Sell-side research market: dying or growing?

It has been difficult for sell side firms and independent providers to grasp the extent of the impact of research unbundling under MiFID II and what strategic actions they can take in the face of it.
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Up to now, it may have been difficult for you as a sell side firm or independent provider to grasp the extent of the impact of research unbundling under MiFID II1, and what strategic actions to take in the face of it.

The recent paper published by Quinlan & Associates (click here for full report) offers a unique and concise insight into how those regulations will impact research providers.

Our takeaways of the outcomes:

  1. No geographic exception. Wherever you are based, the modus operandi with key clients will most probably change, as European Asset Management firm business should comply with this new regulation whatever their investment research origin.
  2. Shift towards well-informed demand. The obligation to justify research and increased scrutiny by end-investors will force fund managers to be more selective and disciplined in their research spending, and cut-off all content that doesn’t add meaningful value.
  3. The rise of specialized content. With quality, not quantity, becoming the key priority, buy-side research will increasingly allocate budget to specialized providers that have unique expertise in service niches.
  4. Pay now consume later. The required research budgeting will necessarily force the current model i.e. “Consume now pay later” out, as is largely already the case for consumption of independent research.

What actions should sell side research take?

Product:

  • Re-thinking value proposition (points 1&2&3). Narrow their focus to expand their content differentiation and grow their brand reputation. A sustainable research business will definitely be conditional to the provision of differentiated content.

Clients:

  • Segmenting clients (point2). Calibrate their service level to different client segments to optimize revenues and lower costs.
  • Going beyond existing clients. Consider the importance of the research published to other types of audiences e.g. primary market advisors / private equity and venture capitalists / private investors.

Monetization:

  • Going Digital. Expand monetization of the low touch content distribution. Deliver a unique and engaging user experience via a personalized, interactive and easy to navigate user interface. And deploy smart user analytics to leverage content penetration.
  • Having robust billing and payment procedures. Need to implement an over-arching model contract and billing process, while ensuring an effective customization to a diversified user based.

ResearchPool is a new digital solution that is increasingly used as a market place for financial research, with big players such as S&P and more independent ones.

Where ResearchPool (RP) offers a solution to the sell-side:

Product development:

  • Enhance value by tracking performance: tools that highlight the research earnings generated per analyst are critical to maximize time allocation efficiency and the ability to re-adapt value proposition. Track the client sales experience: What does he buy? Read? When?
  • Deliver a superior user experience: Use our personalized, productive, multi-device friendly, and easy to navigate platform as if it was an internal solution, rather than devoting resources to developing their own.
  • Find the optimal pricing model: We collaborate with providers to help develop the optimal pricing model based on the client base, specificities and needs
  • Digitize distribution with RP: use our platform to sell research with innovative and evolving web based technology.
  • Get personalized advice on content editing, penetration, and audience targeting

Client development:

  • Be visible to, found by and matched against a large international pool of research users, ranging from tier 1 buy side down to long tail investors, including fund managers, wealth managers, private equity, corporations, among others.
  • Marketing services: personalized email campaigns / roadshows

Monetization:

  • Effectively monetize  “low touch” content via our online and seamless “pay as you go” and “subscriptions” models.
  • Provide one invoice and payment flow from RP with our billing and payment solutions.

To conclude, alternatively, one can see the research market shrinking significantly (Quinlan Associates predicts a decline in global research spend of  up to 25- 30% by 2020) or one can be optimistic on a healthy and sustainable business model based on a potential rationalization of today’s opaque and inefficient market.

At ResearchPool, we decided to lead the transformation and offer innovative solutions to support growth at a challenging time for investment research!

  1. European regulatory framework to be enforced as of Jan 2018

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