The following is a guest article from Caspar Luard, who heads sales and marketing for MeetMax corporate access software.
As part of its standard disclosures to asset manager clients, JP Morgan Securities offers to discuss the cost of providing corporate access for invoicing purposes. Please see this link https://www.jpmorgan.com/country/US/EN/disclosures/corporate_access.
“…where you determine you need to make a direct payment for Services, that payment should be a realistic reflection of the costs incurred in arranging the Services. JPMS plc [J.P. Morgan Securities plc] would be happy to discuss the Services you receive and provide additional information as necessary in order for you to determine the invoice amounts.”
JP Morgan’s corporate access disclosure is the result of increased attention by the UK Financial Conduct Authority on the use of commissions to pay for corporate access and other sell side services. Sell side concerns about being paid have led to process similar to invoicing (except no specific fee is provided). What does a sell side ‘invoice’ entail?
Asset managers who use a broker vote process will receive a report, meant to serve as an invoice, from their brokers prior to the vote which summarize the services delivered to that asset manager by the broker.
Some asset managers will have a predefined format for how this information should be delivered to them or will ask their brokers to upload a report into a broker vote tool such as Cogent or Commcise. However, most of the time the sell side will submit their own reports.
So what does a sell side ‘invoice’ delivered to the buy side look like? Often these invoices are just the unstructured output from a broker’s CRM. CRMs are often not good for generating these reports and will not easily exclude additional noise that is standard CRM entry. Different brokers use different CRMs and there is therefore a lot of variation in the format of these invoices.
There are multiple metrics contained in a sell side invoice, including: meetings provided with a company management (either at a conference or on roadshow); meetings provided with a sell side analyst or expert; earnings models; stock calls; sales calls.
Above is a sample report from MeetMax CAM that formats the meetings and other services provided to an asset manager by a sell side firm over a selected time period. The report identifies the details of the meetings such as location (in asset manager office or at a conference), the date, asset manager contacts participating and the specifics of the meeting (e.g. for a company management the executives and their titles).
The sell side is reluctant to assign prices to their services, but want to ensure they get paid. This has led to the increasing supply of metrics in the form of ‘invoice’ reports or as inputs to broker voting systems. These metrics will continue to evolve as brokers exert more control over their products and gather more usage statistics.