Mark Twain noted after a newspaper had prematurely published his obituary that reports of his death had been greatly exaggerated. The same can be said of sell-side research. The Myners review in 2001 and the October 2003 $1.4 billion Global Research Settlement forced on the industry by New York attorney general Eliot Spitzer, seemed to presage a shake-up of existing business models on both sides of the Atlantic. However, on the surface at least very little has changed.
Analysts write, sales teams sell (research is sold, not bought, or at least that is what equity sales people will tell you) and fund managers pay for the service via bundled commissions. Perhaps the financial services industry has taken to heart another of Twain’s famous sayings: “Never put off until tomorrow that which could be done the day after tomorrow.” Institutional inertia is certainly a powerful force, but there has been change.
There are fewer sell-side analysts. According to the National Research Exchange in the US, a body set up to promote independent research, the number of analysts at the Wall Street firms fell by 30% to 995 from 2001 to the end of 2005.