In a new research report released today, “Searching for the Sell Side: An Added Value to High-Touch Trading,” TABB Group, the financial markets research and advisory firm, believes that by aggregating and institutionalizing information through the deployment of enterprise search technology, brokerage industry firms can form 360 views of their buy-side clients.
By gaining a more informed vision of a particular client’s strategies and holdings, they will be able to help their clients react to unforeseen events by intelligently distributing relevant research and market color, and through this holistic client view, better target different asset classes and products to clients.
“The added value of being able to anticipate and respond to their clients’ needs could increase sales trading by 10% and subsequently generate over $1 billion in annual commissions for the brokerage industry. Research analysts continue to make a minimum of 2,400 calls and attend as many as 350 meetings a year with clients. Although institutional sales and trading departments continue to overwhelm clients with content, the buy side has been increasingly frustrated by the quality of the sell-side coverage received,” says Adam Sussman, director of research at TABB Group and co-author of the report.
“In order to deliver more relevant information, cutting-edge brokerage firms have begun to bring together volumes of data, some digital, some trapped in the non-searchable brains of human capital,” writes Monica Schulz, research analyst and co-author. She explains that by tracking all communications the buy side has with a brokerage – email, phone conversations, trading logs, research requests, instant messages, requests for capital and securities lending – traders and salespeople have tried to ‘guesstimate’ what stocks a client is or should be holding. “To realise a holistic client service philosophy, brokers must be able to understand how each piece of the brokerage-client relationship fits together – and those that successfully pull this off will be capable of providing services more closely aligned with clients’ needs to win the lion’s share of the existing high-touch business. One straightforward way of achieving this is through the implementation of organisation-wide search technology. Through the use of such technology, they can redefine their value-add in a way that increases demand for high-touch services.”
Once enterprise search is in place, client profiling and servicing can be taken to the next level where brokerages can segment customers in new, more relevant ways, such as by client trading strategy. “In terms of hedge funds,” she adds, “directional, relative value, event-driven strategies and all of their sub-sets would be able to receive unique types of research and liquidity based upon how brokerages could best monetize those sources of flow.”
“For any one brokerage to get a leg-up in the highly competitive world of high-touch trading. they will need to use client information in innovative ways. To that end, the standardization and institutionalization of all client communication, including that which is now considered proprietary to the individual, will be essential,” says Sussman.