Published on October 5, 2015 by Shikha Singh
Brokerage businesses are finding it increasingly difficult to justify investment research costs. Increasing competition, rising employee costs and keeping up with stringent regulations – for which internal controls need to be established and maintained – are making the business model downright unviable for some. Moreover, with the unbundling of research fees (from brokerage commissions) and declining soft dollars, it’s becoming near impossible to align the cost of research to brokerage commissions.
Banks and brokerages are therefore outsourcing processes in non-core functions to lower costs, increase efficiency, reduce management requirements, access services 24×5 (or more) and tap a large pool of experience and skilled resources with domain expertise.
The editorial and production process, in particular, has become a potential bottleneck for timely publication and an area where costs have increased since senior financial editors (and for the US market, series 16 licensed Supervisory Analysts) are expensive resources. In an environment where time-to-market is key, a resource needs to be available to review and process reports as and when analysts submit them—we ensure resource availability 24/5, which would otherwise be difficult and costly for the firm.
Eliminating publishing bottlenecks: We provide editorial and production/publishing services to several global sell-side firms. Our team meets tough deadlines in a fast-paced work environment and amid a heavy flow of reports.
Here’s an example of an operational model that turns around reports real-time, late into the night, ensuring high-quality and eliminating reputational risk for the firm.
This email exchange took place close to midnight Hong Kong time for a two-page report that analysed the immediate impact of a major geo-political development for an analyst’s large-cap stock. Our team in Bangalore reviewed and published the time-sensitive report to ensure that he was the “first-to-market” and could discuss the implications of the news on the stock with his clients before the market opened next morning. The entire process was completed in less than 30 minutes.
For this particular bank, the Bangalore team reviews/finalises all documents submitted by Asia-based analysts in time for the morning call the next day. They review the report for language, data, structure, and issues such as circulation of rumours, exaggerated claims, and negative commentary on management or the government. The editors review each report to ensure that the analyst has put forward a reasonable basis for the conclusions (e.g., price targets, recommendations, ratings, estimates and valuation assumptions). The team manages reputational risk by ensuring that reports meet the high standards of quality and integrity and comply with the relevant securities regulations and bank policies. The editors also liaise with internal parties, such as the bank’s own compliance team and control room (for approval and disclosures) and DTP (for publication/printing).
Here’s an example of another operational model that reduces turnaround by pre-empting regulatory issues:
Here, the Bangalore-based editor provides both an editing and a pre-SA service. In addition to the responsibilities we outlined earlier, the editor pre-empts regulatory issues and gets them addressed before the SA reviews the report. In case the SA has additional concerns, the editor works with the SA and the analyst to ensure that all SA queries have been answered. It’s only after this that formatting is checked and the report is published. This process significantly minimises the time taken for an editorial check, reduces the time spent on review by an SA, avoids a pile-up in the SA queue, and expedites research publication.
Thus, we are well-positioned to help sell-side research eliminate publishing bottlenecks and deliver high-quality research within tight deadlines.
* All emails have been sanitized to remove any specific references and ensure complete client confidentiality
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About the Author
Shikha heads Acuity Knowledge Partners’ (Acuity) editing, formatting & publishing and design services, managing all client accounts in this vertical. She has 16 years of experience in working with financial research content. Before joining Acuity, she worked with Goldman Sachs as a Series 16-qualified Supervisory Analyst and Editor. She also set up and managed its 10-member content management team in Bangalore. Her previous work at JPMorgan included reviewing equity research reports, and she focused on credit and industry and company research reports during her stint at Crisil Research (an S&P company). Shikha holds an MBA in Finance.
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