Research as a Service: Assessing the Implications of MiFID II on Investment Research

by John Dwyer, March 14, 2017
Industry Trends
Global, EMEA

Abstract

Research aggregators have offered the buy side access to research via a platform with transparent pricing, usage analytics, and budgeting tools. A key driver of the success of these platforms will be the pricing strategy; we explore the implications of a “per report” pricing approach versus a subscription-based Research as a Service approach.

Celent has released a new report titled Research as a Service. The report was written by John Dwyer, a Senior Analyst with Celent’s Securities & Investments practice.

Research aggregators have emerged offering the buy side access to research via a platform with transparent pricing, usage analytics, and budgeting tools.

A key driver of the success of these platforms will be the pricing strategy; we explore the implications of a “per report” pricing approach versus a subscription-based Research as a Service approach.

Research as a Service harnesses best-in-class technology to optimize transparency, compliance, and pricing of research. In addition, it combines digital publishing and alignment of incentives to create a network generating actionable alpha. For example, Smartkarma is pioneering the Research as a Service model across Asian markets. Its recent partnership with Société Générale is a milestone for the investment research industry. Real consensus among the buy and sell side remains elusive — other than an expectation that the regulatory picture is likely to remain mixed.

“The regulatory pulse is likely to quicken through 2017 as evidenced by the Financial Conduct Authority’s recent announcements regarding firms failing to meet their expectations in a number of key research-related areas, including monitoring, pricing, budgeting, and record-keeping,” commented Dwyer.

“The initial focus of the incumbents on the buy side and sell side is likely to be on compliance. However, as new operating procedures are put into place and the research evolves to a peer-to-peer approach, then greater scrutiny will emerge on commercial implications of how alpha-generating research should be monetized,” he added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Strengths of Smartkarma Business Model

3

 

Unbundling Uncovered Conference

3

Key Questions

4

Introduction

5

Research Aggregators

6

 

What Is the Direction of Travel?

7

 

Research as a Product (RaaP)

9

 

Research as a Service (RaaS)

12

 

Some Fundamental Questions of RaaS

14

 

Pain Points of the Current Bank-Led Research Model

15

 

Chasing the Tail

17

 

Four Key Themes

18

Company in Profile — Smartkarma

20

 

Client Base

21

 

Insight Providers

21

 

Revenue Model

21

 

Compliance In-Built

22

 

Key Celent Perspectives on Smartkarma

23

 

Société Générale and Smartkarma

24

Unbundling Uncovered Survey Results

25

 

Hit the Buy Side Where it Hertz

28

 

Contrarian Value

29

 

Confidentiality

29

 

Leading Indicators

29

 

Long Volatility Strategy

30

Key Focus Areas for 2017/18

32

Concluding Remarks

33

Leveraging Celent’s Expertise

35

 

Support for Financial Institutions

35

 

Support for Vendors

35

Related Celent Research

36

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