Revolutionizing the Research Practices of Investment Management Firms

| Point of View

Evolving drivers and challenges

Research remains an integral component of the investment management process, playing a key role in overall strategic asset allocation and the portfolio construction process. Historically, sell-side firms, buy-side firms, and investment banks have been the primary consumers of investment research and these players are now under tremendous pressure in today’s volatile market to manage research operations more efficiently. Post-crisis, investment management firms began to re-evaluate their research practices, not only to optimize costs but also to deliver better quality research and advice to clients. However, firms looking to overhaul their research practices often face multiple challenges due to heightened regulatory pressure, diminished advisor productivity, and increased client demands. Increasingly wealth managers are outsourcing their investment research services to third-party vendors. Though most firms still view research as a critical in-house function, they are re-evaluating the economics and overall operations of their research function. Though outsourcing presents multiple benefits for the financial industry, different firms are expected to outsource different processes—leveraging a sourcing model that best aligns with their business strategy.