The Institutional Investor Vote: Ranking Sell Side Analysts

It’s that time of year again – the Institutional Investor (II) vote that ranks sell side research analysts. I know because my inbox is flooded with “Please vote for us” requests.

Asking me to vote for you is not going to impact my vote, but I understand the desire of sell side analysts to ask for votes. For buy side analysts and portfolio managers, success is easily measured since it is all about investment performance (see: Alpha, Baby). It’s black-and-white: either you performed or you did not.

For sell side analysts and associates, measuring performance is not nearly as black-and-white. Sell side analysts provide general research and make general recommendations so there is no benchmark to compare them against. Instead, the II vote takes precedence.

Making the First Team All-American Research Team is quite an honor because it is a democratic vote by buy side analysts and portfolio managers. Making the First Team means the buy side views your research as the best on the Street.

Being an II top-ranked analyst has another benefit as well: money. Top-ranked analysts will typically see seven-figure comp packages. Now you can see why my inbox is flooded with “Please vote for me” emails. It’s always about money on Wall Street.

So how does a sell side analyst make it to the top of the rankings?

The II ballot also has a section where we (the buy side) rank the most important attributes that we look for in a good sell side analyst. You might think that good financial modeling and idea generation would be the top attributes. Well, you’d be wrong.

Industry knowledge and accessibility/responsiveness are among the top attributes that buy-siders look for in sell side analysts. The best sell side analysts are like walking a Wikipedia on their industry. Ask any question and they will have an answer. That doesn’t mean financial modeling isn’t important, it’s just that every sell side analyst can model properly. In-depth industry knowledge is what sets apart the top analysts from the rest.

If you are looking at a career as a sell side analyst, just remember to become an expert in your industry and that seven-figure payday might be yours.