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Welcome back to another issue of ‘Career Guides Weekly’ by Career Guides.

Today’s issue’s is focused on an important distinction in the world of financial services careers: the difference between the ‘Buy-Side’ and the ‘Sell-Side’.

It’s important for you to know the differences between the two as each ‘side’ ultimately offers different career paths, earnings potentials, exit opportunities, responsibilities, and more.

With that, let’s dive in!

The 'Buy-Side' vs The 'Sell-Side' And The Main Differences Between Them

A lot of students and graduates are keen on breaking into the world of banking and finance careers, but few, if any, know the difference between the 'Buy-Side' and the 'Sell-Side' when it comes to investing careers.

Here's a quick whistle stop tour on the differences between the two so the next time an interviewer asks you “Why do you want to work on this side as opposed to the other?“ you won’t be lost for words.

Definitions

The sell-side refers to financial institutions and professionals who sell securities or financial products to clients. These entities are involved in:

1. Underwriting (evaluating and assuming risk for clients) (IBD)

2. Providing advisory services (financial advice) (IBD)

3. Market-making (connecting buyers and sellers) (S&T)

4. Facilitating transactions (executing financial trades) (S&T)

In case you're wondering, 1 and 2 typically fall within the 'Investment Banking Division' of an investment bank. Whilst 3 and 4 typically fall within the 'Global Markets' or 'Sales & Trading' division.

The buy-side on the other hand represents entities that buy and invest in securities on behalf of their clients. These institutions manage funds, assets, or portfolios, aiming to achieve returns for their investors.

This is typically the ‘Asset Management‘ and 'Private Wealth Management' division of an investment bank.

Functions

Sell-side institutions include investment banks and brokerage firms. They create and sell financial products, conduct research, and offer advisory services to clients.

Investment banks, for instance, assist in raising capital through the issuance of stocks and bonds, mergers and acquisitions, and providing market-making services.

Buy-side entities include asset management firms, hedge funds, pension funds, mutual funds, and private equity firms. They analyse investment opportunities, manage portfolios, and make investment decisions based on their clients' objectives.

Goals

The primary goal of the sell-side is to generate revenue by executing transactions, providing liquidity (buying or selling financial securities (products) for clients), and offering advisory services.

The primary goal of the buy-side is to generate returns on investments for their clients while managing risks. They typically do not engage in market-making or underwriting activities.

Key Differences

1. Roles: Sell-side firms facilitate transactions, create financial products, and offer advisory services. Buy-side firms focus on managing assets, making investment decisions, and generating returns for investors.

2. Revenue Generation: Sell-side firms earn revenue through fees, commissions, and transactions. Buy-side firms earn revenue through the performance of the investments they manage as well as management fees.

3. Client Relationships: Sell-side firms have clients to whom they sell financial products and services. Buy-side firms have investors or beneficiaries whose assets they manage or invest.

Both sides play crucial roles in the functioning of financial markets. More importantly for you, having a strong understanding of both sides will enable you to approach applications, assessment centres and interviews one step ahead of other candidates.

A few questions you should consider before deciding which side to pursue for internships and full-time roles include:

1. Which side sounds more interesting to me?

2. Which side is more aligned with my strengths?

3. Do I know the differences between the roles and careers within each side?

4. Which careers within each side interest me? Am I more interested in Asset Management or Investment Banking? Sales & Trading or Private Equity? Private Banking or Hedge Funds?

5. What type of work do I want to do? Do I want to be a sales person or an investor or someone that executes trades?

Once you have the answers to these questions you’ll be able to make a more informed decision on which career path you’re more interested in.

It’s totally normal, common and okay to be interested in areas within both the buy-side and the sell-side. Most people tend to start their careers in the sell-side and then move into the buy-side later on.

Two of the main reasons include:

1. The nature of higher potential earnings

2. Better work/life balance

A future newsletter issue, for sure.

With that, hopefully you’ve learnt something new from this article, thanks for reading and I’ll see you in the next one.

Best,

Afzal

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