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Unbundling: Research à la carte

The unbundling of research is gathering pace again, this time driven by ­customer demand. Clients with more discerning appetites would prefer to order individual bits and pieces from a menu where the prices are clearly ­written. However, both investment banks and smaller clients are addicted to the buffet approach. Peter Koh reports.

INVESTMENT BANKS IN Europe expect to start pricing their research in dollar terms, as opposed to basis points, for the first time within the next 12 to 18 months.

The move to attach a firm price to the product, although basic in just about every other industry, will be a radical departure for the equities business and is likely to spur a redrawing and divergence of business models at brokerage houses.

This unbundling of the price of brokerage services, which was kicked off by regulators, particularly the Financial Services Authority in the UK, is now being propelled by customer demand. But despite investment banks having in most cases already undertaken radical overhauls of their research departments – moves that by changing the research product and the way analysts spend their time were supposed to make research commercially viable – many banks are resisting this next logical step out of a fear that they might not have gone far enough.

“The world of research will be turned upside down in the next 12 to 18 months,” says Michael Baptista, head of research at ABN Amro in London. “We’re in active talks about pricing our research in dollar terms because clients have asked us and everyone else to do it.

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