investment banks employed an average of 63 analysts.

Nearly 1/3rd of all of the firms in our survey did not employ junior analysts (these tend to be the smaller independent research firms).  Among those research firms that do use junior analysts,  33% of the total number of analysts are juniors (median) while the mean was 46% of total.

Excluding quant and technical research firms, the median coverage per senior analyst was 13 stocks, while the mean coverage was 15 stocks.  The average number of stocks covered by senior analysts working at IRPs was 17, while the average number of stocks covered by senior investment bank analysts was 16 stocks.

2017 Analyst Hiring Expectations

Despite the number of analyst layoffs seen so far this year, the firms that participated in our study were surprisingly optimistic about their hiring plans.  In fact, 43% of respondents expect research staffing levels to increase in 2017, with 14% anticipating staffing gains of more than 10%.  Only 9% of those surveyed expect analyst staffing levels to decrease in 2017.

Both independent research firms and investment banks expect analyst staffing levels to grow in 2017, with 39% of IRPs and 40% of investment banks expecting to employ more analysts by the end of the year.  As you can see from the above chart, IRPs were slightly more optimistic, with 15% expecting a staffing increase of more than 10%, whereas only 3% of investment banks expect a similar increase.

Geographic differences were even more stark.  Nearly one third (32%) of UK firms expect analytical staff increases of more than 10%, and 64% of UK firms anticipate some level of growth.  69% of Asian research providers expect higher analytical staffing levels by the end of 2017, with 25% projecting gains of more than 10%.

Our Take

It’s clear from the survey results presented above that executives at both independent research firms and investment banks believe that improved business conditions in 2017 will warrant increased analyst hiring.

As we mentioned before, these results are somewhat surprising given the number of investment banks that have recently laid off analysts or shuttered their research departments altogether like Brean Capital, CLSA or Avondale Partners.  Not only have these firms pointed to weak cash equities revenue, but the prospect of unbundling caused by the implementation of MiFID II in 2018 have driven some firms to reassess plans for their research businesses.

However, both independent research firms and investment banks may have their own reasons to be optimistic.  The pickup in IPO business seen so far this year could be causing some investment banks to reverse some of the staff reductions seen last year.  Independent research firms may also feel that MiFID II will be a boon for their businesses, prompting them to plan to increase their analytical staffs later this year.  While we are doubtful this bullish outlook will come to pass, we will have to wait and see how the rest of the year plays out.


About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email: Michael.Mayhew@integrity-research.com

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