Research continues to be one of the most visible ways in which an investment bank can make an impression on its clients, yet many of those clients are not necessarily willing to pay a premium for that research. This was just one of the conclusions drawn from our recent Investment Banking Survey of 100 US and UK fund managers and corporate executives. Let’s take a closer look at some of the key findings related to clients’ views of research:
- Clients rank research high. Investment banking research was the second most important factor influencing a client’s choice of an investment bank (58 percent), only price was more important (68 percent).
- Clients have a view as to what should be a core basic service—written research is regarded as being a part of this core service.
- Clients want access to analysts. Above basic research there is a hierarchy of value, with access to analysts being particularly valued. Analyst visits and access to corporate management are “scarce resources” compared to written reports and conference calls, and are the most expensive to provide. We find that many investment banks typically provide these “premium” services on the assumption that clients will pay more for them in trading business.
- Clients value industry research. General industry and thematic research, particularly with commercial insight, was often more valued than specific company-focused research.
- High-touch communications matter. Investment banking clients most valued one-on-one time with analysts or telephone calls. E-mailing research was cited as the least valued form of communication.
Making research count
Our survey findings point to a clear fact: research is key, but now the challenge for investment banks is to meet demands for a product for which, in its basic form, clients are unwilling to pay premium. For investment banks’ research operations, there are a number of ways to drive value in the future:
- Take clients up the value curve, realizing what they truly value—thematic research with commercial insight—and where they are willing to pay a premium.
- Focus on relatively few industries and establish a depth of knowledge, which allows premium pricing.
- Expand research into areas where demand is still growing rapidly, but coverage remains low, in emerging markets, for example.
- Develop a business model in which low-cost centers help with basic number crunching and simple analytics, enabling analysts in high-cost locations to meet enhanced client demands.
To learn more about investment banking clients’ perspectives on research, download: