The sell side

The sell side consists of those firms and individuals that assist the investing public in making investment decisions. This group creates and markets securities products to the buy side.

The main groups involved in the sell side are investment bankers, stockbrokers and analysts. Analysts provide the research for buying decisions, and stockbrokers use this information to inform their clients about which securities to purchase. Investment bankers advise issuers regarding the structuring and marketing of securities products.

An analyst investigates a public company, and creates an analysis of where he thinks the company’s stock price will go. The analyst then presents any “buy” recommendations to the assembled sales staff before the markets open each morning, which is known as the morning call. The sales staff will be looking for a sales pitch to use for each stock, so the analyst may provide key points about the company that will be memorable for clients. If the clients buy the company’s stock, then the brokerage earns a commission, which in turn secures the employment of the analyst. Conversely, if an analyst only has a “hold” recommendation on a stock, it is not recommended to the sales staff, which therefore generates no commissions. Thus, analysts working for brokerages are always looking for stocks for which they can reasonably issue a “buy” recommendation.

A junior stockbroker is usually required by a brokerage to only pitch a certain set of stocks to their clients. As they rise in seniority, they may be allowed to make additional recommendations of their own to their clients. However, most of the time they are selling to their clients whatever the brokerage's team of analysts have decided are the best stocks. They also give advice to their clients about whether to retain or sell any securities currently held. Whenever a client wants to execute a trade, the stockbroker processes the order and charges a commission or fee for this service.

Related Courses

Corporate Finance 
Investor Relations Guidebook 
Public Company Accounting and Finance