Research is Sold, It Is Not Bought – Part 2


New York, NY – Over the past nine months, a number of independent research firms have come to the realization that in order to rebuild their research businesses in the wake of the market turmoil experienced over the past two years, they need to focus not just on building a great product, but they also need to develop a strong research sales capability.  The following blog, the second part of a two part series, discusses this topic in more details.

Different Types of Research Sales Partners

Last week, we discussed why a research provider might want to build their own internal research sales organization versus working with an external research sales partner.  As part of this discussion it became clear that either the high cost of hiring and supporting a salesforce, or a management team’s lack of expertise or desire to manage a sales team, might prompt them to decide to “buy” this capability rather than “build” it.

Once this decision has been made, the next question that the research firm needs to address is what kind of partner makes the most sense for them.  Based on our research, we have identified four major types of firms which currently provide third-party research sales services.   This includes:

  • Investment Banks
  • Agency Brokers
  • Independent Sales Agents
  • Research Aggregators

We will discuss the strengths and weaknesses of each of these types of research sales partners in more detail later in this article.

Criteria for Success

Independent research providers have used partners to provide external research sales services for many years.  However, many of these commercial arrangements have not proven to be as successful as the research firm had hoped.  After studying a number of these relationships, the team at Integrity has identified a few key factors which have led to the success or failure of these relationships.

  1. Management Commitment:  One of the most important factors to the success of any business relationship is the commitment of the two parties to making it work.  Therefore it is critical that a research provider ascertain how committed the management of a potential partner is to the initiative.  The research provider needs to determine if the management of the partner sees the arrangement as opportunistic or strategic.  This doesn’t mean that a research provider shouldn’t work with a firm that sees the relationship as opportunistic.  However, it is important that both parties have similar expectations for the relationship.
  2. Dedicated Resources:  A critical factor to the success of any research sales relationship is whether the potential partner has a team that is dedicated to selling third-party research.  Firms that have tried to leverage existing sales resources (like research sales people or sales traders) to sell third-party research services have rarely been very successful. 
  3. Limited Channel Conflicts: We have discovered that a related factor is the lack of channel conflicts between the research provider and the research sales partner.  One of the most obvious channel conflicts has been whether the firm that is providing research sales services also offers their own proprietary research.  We have discovered that salespeople who make a living selling their own firm’s research really have little incentive to market third-party research that is likely to compete for a limited pool of commission dollars.  In addition, many salespeople also find it very difficult to think about marketing third-party research if they have a large number of research and non-research products to market to their clients.
  4. Track Record of Success:  Another important criteria that a research provider should consider when looking to find a research sales partner is how long have they been selling third-party research and how successful have they been at it?  There are a number of firms that have recently decided to embark on selling third-party research.  Unfortunately it is unclear whether they understand the third-party research sales process, or whether they have the right team to be successful.  Of course, it is important to ask firms that have been at it for a while how successful they have been.  This is a question that can be asked of current and former research partners.
  5. High Degree of Focus:  Research providers also need to determine if their potential partner will be focused enough on a limited number of research providers for them to be successful selling their service.  This is not merely a numerical limit of research partners.  Instead it is comparing the number of research firms a partner represents to the number of salespeople they have dedicated to the sales of this research. In other words, it is highly unlikely that a firm that has a ratio of 150 RPs to 15 salespeople will be able to market any one specific research providers research very well.  Most research providers would love to have a ratio of 1 RP per 1 salesperson from a partner.  However, most research sales providers cannot afford this level of dedication.


Investment Banks

The most high profile type of research sales partners that an independent research firm might choose to use are investment banks.  In the past 4 to 5 years a handful of bulge bracket investment banks have rolled out platforms to market alternative research to their buy-side clients.  The three firms that are most widely known in this space include Goldman Sachs’ Hudson Street platform, Merrill Lynch’s Open Minds Platform, and UBS’s alternative research platform.

The primary strength of using this type of partner is the credibility and PR value this can provide to a boutique research provider.  In addition, firms like Goldman Sachs, BofA Merrill or UBS have a large number of institutional clients they can introduce a research provider to.  These firms also have global platforms which they can leverage to market an RPs services to.  Lastly, these investment banks can implement a wide range of initiatives to showcase their research partners, including luncheons, conferences, roadshows, etc.

Despite these many strengths, investment banks aren’t appropriate partners for everyone.  First, some research providers question just how committed their management will remain to marketing third-party research to their buy-side clients if the firm’s expectations are not met.  Also, the large investment banks mentioned above don’t employed dedicated sales teams to sell third-party research.  In fact, these firms don’t really sell their RP’s research, they make introductions for their partners and they are expected to sell their own research to these buy-side investors.  In addition, these firms all have extensive proprietary research offerings that create channel conflicts for their partners.  Consequently, many of the research providers that have used these platforms have felt underserved by these initiatives over time.

Agency Brokers

Another well known type of research sales provider is the agency broker.  There are a wide range of agency brokers who purport to provide third-party research sales capabilities.  However, most don’t really proactively market research to their clients.  Instead they act as payment vehicles for a number of research providers, and they occasionally identify leads for these providers.  Three of the agency brokers that have been most active in actually selling third-party research to the buy-side include Instinet, BNY Convergex (BNY Westminster and Jaywalk), and CAPIS.   It is important to note that a large number of agency brokers have been looking into rolling out third-party research sales initiatives in the past 6 to 12 months.

The major strength of this type of research sales partner is that many agency brokers have a large number of buy-side clients that they can introduce to their research partners.  In addition, agency brokers generally have strong execution capabilities which enables them to provide an efficient cash register to pay for their partners’ research services.   Another strength of most agency brokers is that they do not offer their own proprietary research.  Consequently, they don’t have too many channel conflicts with third-party research providers.

Despite these strengths, many agency brokers are not set up to be successful marketing third-party research to their buy-side clients.  Most agency brokers don’t have salespeople who are dedicated to selling third-party research (Instinet, BNY Convergex, and CAPIS are exceptions).  Instead many agency brokers try to leverage their “sales traders” to make introductions for third-party research providers.  Unfortunately, this strategy often does not work as most sales traders don’t have strong relationships with the primary users of research — that is buy-side analysts and portfolio managers.  In addition, most agency brokers have historically not been terribly committed to selling independent research to their clients.  However, recently a small but growing number of agency brokers have become convinced of the strategic importance of providing research to their customers in order to grow their commission revenue.

Independent Sales Agents

Another option for research providers looking for an organization to market their research to the buy-side are boutique research sales agents.  Whereas there are dozens of these types of firms currently in existence in the US, most of them are small both in terms of their number of employees and the number of research providers they represent.

The primary strength of this type of firm is that they are extremely committed to selling third-party research to the buy-side as this is their only source of revenue.  In addition, these firms do considerably more than provide introductions for their research partners.  Most firms actually close sales for their providers, they develop and implement marketing plans for them, and they provide various levels of product development help to their clients.  In addition, these firms are often equipped to sell subscriptions, act as an institutional salesforce or work the broker vote. These firms are also quite focused as most handle between 4 to 6 research partners with a staff of between 2 to 4 sales professionals.

Unfortunately, independent sales agents are not the answer for every research provider.  Most research providers complain that these firms are the most expensive type of sales partner, charging a commission of between 25% to 50% on an ongoing basis.  Of course, this is understandable given that the only way they generate revenue is through selling research.  In addition, independent sales agents typically don’t have huge buy-side client bases they can leverage to introduce new research firms to.  These firms often are limited in their geographic scope.  Lastly, some research providers complain that these boutique sales agents can lose their focus on research providers over time after they feel they have saturated their rolodexes.

Research Aggregators

Some research providers have found other types of partners helpful in marketing / selling their research to the buy-side.  One type of firm has been the research aggregator or market data vendor, including firms like, Thomson Reuters, Bloomberg, FactSet, CapIQ, or even Gerson Lehrman Group.

These firms are attractive because of the large number of clients they can introduce a research provider to.  These firms also have great geographical research.  In addition, these firms don’t typically have their own proprietary research which might conflict with their interest in selling a third-party firm’s research.

Despite these strengths, these firms typically don’t have salespeople who are dedicated to marketing third-party research providers’ services — they focus instead on providing content distribution and aggregation.  In addition, these firms also offer their clients with access to a large number of research providers, making it much more difficult for any one provider to be noticed.  


As you can see, research providers that decide not to build their own research sales teams have a number of different options they can employ to expand their customer bases.  Unfortunately, most of these options are not perfect as they have both strengths and weaknesses.  Alternatively, some research providers might want to combine a few of these options, or they may want to hire their own staff in addition to using one or more of these solutions discussed in the article above.  Regardless of what strategy an RP wants to embark on, it is clear that the choice of the specific sales / distribution mix to use, and the partner to choose is an extremely important one to the success of the business, and one that should not be taken lightly.


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