Investment Research is an important function of investment decision making. However, over the last few years this function has come under increasing pressure. First, in the early 2000s banks were forced to put up a wall between research and investment banking in order to prevent corruption. Next, the digitization of trading and creation of multiple exchanges for equity trading led to brokerage and clearing costs in a race to zero. These costs previously supported sell-side research. On the buy-side, more and more research went in-house to hedge funds that are attempting to gain a proprietary edge. In the future, these trends will be exacerbated as the industry continues to change.
The second big change is that research will be packaged more like a technology product than as a written document. Banks, funds and third party operators will create software to help distribute research across mobile applications. Investors will spend less time in front of their desktop computer and more time accessing information on handheld devices. Due to this change, research will also need to be created for these formats.
Lastly, research analysts will gain and lose trust quicker than ever before. As data becomes so widely available, investors will rapidly switch from analyst to analyst until they find the one that means their demands. Reputation will be build or destruct overnight.
Overall, the research industry is experiencing significant changes. The trends that were started by changes in technology will eventually impact all parts of the investment decision making process. Research and investment firms that realize there trends and take action will take the lead in the industry.
