Is Analyst Research Dead?

More and more financial firms are seeking our investor marketing services for their clients. The more we chat with financial professionals, the more we find out about the industry and their collective pain points. 

We recently wrote about how traditional IR is dead. Although some financial professionals are still reluctant to adapt, they all agree that the role of analyst research is dead.

Only a few decades ago, sell-side analysts were considered “referees” of the markets, experienced experts, influential and feared by listed companies, “stars” that investment banks were competing for. Their reports and recommendations distributed “free of charge” were moving share prices and could make or break an investment. Their forecasts were reviewed and analyzed. They were making the consensus. They were considered essential to investors and fund managers.

And then along came the internet.

The way we consume financial information has changed. Investor behavior has changed. Modern investors have decided they don’t need them. We are inundated with information from all angles. Potential investors are getting financial information and engaging in investing discussions with people from all over the world, thanks to chat forums, investing groups, financial blogs, social media, you name it…

Not only is there too much information out there but the financial industry has also changed. There is more scrutiny on active managers to do their own diligence to justify management fees. It is not enough to only follow analyst recommendations and definitely not enough to take a passive approach or follow an index. Margins have changed and it is too expensive for banks to have large research teams when financial professionals can share information from their favourite analysts.

Let’s not even get started on the third party, subscription-based research providers.  You bet they’re feeling the squeeze. Some resort to un-kosher tactics to stay alive. Our clients sometimes get solicited from these companies to pay for them to provide research on their company. Promising a favourable report, for a price…

The theme here seems to be “non-traditional”. So it’s not to say that financial research is “dead” in 2020 – It’s not dead, it just holds less weight. Research teams are significantly smaller and only need a couple star analysts.

What is evident is that the financial industry has changed. In today’s non-traditional world, there needs to be an emphasis on digital marketing tactics to reach the modern investor. This is why financial professionals who have realized this come to  Plexus Media to help their New Issues reach their full potential. Check our website for examples and more information.