For the first time over the three years we have been conducting research pricing studies, we invited investment banks to participate, joining the independent research firms we have previously polled. We received a record response across both groups, with investment banks representing over 40% of the 161 research providers participating in the survey.
The 115-page study is particularly timely in light of increasing pressure from European regulators for increased transparency of research fees. For this reason, the survey results are relevant for asset managers seeking to benchmark bundled research, in addition to research providers examining their own pricing strategies.
Integrity Research Associates conducted a survey of investment banks and independent research providers from December 16, 2016 to January 30, 2017 through an anonymous online survey. In total, 161 firms participated in the survey, including 68 investment banks. There was participation from all major geographical regions. U.S.-based respondents represented 52% of respondents. European research providers represented 26%, with 12% based in Asia.
Research reports and analyst access were the most common research products offered by respondents. The median respondent offered seven research products. We estimated that fundamental research was the main research methodology for just under one half of the respondents, while primary research providers represented about a fifth of respondents.
Respondents were asked to describe their fee structures, their average research payments received from buy side clients, maximum fees received from a buy side client and minimum fees from a buy side client. In addition, they were asked to provide a per sector fee if they charged by industry sector and a geographic fee if they charged by geography. We estimated 30% of the respondents were sector specialists and nearly 40% were geographic specialists, supplementing the data provided by research providers that charged sector fees or geographic fees.
The study extensively examines average and maximum payments to research providers, as well as differentiating fees across a variety of metrics. Top-tier independents had equivalent research-related payments across all buy-side clients compared with large investment banks, but there was a big disparity in the maximum payments received.
Fees by Products and Services
We segmented fees by the type of research offered, including fundamental research, economic research and primary research, as well as more specialized offerings such as technical analysis and quantitative analysis. The study also estimated benchmarks for payments per industry sector and per region. We also examined fees by payment method, by the size of the research provider, by regulated entity, by location, by number of products, as well as determining which factors have the biggest impact on research payments.
We analyzed the variety of fee structures being used by independent research firms which range from menu pricing to per user pricing to project pricing to simply being price takers. We examined the impact of fee structures on revenues and which structures generated higher or lower fees.
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