Unbundling Uncovered: investment research in summer 2023

We’re excited  to join everyone in New York today, where Singletrack CSO Brijesh Malkan and Head of US Operations Todd Klein will be participating in two of the panels. Here, we share how we answered those questions posed by the Substantive Research team, covering topics like current market volatility, regulatory changes and the future of the investment research market. We look forward to getting more perspectives and deeper insights on these and plenty of other issues at Unbundling Uncovered today.

How has current economic uncertainty and market volatility affected the research market, and how structural do you think these factors are?

Uncertainty and volatility are constants for capital markets. However, the last few years have brought a series of major destabilising forces, from the pandemic, to war in Ukraine, to the current high inflation levels. Firms everywhere are tightening their belts, and that means competition levels will stay high. Reduced budgets and the upheavals of Covid also mean that the accelerated digital transformation we’ve seen will continue. Virtual ways of doing business are only growing in importance. Flexibility and agility remain crucial: firms must be able to adapt to changing needs fast.

The regulatory outlook for research in Europe, the UK and the United States looks uncertain, with mixed signals coming from each market. How much can buy and sell side firms be doing now, given the fluid situation they are dealing with?

Regulatory activity and market uncertainty are at levels not experienced since the leadup to MiFID II. Uncertainty about outcomes of EU and UK regulatory reviews and the No Action Relief expiry are creating complex, even contradictory conditions. On the whole, we are seeing a scaling back of unbundling provisions from regulators although there doesn’t appear to be much appetite for this piecemeal approach from industry participants. While operating somewhere on the bundled/unbundled continuum, firms must continue to interrogate their operating models. Ensuring that all the firm’s key resources – from people to clients to data – are in good order will give a distinct competitive edge.

Can the provision of investment research be a stand alone business in the coming years, or will it need to be part of a more comprehensive offering in order to be sustainable?

It’s still unclear exactly how research providers will be able to operate once the No Action Relief expires. Firms taking the RIA path will be locked out of many other areas of activity. There will always be a place for incisive, substantive research, yet with reduced budgets across the board, the focus for research providers should be on developing and maintaining a deep understanding of their clients’ needs in order to provide indispensable, bespoke-feel service across all tiers. Additionally, flexibility as regulation evolves will be key: there is little appetite on the buy side for increased compliance complexity.

What is the most important thing that research providers need to do in order to navigate a tough time for many firms within their client base?

As the markets are squeezed, firms must be ready to make the most of everything they have: that includes their talent, their client base and their proprietary and third-party data. By eliminating silos and creating mechanisms for a 360 view of activity, firms can unlock big efficiencies and stay agile as the situation evolves. Incorporating automation and AI-backed tools will only enhance this.

More specifically, research providers can focus on certain key activities to stay successful, including:

• Productisation of research offering
• Automation of entitlements management
• Deep client strategy reporting and analytics
• Increased client prospecting

Where have you seen the greatest innovation in the market, and in which areas is your firm innovating right now?

While the situation has increased uncertainty for all market participants, it has created impetus for firms to think differently about how they deliver their services and capture value. A key driver for innovation at the moment is the need to operate efficiently and optimise workflows and tools already in place. Singletrack has invested in tools and technology to enable our clients to fully leverage their research and optimise client engagement including AI-backed automation tools, ambient data gathering, proper storage and management of proprietary data as well as integration with third-party data, giving a single overview of your business to help with strategic, data-driven decision making.