Investment research faces the biggest challenge to its business model since Eliot Spitzer, the pugnacious former attorney-general of New York, jammed a mile-high wedge between analysts and bankers 15 years ago. From January, clients must pay for research directly rather than via commission. A horrible shock is predicted as analysts such as me discover what they are really worth. Many say research is in terminal decline regardless.
Such doom and gloom is not shared by the so-called sellside, however — and we are a cynical bunch. We see a bright future where newly unbundled content is king and clients are happy to pay for it. Outsiders are too pessimistic because they do not have the data we do. This is not their fault. Indeed, it is exactly because the economics of research is mixed up with sales and trading that regulators want to untangle the mess so clients can see what they are paying for.
Why are the naysayers wrong? Take readership. Low click-through rates are often cited as a sign of disengagement, but analysts are now encouraged to summarise their ideas into the body of emails so clients do not have to download whole reports. On average, about a third of these emails are opened — a significant number. More encouragingly, openings skyrocket when original work is presented in an attractive way. Our best content is often more widely read than much paid-for financial commentary.