The Silent Exodus: Why London’s Financial Analysts Are Disappearing
There’s something haunting about the decline of financial analysts in the City of London. It’s not just a numbers game—though the numbers are stark. In 2007, there were 29 small and mid-cap retail analysts; today, there are just 17. What’s truly fascinating, though, is what this decline represents. It’s a story of regulatory shifts, changing priorities, and a financial ecosystem struggling to adapt.
The MIFID II Effect: A Well-Intentioned Hammer
Let’s start with MIFID II, the EU directive that landed in 2018 like a well-intentioned hammer. Its goal was noble: increase transparency and protect investors by unbundling research costs from broking commissions. But here’s the irony—while it achieved transparency, it also gutted the small and mid-cap research sector. Personally, I think this is a classic case of unintended consequences. Regulators often focus on the what without fully considering the how. What many people don’t realize is that small-cap research is the lifeblood of smaller companies. Without it, these firms lose visibility, liquidity dries up, and the entire ecosystem suffers.
The Human Cost: A Profession in Decline
What makes this particularly fascinating is the human element. Being a financial analyst used to be a prestigious, even glamorous, career. I remember attending the Extel awards in the 1990s—it was like the Oscars of finance. Analysts were celebrated, their rankings could boost salaries, and their insights shaped markets. Fast forward to today, and the profession feels almost forgotten. Young graduates are flocking to tech, not the City. Why? Because the allure of being an analyst has faded. The pay isn’t what it used to be, the job security is shaky, and the prestige? It’s been replaced by algorithms and AI-driven research tools.
Consolidation and the Death of Diversity
Another detail that I find especially interesting is the wave of consolidation in the industry. Names like Bridgewell Securities and Seymour Pierce—once staples of the City—are now relics of a bygone era. Numis Securities, Panmure Gordon, and Stifel have all been absorbed or shut down. This isn’t just about fewer firms; it’s about fewer voices. Sector coverage has shrunk from 18 categories in 2007 to just nine today. Chemicals, Metals & Mining, Transport & Logistics—gone. This raises a deeper question: what happens when the diversity of research diminishes? Markets become less informed, less dynamic, and more vulnerable to blind spots.
The Road to Recovery? Not So Fast
There’s been some chatter about a potential recovery, thanks to the FCA softening MIFID II rules in 2023. David Enticknap, CEO of Extel, is cautiously optimistic, saying, ‘The seeds are there.’ But here’s the thing: seeds need fertile soil to grow. And right now, the soil is rocky. The buy side needs to value research again, and young talent needs to see a future in this profession. From my perspective, this isn’t just about tweaking regulations; it’s about reimagining the role of analysts in the modern financial landscape.
The Bigger Picture: London’s Place in the Global Financial Order
If you take a step back and think about it, this isn’t just a London story—it’s a global one. The decline of analysts in the City mirrors broader trends in finance: the rise of passive investing, the dominance of tech giants, and the commodification of research. London has always prided itself on being a financial hub, but what happens when the expertise that underpins that hub starts to erode? This isn’t just about nostalgia for the old days; it’s about whether London can remain competitive in a rapidly changing world.
A Noble Calling—But Who’s Listening?
Back in 1996, Alistair Darling noted that a top Extel ranking could add thousands to an analyst’s salary. Today, that feels like ancient history. Persuading young graduates that being an analyst is a ‘noble calling’ is an uphill battle. Tech offers higher pay, greater job security, and a sense of being at the forefront of innovation. Finance? It feels like a relic of the past. But here’s the thing: markets need analysts. They need the human insight, the skepticism, the ability to see beyond the numbers. Without them, we’re left with algorithms—and algorithms don’t ask tough questions.
Final Thoughts: A Call to Action
What this really suggests is that the decline of analysts isn’t just a problem for the City; it’s a problem for anyone who cares about informed, transparent markets. Personally, I think it’s time for a reset. Regulators, firms, and educators need to come together to redefine the role of analysts and make it appealing again. Because if we don’t, we risk losing more than just a profession—we risk losing the expertise that keeps markets honest.
In my opinion, the story of London’s vanishing analysts is a cautionary tale. It’s about what happens when we prioritize rules over people, efficiency over expertise. But it’s also an opportunity. If we can reimagine the role of analysts for the 21st century, we might just save more than a profession—we might save the soul of finance itself.
