Research is Not Bought, It Is Sold


For years, Integrity Research has argued against the “Field of Dreams” philosophy of running a research business – build it and they will come.  While we agree that a firm needs a high quality differentiated research product to succeed in today’s marketplace, we also believe that one of the key drivers to the success of any research firm is a strong team of institutional sales professionals.  Based on our most recent 2015/2016 Independent Research Pricing Study, the data supports our contention.

Numbers Matter

Integrity Research Associates conducted a survey of independent research providers between September to November 2015. 550 firms were invited to participate in the survey, with 83 firms completing the survey, representing a 15% participation rate. We estimate that the survey respondents represent a sample size between 8% and 10% of the target population of independent research providers.

According to our survey, the median number of salespeople per independent research firm that participated was 2, while the average number of salespeople per research firm was 4.

However, the more interesting finding was that the more salespeople a research firm employed, the higher the revenue that firm was likely to have.  The only revenue segment this was not true for was between $5.0 million and $10 million, where the average number of salespeople fell to 2.1.  The causal relationship between the number of salespeople and revenue was reestablished for research firms with more than $10 million in revenue.

Institutional Sales is Critical

Institutional sales people generally act as the filter and intermediary between a firm’s analysts and the buy-side clients. These sales people interact with clients and come to understand their interests and needs; they push only the research and trade ideas that individual clients might care about; and, they communicate directly with clients to follow up on these ideas and make sure that any/all of a client’s questions are addressed. Over time, good institutional salespeople become trusted sources of research, ideas, and insight to the buy-side.

According to our recent pricing study, one of the most important determinants of higher average annual revenues per client was the presence of institutional sales. The majority of respondents (75%) did not provide institutional sales coverage and reported average client revenues of $51k per client.  However, the one quarter of respondents who provided in-house institutional sales coverage, reported 53% higher average annual client revenues of $78k.

We found support for this result from another analysis we conducted.  As you can see from the table below, we performed a series of regression analyses on average and maximum client revenues to determine which factors had the greatest impact on total fees received.

The factors we included in the analysis were 1) the number of sales people employed; 2) whether corporate management access was offered; 3) the percent of buy-side revenues received from a broker vote; 4) the percent of revenues received through a trading desk (directed commissions).  Based on these regressions, sales had the most powerful impact on revenues with a tStat of greater than 2.0 in both the “Average Client Revenues” and “Maximum Client Revenues” regressions.  Each salesperson equated to $2,400 in average client fees and $37,000 in maximum fees.  This relationship had the best t-statistics in both regressions.

Our Take

Clearly, research firms cannot succeed with buy-side investors without a unique value-added research product.  However, as you can see from the results of our 2015/2016 Independent Research Pricing Study that we discussed above, research firms also need to address a range of sales issues to maximize their financial opportunity.

Whether the question is how many salespeople a firm should hire, or what roles they should play in interacting with clients, research management needs to understand that correctly answering these questions will have a significant impact on the ultimate success of the business.  As we have said before (and will likely say again), research is not bought, it is sold!



About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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