Wednesday, November 14, 2007

Dispelling Common Myths About Independent Research

We spend a lot of time talking to our clients and to potential customers, and most days, the issues they discuss with us are the same. So today's blog will address the 7 most common misconceptions we hear - and offer our responses to the issues.


MYTH #1: “All investment research is the same.”

FACT: StreetBrains takes research a step further than what currently lands in your inbox – our research focuses on specialized sectors, niche trends, and unique companies that will help you to garner unmatched returns.

MYTH #2: “There’s no such thing as truly independent investment research.”

FACT: StreetBrains has no investment banking arm or broker-dealer, so our analysts are able to offer opinions free of any conflicts of interest. Period.

MYTH #3: “My firm doesn’t pay for independent research – We get it for free.”

FACT: If your firm pays for execution and is provided with research as an ‘add-on’ or ‘bundled’ service – your firm is paying for that research. “Bundling” of research and execution makes for opaque record keeping, and will soon become extinct.

MYTH #4: “Unbundling research from execution services probably wouldn’t save my firm any money.”

FACT: By unbundling research from execution, you can secure best execution pricing. Then, you are able to take your research dollars and pay separately - and more transparently - for high quality research that delivers actionable information and profitable returns. Unbundling is gaining steam as the preferred approach to obtaining quality research.

MYTH #5: "When the global research settlement terms end in 2008, firms will do away with independent research."

FACT: Although the ten firms involved in the global settlement will not be required to distribute independent research, these firms, as well as most other large firms, have publicly noted their intentions to continue offering third-party research. Because the global settlement required firms to handle their in-house research differently, independent research continues to be a valuable asset to the firms.

MYTH #6: "Soft dollar payments for research will soon be eliminated."

FACT: Although the issue of soft dollar payments looks likely to move to the SEC's front burner before the end of 2007, it is unlikely that soft dollars will be eliminated. It is unlikely that more disclosure and regulation will be required under current soft dollar arrangements, however, the SEC will be looking for ways to show mutual fund boards how they can easily distinguish proper soft dollar arrangements from bad. License-fee payment models - such as StreetBrains' - help deliver transparency of pricing in soft dollars arrangements.

MYTH #7: "Fundamental research is still the most widely used and desired investment analysis."

FACT: According to a recent study by Integrity Research Associates, specialized research has outgrown fundamental research as the leading category of analysis for independent research providers in the UK. As fundamental research becomes increasingly more commoditized, institutional investors continue to search for analysis that gives them an edge on their competitors.