When Is an Analyst Not an Analyst?

When is an equity analyst not an equity analyst? Apparently when they work at Lehman. That’s because Lehman is moving some analysts to the trading desk and calling them “desk analysts”. No, they don’t do home furnishings, but they do call clients and flog analysis.

Why do it? Lehman says it is making the change to better service its best clients. Unlike normal analysts, these desk analysts can give on-the-fly recs, don’t publish research, and aren’t bound by new SEC dislosure regulations.

While a cynic would call this a way to end-run regulation, I think it an overdue change. Let’s stop pretending that equity analysts can operate in a some rarified world separate from how their income is generated (i.e., trading). Analyst are salespeople. Always have been, always will be.


  1. Couldn’t agree more…analysts are sales people…they just haven’t been treated that way.
    I always had a problem with the fact that when I was an analyst I came up with all these interesting investment ideas about companies that had undiscovered potential, spent the time to write reports extolling the fact that revenue, or free cash flow, or operating margins would grow more quickly or be better than than the market expected.
    The firm would then hand the information (reports) to the sales guys who would go and sell the ideas to the funds and make the lion’s share of the commissions.
    I sure hope that the Lehman analysts are able to now get commissions on those trades…after all, if they were the ones originating the idea, it only seems right.

  2. duncan says:

    Asking an analyst to sit on a trading desk and sell his or her ideas is a great concept. I have only one question: where will they get those ideas?
    It’s like expecting a composer to do their best work while in a boiler factory. If they produce anything at all, it will be an industrial symphony set in the key of “clank.” Sure analysts are salespeople some or most of the time – but if they don’t structurally have a cave to retreat to and think about the broader picture, they will turn into a “gossip mux-demux.” They will sit on a trading desk, hear a 1000 ideas an hour, and then spew out some sort of hashed average of what they just heard. It will be all noise, no signal, and no originality.
    And last I heard – analysts aren’t exactly underpaid at most brokerages. Sure the sales guys knock off earlier and don’t have to write 25 page research reports. But neither do the analysts spend the bulk of their time selling things they don’t care about to people they don’t like.

  3. The term “desk analyst” says it all. What kind of insight can you expect from someone sitting at a desk all day long?

  4. Nigel deGruyther says:

    I will go out on a limb here and disagree with everyone.
    These “desk analysts” are not analysts at all. They are old style salesmen. Whereas the norm now is for the salesmen to simply parrot the comments the analyst made at the morning meeting; in times past, salesmen actually added value by adding their own commentary on things such as the relative upside/downside of various sectors, and comparisons of individual stocks and putting comments into context with other economic data.
    In all likelyhood, I think you will see Lehman replacing the salesmen with desk analysts not replacing analysts with desk analysts.

  5. I was an equity analyst for 10 years and, I think what Lehman is onto makes sense.
    They are trying to fill a job: the trading and sales desks need additional input & analysis to maximize the effectiveness of trading, which is where the money is. If they did only this, the well would run dry of good ideas, I am sure. But if they do this in combination with some retention of traditional analyst jobs, I think clients would be better served.
    In my last job at a global firm, generally we operated close to this model. We still researched and published, but we were very close to the desk. No walls. No offices. No distance.
    Very effective, except for writing reports.