Green shoots for research providers

There are three key factors that underpinned our optimism:

1. Shifting to a dual payment structure will increase the capital available for research products and services, removing some of the burden on investment managers to fund purchases directly from P&L. 
2. Market volatility is increasing the value of research and insights that support alpha generation, which may help unlock research spend.
3. Emerging innovative technology has the potential to enhance value delivery and increase consumption capacity across the buy and sell sides.

All three of these macro factors bode well and provide the first signs of tailwinds for an industry that has been pushing a large rock up a mountain for the better part of a decade—if you’ll excuse my mixed metaphors.

But what can research providers do to take advantage of these positive signs? What steps can firms take to drive ROI from investment research? Here are our conclusions.

Step 1: get the basics right

During our discussion, both Mike and Jason emphasised that research firms continue to leave money on the table because they fail to invest in developing a well-informed understanding of their clients’ service preferences and interests. 

To better match interests to products and services, research providers should consider answers to questions such as the following: 

• Which PMs value the written research, and which prefer meetings?
• Which companies and sectors are my contacts focused on this quarter?
• Which of my clients have the budget capacity to consume and remunerate greater service levels?
• Which accounts do I have deep but not broad relationships with?
• Which accounts with similar profiles to successful existing clients should I be prospecting? 
• Am I capturing and monetising 100% of my high-touch analyst interactions?

To be effective, firms need to ensure they have high-quality data on their clients, capture engagement activity, and can distill data into actionable insights ready to be integrated into workflows.

Step 2: use research insights to grow cross-service revenue

High quality metrics on research engagement are essential for supporting revenue generation. This was a key theme during our webinar discussion, familiar to me from recent conversations with leaders at independent research providers and banks.

What does this look like? In my discussions with Singletrack clients common examples include Sales and sales trading professionals receiving alerts on new research engagement activity to identify trading signals and to look for signs of interest in a particular analyst or corporate access interaction; heads of research analysing research portal searches to uncover unfulfilled needs; bankers using research metrics to gauge activity and sentiment in particular sectors and sub-sectors.

High value data points include:

• Reading a historic report
• Immediately opening or reading an email
• Forwarding a research report
• Blocking a key contact

The bottom line was that while research itself is a high value product for the buy side, engagement insights are equally important for the sell side to guide targeting of high-touch services, to drive cross-sell (e.g. for corporate access or trading services) and to mitigate revenue downside risks (e.g. as an early warning indicator for a drop in vote).

Step 3: create value with the right technology

There is a general acceptance that simply expanding coverage or adding a new product such as expert networks or alternative data services will not, in and of itself, unlock revenue. This is because it often requires displacing a similar product or service the buy side is already consuming. However, both the buy and sell sides acknowledge that technology-enabled services can create value and, in turn, increase revenue.

Tech-based opportunities for research providers include:

• Distributing research in machine-readable formats so downstream platforms can extract insights at scale – for example API-based delivery into a buy side LLM
• Improving search, modelling and communication tools for investment research portals
• Helping buy side professionals generate new insights from core research through interactive data and research products – for example scenario modelling
• Lower the cost and effort on the buy side to produce outputs like investment cases, chartpacks and presentations using last mile solutions

Furthermore, AI will undoubtedly lower the cost of research production very rapidly – further improving the ROI equation.

Light at the end of the tunnel?

As I reflect on our webinar, what began as a rather gloomy evaluation of the research industry’s current predicament evolved into a highly optimistic conversation. The research industry stands at a crucial inflection point and has the potential to act as a catalyst—not just for changing capital markets, but for reshaping how we think about and deliver knowledge-based services.

To borrow a football cliché (which will no doubt be welcomed by at least one of my webinar participants), it’s a game of two halves. The past decade has undoubtedly been challenging for the research industry. But with the right approach and innovation, the next decade could prove to be a golden era.

About Singletrack Academy

Singletrack Academy is a new service from Singletrack that helps capital markets firms accelerate the adoption of data-driven advisory. Through the medium of exclusive events, training programs and thought leadership content, Academy brings together professionals from across the industry in the exchange of market trends, best practices and more.

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