What Research Services Do Investors Value Most?


 As institutional investors are pressured by regulators and market forces to be more careful in their research spending, research providers must prioritize services which add the most value to their clients.  Analyst access, corporate access and events remain the most highly valued services, based on Greenwich Associates surveys.

If we compare how US equity investors allocated research commissions in 2016 relative to 2005, it is remarkable what hasn’t changed over the eleven years.  Analyst access garnered nearly a quarter of commissions in 2005, and was unchanged in 2016’s poll.  The importance of conferences and seminars as well as economic analysis were similarly stable.

What has grown in importance is access to management, which increased from 18% of research commissions in 2005 to 22% in 2016.  Assess to management is becoming more integrated with other events, such as conferences and seminars.  If we combine those categories, events encompass 34% of commission spending.

Proportion of Research Commission Allocation

2005 2016 Change
Analyst service 23% 23%
Access to company management 18% 22%
Research conferences & industry seminars 12% 12%
Reports/Stock Ideas 25% 17%
—Company or industry reports 14% N/A  
—Thematic investment ideas or specific stock recommendations 9% N/A  
—Global research 2% N/A  
—Individual company studies & stock specific ideas N/A 13%  
—Industry, Cross-Sector or Cross-Region Studies N/A 4%  
Sales service 15% 11%
Economic analysis and portfolio strategy 6% 6%
Data services N/A 6%
Other (customized research, expert networks, etc.) 2% 3%

Sources: Greenwich Associates, Integrity Research

Data services are a new category since 2005, and currently draw 6% of commissions.  Customized research and expert networks also grew slightly from 2% of research commissions to 3%.

Written research has declined in importance over the period.   Greenwich has altered the component categories since 2005, but the aggregated commission allocation for research reports has shrunk from 25% to 17%.  As we have noted before, for the largest research providers (investment banks) written research is ‘marketing chum’, which reduces its inherent value.

Sales service has also declined in value over the eleven year period, falling from 15% of commissions allocated to 11%.  In part, this is the result of investment banks rationalizing their sales forces, often culling their most senior (and expensive) sales staff.

Our Take

European regulators are trying to force investment banks to provide more explicit fees for their research services.  We doubt there will be any quick movement to explicit pricing for all research services, with the bulk of research product continuing to be valued ex-post by the buy side using modified broker voting.  However, in the context of secular declines in commission spending, research providers — whether investment banks or independents — will need to increasingly focus on investing in the most valued research product, as well as concentrating on the services they do best.


About Author

Sandy Bragg is a principal at Integrity Research Associates. He has over thirty years experience as an investment research professional. Prior to joining Integrity in 2006, he was an Executive Managing Director at Standard & Poors, managing S&P’s equity research business and fund information properties. Sandy has an MBA from New York University and BA from Williams College. Email: Sanford.Bragg@integrity-research.com

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