There was a time when the research center was the most coveted destination for new hires at Korean brokerages. While seven or eight out of 10 now prefer private banking (PB) centers, in the past the majority of aspiring securities professionals wanted to become analysts. The primary reason behind the neglect of analysts, once called the "flower" of brokerages, is that their workload has grown sharply while their pay remains relatively poor within the firms. On top of this, mounting pressure from listed companies and individual investors over every single report has created an environment where it has become difficult to serve as the market's compass.
In a market with heightened volatility, analysts have grown more cautious with their words. The reason is that the blame for a stock price decline could come back to them. As a result, "sell" reports are declining, while the number of reports issued with "no rating (N/R)" is on the rise.
According to the Korea Financial Investment Association on the 20th, the number of analysts, which stood at 1,575 in 2010, has remained around 1,000 in recent years. While a considerable number of brokerages have been cutting research staff or minimizing hiring, analysts' workloads have instead increased. This is because news on U.S. stock market analysis, macroeconomics and other topics pours in without pause.
The number of reports published rose about 50% in just two years, and the number of reports written per person increased from around 15 annually to more than 20. As their scope of work has expanded significantly beyond writing reports to include wealth management (WM) support, investment banking (IB) collaboration, television appearances and YouTube content production, it is not uncommon for analysts to arrive at work before dawn and leave late at night.
The work environment is also deteriorating. When an analyst issues a report containing a negative opinion, listed companies respond with public rebuttals or by restricting corporate visits and investor relations (IR) briefings, while some individual investors mount collective protests through online communities and social networking services (SNS). As brokerages' revenue structures have changed, research centers have come to be regarded as "cost centers" that do not generate direct profits, making them targets for cost cutting. The days when they were valued as the core organization determining a brokerage's competitiveness by providing high-quality analytical reports are also long gone. Salaries have fallen below those of retail or investment banking (IB) divisions, and it has now become a structure in which star analysts are hard to emerge.
"Analysts are asked for objective analysis, yet when they issue a report unfavorable to a company's stock price, the individual bears the burden," said Choi Young-kwon, chairman of the Korea Analysts Association. "There is virtually no institutional mechanism to protect them, so talented people are leaving the industry."
