What will 2024 hold for the investment research industry?

The UK investment research industry is likely to experience significant change in 2024, driven by policy change, the economic climate and investor demand. But are research publishers ready to adapt and adjust their strategies and business models to meet the evolving needs of investors and institutions and help the country’s capital markets to thrive?  

Back to bundling

Last summer, Rachel Kent released her Investment Research Review, which was warmly received by the UK Government. The goal of the review was to recommend ways to revitalise capital markets in the UK – and re-invigorating investment research is seen as a key part of that process. Liquid and vibrant capital markets need strong research coverage – including for smaller cap firms – to encourage both institutional and retail investors. The review forms part of the wider package of measures – including the ‘Edinburgh Reforms’ all designed to make London a good place to list a business.

One of Rachel Kent’s key recommendations was for investment research providers to have flexibility in how they charge for research, including the option of ‘re-bundling’ research and execution. The disaggregation of research provision from trading, which was mandated by MiFID, is set to be reversed, offering forward-thinking publishers a unique opportunity to position themselves at the forefront of this wave.

Crucially, the review stipulates that regardless of whether the research is bundled or unbundled, there still needs to be transparency for end investors around the cost of research accompanied by efforts by research providers to benchmark research pricing and communicate payment policies, amongst other transparency guidelines. 

Innovation in investment research

The key trend shaping the investment research industry is the march of technological transformation – with artificial intelligence (AI) leading the way. With AI already able to produce transcripts of analyst briefings, automate the analysis of company accounts and ‘write’ analyst reports, it is clear that the role of human analysts will evolve. 

At BlueMatrix we believe that these changes will be for the better – freeing analysts from some of the more mundane parts of their job, for example. But it will also place the emphasis on the added value that human intelligence and insight that the best analysts bring.

The onus is on publishers to stay ahead of the curve, not just by adopting these innovations but by understanding their implications for the investment landscape. Technological advancements are not just tools; they are catalysts for change, and publishers must harness their potential to unlock new dimensions of insight for their clients and solidify their relevance in this increasingly tech-driven landscape. 

Research distribution 

Just as technology is changing the way investment research is produced, it is also changing the way it is consumed.

The ‘traditional’ distribution model for many analysts has been to email out PDFs of their latest reports. However, increasing amounts of research is distributed in rich media formats, such as HTML, that can be consumed on mobile devices. Rich media opens up the possibility of including video and audio, as well as more complex interactive features into investment research reports. And more research is available on publishing portals which can both control who has access to what research – limiting access to those with the correct rights – but also provide rich data on who and how research is used.

We’ve also seen demand – particularly from buy side firms, such as wealth managers - to be able to redistribute investment research to their end clients. Increasingly, clients are demanding rich experiences and information about their portfolio, usually via an app, and we are seeing investment research being incorporated. 

This client demand for information and data is one of the factors that it driving technological change at wealth managers. But there’s also an efficiency drive in wealth management - to streamline and optimise operational processes and enhance client services. This isn’t merely a trend; it's a necessity in an era where technological disruptions are rewriting the rules of delivery. As we’re seeing across all industries, companies are investing significantly in the likes of AI-driven analytics and automation tools.

The Kent review also touched on research distribution – calling for a central research platform on which all investment research would be published. Discussion are already underway with the treasury on what this could look like and how it could be funded. 

Looking ahead

There’s no doubt that investment research providers have been through a tough few years. 2024 looks like it could be an inflexion point – with a real desire from policymakers and regulators to see investment research at the heart of a revival of UK capital markets. Meanwhile changing technology will bring challenges and opportunities in equal measure.