AuthorTopic: Research Spin-Offs
@2003-07-31 14:10:56
Did anyone catch the article in the Financial Times this weekend about investment banking firms spinning off their research departments. Talk about major upheaval in our industry.
I am of the opinion that this solution is slightly drastic. I think the proposals released by the NYSE should be more reasonable. And yes I have a conflict of interest! Ha! Ha! However, if it does happen, competition in our industry will get much much worse. Curious as to what everyone thinks.
@2003-08-02 16:42:51
I read that FT article also and believe that layoffs seem likely -- research departments are run like expense centers and are not profitable as a stand-alone business. What fees do research depts. really generate that isn't [in]directly linked to i-banking? Is there a profitable way to provide [independent] research and is the demand out there? Maybe, but not enough demand for the supply of analysts at each major bank...

I see a lot of sell-side talent going to the buy side if the proposed restructuring for Citigroup becomes the industry norm.

I'm more interested to see what unfolds in the next big story:
"Gramm-Leach-Bliley Act Repealed, Glass Steagall v2.0 Passed"
@2003-08-03 21:35:14
Sell-side research is also a value-add to instiutional trading (provide an institution with a good idea, they will trade through you and you will make a commission). That is where sell-side research originated. If they want to isolate anything, it should be retail business from everything else. The problems only started once stupid retail clients began taking all recomendations at face value. The institutional clients, who this research is designed for, know how to use the reports. Sell-side research is so instrumental for institutional business it will never be spun off. The massive increase in equity ownership by individual Americans is threatening to cause overegulation of the industry and will hurt everyone in the end. They should separate retail from i-banking, let the grandmothers go somewhere independant like Schwab.

CFA Discussion Topic: Research Spin-Offs

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Martin Rockenfeldt