"This Just Feels Like Death": Analysts Flee Research Positions Amid MiFID II Changes

Tyler Durden's picture

For the past couple of months, we've frequently shared our views that Europe's MiFID II regulations, which force investment banks to charge for equity research instead of "giving it away" in return for trading commissions, could be a wake up call for 1,000's of highly paid research analysts who were about to have their true 'value add' subjected to a market bidding test.  Here are just a couple of examples:

Now, per a note from Reuters, it seems that a growing number of equity research analysts are finally waking up to the fact that hedge funds don't really have a burning desire to drop $400,000 per year on reports drafted by a 23-year-old recent college grad that do little more than summarize free SEC filings.  Who could have known?

Having covered financial stocks at big and small banks for more than two decades, David Hilder was accustomed to the ebb and flow of Wall Street job cuts and hiring sprees.


But he threw in the towel as an analyst last year after deciding customers simply will not pay what it costs to produce research in the years ahead, especially after a regulation called MiFID II upended the pricing model.


“It certainly seemed that the difficulty of being paid for research was going to increase, not decrease,” said Hilder, who is now trying to reinvent himself as an investment banker.


Many share Hilder’s grim outlook. Reuters spoke to dozens of current and former analysts who moved to independent research shops or investment firms, joined companies in industries they covered, or have launched new careers or are considering doing so, after nearly a decade of cost-cutting that is likely to accelerate under MiFID.


Not surprisingly, a study from Frost Consulting recently found that major global investment banks have slashed their equity research budgets by more than half, from a peak of $8.2 billion in 2008 to $3.4 billion in 2017.  And, as we noted back in the summer, McKinsey & Co. thinks the pain is just getting started and that banks will have no choice but to fire a ton of equity research analysts who write a bunch of stuff that no one ever reads...which seems like a reasonable guess.

Europe’s impending ban on free research will cost hundreds of analysts their jobs with banks set to cut about $1.2 billion of investment on the area, according to a report by McKinsey & Co.


The consultancy estimates the $4 billion that the top-10 sell-side banks currently spend on research annually is likely to fall by 30 percent as clients become pickier about what they pay for, McKinsey Partner Roger Rudisuli said in an interview. Investment banks’ cash equity research headcount has fallen 12 percent to 3,900 since 2011 compared with as much as 40 percent in sales and trading, leaving the area facing “big cuts” to catch up, he said.


“Two to three global banking players will preserve their status in the new era, winning the execution arms race and dominating trading in equities around the globe,” McKinsey said in a report Wednesday, which Rudisuli helped write. “Over the coming five years, banks will need to make hard choices and play to their strengths. Not only will the top ranks be thinned out, there will be shakeouts in regional markets.”

Meanwhile, in light of the MiFID II writing on the wall, Evercore ISI analyst Glenn Schorr admits that his research has become a bit morbid of late...

Evercore ISI analyst Glenn Schorr recently titled a research note “Writing My Obituary,” with a follow-up called “Stay of (my) Execution.”


“For the last few years, it’s been all about morgue humor like ‘flat is the new up’ and ‘no bonus, but at least you get to keep your job,'” said one former analyst who recently left a large bank but would not be quoted by name to avoid upsetting former or future employers.


“Contrast that with Silicon Valley,” he continued. “It’s not even the money; it’s the optimism that I envy. Those guys are building a brighter future and this just feels like death.”


Sean McGowan spent 25 years covering consumer stocks at small and mid-size brokers before losing his job early last year amid broad cost-cutting.


“The more I started to do research on the impact of MiFID and what was likely to happen to the industry, the more I realized that going back to that world would be like swimming upstream,” said McGowan. “A lot of the jobs on the sell-side are going to disappear and inevitably some of the more enjoyable parts will be peeled back. I don’t want to haggle someone about the price of a phone call.”

Of course, the inevitable result of these changes is that the world's hedge funds will have employ their "buy the fucking dip" strategies without the support of 50 research analysts...maybe just 20 instead.

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junction's picture

You're fired! Don't slam the keyboard down on your way out.

bamawatson's picture

more waiters & uber drivers

StackShinyStuff's picture

You need all that research just to BTFD?  Who knew?

The Alarmist's picture

I think TPTB have underestimated the value of keeping these folks in cubes and off the streets.

Government needs you to pay taxes's picture

By now, research analysts who are employed are amongst the world's best sausage washers.  They wont be Uber drivers, unless you get a solid premium for a ride and a blowie.

philipat's picture

But this creates an opportunity for independent "boutique" research houses who, unlike the sell-side "analysts" who don't want to upset investment banking clients and potential clients (essentially everone!), can issue REAL research including some actuall SELL recommendations.

Rainman's picture

Only now they discover they shoulda never hired humans to do a machine's job.

JRobby's picture


(Laugh Track Deafening !!!)

In the post 2012 CB / QE "PUMP" age?

overbet's picture

Theyre fucking worthless. I needed help analyzing some filings about 6-7 years ago. I wanted to learn some things I didnt know in the tech sector. I met an ex Lehman analyst at the poker tables and he used to be a tech analyst. Wow, what luck I have I thought. I even went as far as freerolling him on my earn. You know what I learned? How he could apply the word granularity to every fucking sentence and say absolutely nothing while speaking nonstop. Got rid of him and then he took my strategey and used it as an in for a job at Investco. He was a huge Bill Mahr fan. I shoulda seen the red flag. 

bottom_line's picture

Research in this market? Do those guys drive horse and buggy to work, too?

ReturnOfDaMac's picture

BTFD, you don't need no stinkin' analyst for that!  You can also be lazy and buy the index.  Screw 2/20, in the limit it is a guaranteed way to put your loot in their sack.

Deplorable's picture

Kick those asshole analysts out on the street...

resistedliving's picture

See the Alarmist post above. 

He makes a ten upvote point imo. 

Better locked in their cubicles than driving us around 


Omen IV's picture

"asshole" maybe today but more than 25 years ago....not.

As  CFO of a private company of a tech company - I started a relationship with an equity analyst at a leading San Francisco based Boutique Investment Bank - there was no IPO's of a company in this sector for 6 years prior. He spent the time to understand the strategy, market and the numbers and he further documented independently and obtained outside market information. This level of detailed research would never have been done by a Investment Banker who typically have a short term attention span and no time for independent research.

The Analyst got the investment committee on board and was a major help in the after market.

These guys are a necessary and integral part of the Capital raising and after market awareness process.


Herdee's picture

You just need more industry leaders to dump the stock market and go private. Who needs federal government socialist NeoCon bullshit along with all the manipulation from crooked banks and dark pools? And oh ya, a big company is also subjected to manipulation by the Treasury and Fed's trading desk along with many other Central Banks taking part in scams.

candyman's picture

No more lunches in San Jose.

Hillarys Server's picture

Tobacco company research supports tobacco.

Why does anyone expect anything different from the used car salespeople called equity analysts?

Before the global settlement twenty some years ago almost all equity research ratings were "Buy". For every stock. Forever. 

The reason was so the brokers could get investment banking deals from the companies.

The brokers still have investment banking arms or other conflicts of interest. 

The analyts now just have to make a declaration at the bottom of the report that they weren't influenced. The declaration is in the templates they write on. The analysts don't even read it.

Anyways, would you believe a used car salesperson who signed a declaration that they're not trying to sell you a used car and are just wandering around in the used car lot for no special reason and would like to introduce a car to you to be nice?

Consuelo's picture




“Contrast that with Silicon Valley,” he continued. “It’s not even the money; it’s the optimism that I envy. Those guys are building a brighter future and this just feels like death.”

The grass on the other side being always greener...

You're right though Mr. Schorr, it isn't the money per se, it's the fakery of bots which magically brings in all that money.   

That's how 'optimism' is achieved... 

DarthVaderMentor's picture

All I offer is this sage advice from an old financial technical video....


We don't need no analysts........BTFD! Make them all waiters and Uber drivers!


CJgipper's picture

Try business law.  It's a race to the bottom among a bunch of over-acheiving perfectionists, many of whom are literally sociopaths.  Fun times.

A. Boaty's picture

Who needs research when we have the Fed?

Al Huxley's picture

Well, I'm glad it feels like death.  You take a job in the most parasitic, criminal industry ever created, where the purpose in life everyday is to fleece naive 'investors' and stuff the proceeds into the pockets of your owners - that should feel like fucking death.  Great to hear that you're feeling a sense of existential angst. 

Chris88's picture

It isn't Wall Street's fault you have a GED.

Al Huxley's picture

Oh sorry, did I hurt your feelings?  I thought you had to be a sociopath to work in the Financial industry, but maybe that's only the traders and the salesmen.

Chris88's picture

Nah, I'm entertained hearing losers whine about the financial sector being parasitic and blaming it for their failures in life.  The biggest increases in wages, employment, home price appreciation, and population since the crisis have been DC and the suburbs of it.  $120 trillion in unfunded liabilities and you complain about financial services, that's a knee slapper.  Wait wait, let me guess, Wall Street made the government do it.  You know from reading Jekyll Island.

Al Huxley's picture

Yeah, I guess you're right.  Socializing 1 trillion in losses by the financial sector in 2008-2009 - just a drop in the bucket, why the hell would the rest of the country think Wall Street's screwing them?

Chris88's picture

My fund didn't take a penny and profited from it, and even on the sell side many boutiques/MM banks painfully recapped themselves without receiving a penny.  Your stupid ass looks at the bulge bracket and lumps everyone together because you don't have a clue what you're talking about.  Go shit in Zuccotti Park with the rest of the FSA.

Al Huxley's picture

Oh, I see - so what you're saying is you work in the finance sector, you're just not very good at it. Got it.

Chris88's picture

My pod's return speaks for itself, L/S funds don't generally keep people around after a year, hell even a few bad calls in 6 months you're usually shown the door.  Again, not like you'd have a clue.   Gets shown he's a moron and he just keeps digging, go on and say something else stupid.  Please, entertain me more, tell me what I said about a select few mega banks being bailed out that has any look-through to my job, go on, genius. Not a single hedge fund received a bailout, but you'll be on a HF article whining like a faggot, too.  You don't care about bailouts at the end of the day, you're just an envious clown.  

Al Huxley's picture

Wow, you're pretty touchy for an finance guy.  You'd think all that cash you're rolling in would have given you a thicker skin.  Oh right, you're not one of the successful ones, I forgot.

Chris88's picture

You can't even make a coherent argument.  Indicative of ZH turning more and more into HuffPo.  I'm just tired of the whining by the uninformed losers in life, you guys are so pathetic.  If you spent less of your time crying on ZH maybe you could at least get some mediocre dead end job.

Al Huxley's picture

...no if only the traders and salesmen at the investment banks could start getting a feeling of death, that would really be heartwarming.

stewmint's picture

Pivot to prj management/ba. Endless stream of regulations require endless projects to meet regulatory requirements. 

Adapt or die.

JibjeResearch's picture

Scumbags... will pay.. now or in the future...

There's no free lunch!


Zorba's idea's picture

Ha! Why not become a "Non-GAAP" Analyst...I hear its all the rage.

Chris88's picture

As always, the true value-add analysts will survive and many will suck wind.  To claim SS ER is dying is retarded, the unofficial reason it exists is to drive banking, and banking is the highest margin business.  Those budget cuts on the SS won't be so steep when the IBD starts to see deal flow dry up in previously covered sectors or companies.  I'm on the buyside and could give a rat's ass either way (our fund is already highly selective of analysts and has been long before I worked here), but the author of the article and the doomsayers don't have a clue as to the way things work on the Street.  Now let's hear from the peanut gallery of day laborers.

Al Huxley's picture

Value-add analysts - there's an oxymoron.

Chris88's picture

You'd know from exp...oh, right.

Government needs you to pay taxes's picture

You mentioned being on the buyside.  Would that be an active mgmt strategy?  You know, the shit that has consistently underperformed since the start of Jew-E?

Chris88's picture

Yes, we are a long/short fund, pretty sizable (not like a Bridgewater or anything though) but I will not give away our AUM.  When you're L/S and the market goes straight up, the majority of these funds will obviously underperform.  I've heard the "active management is dead" crap time and time again in every single bull market, but they all end and when they do fund flows reverse.  These same idiots saying that can't seem to figure out what a Sharpe ratio is.

I Write Code's picture

I don't know what's sillier -

financial research in general,

this new law, or

hearing that the jobs of those who make free stuff end when it becomes illegal to have free stuff.

Yellow_Snow's picture

Bout time people caught on to their scam of absolute rubbish financial research reports.

Did you ever read that stuff?  If you flipped a coin you would be 50% less wrong...

Reynard Fox's picture

Only a few of the fittest will survive.

hooligan2009's picture

there is a solution - demonstrate the value add from the analysis.

if there is no value - there is no valuable analysis and it is worthless.

mkes you wonder if investors should be suing the sell side banks and brokers providing bond and equity "research"AND the fund managers for taking free lunches at the investors expense - for the failure to create any value from "paying" for research over the last 5 decades.

of course, the research compiled by analysts at central banks is sacrosanct, even though both the analysis and the models of "financial economics" have proven time and again to be simply an encapsulation of excited misery.

ponders - when will anyone ask any central bank what difference a trilliion euros or dollars makes to the statistical (and well analysted (sic) ) measures of inflation, growth or unemployment? does each trillion make 1% difference to inflation, so without the Fed's or the ECB's 4 trillion of dollars or euros mean that inflation would be 4% lower? maybe each trillion changes inflation by 0.25%? or 0.1%?

of course, the central banks are irrelevant to any economic measure - otherwise inflation, growth and unemployment would be set to a specific level, as determined by central banks and not by the sum of individual efforts (and it would be time to put on that t-shirt that says "do no wor,k pay no taxes - print money"


Rex Andrus's picture

I have enjoyed watching the slick reports morph into criminal marketing props. Between tv and slight of hand like this, normies are fucked.

venturen's picture

Just buy the dip...of everything....analysis is so last century...printing your way to enirch the few...is the Path!

Coldfire's picture

Sell-side “research”. So scientific.

Dragon HAwk's picture

Let em risk their own money, if people want to tag along go for it, All analysts are rich Right?