• Brokers are hiring talent to compete more effectively
• JP Morgan retains market share top spot; Jefferies moves up to second place
• ‘Juniorisation’ trends reversing – 1,400 years of net experience returned to top 30 brokers in 2024 YTD

Substantive Research, the research and market data discovery and spend analytics provider for the buy side, publishes the findings of its latest survey into investment research pricing and consumption, highlighting how research spending has evolved during 2024.

To compete more effectively, brokers are hiring talent, a clear indication that human judgment is preferred over AI. This means that the juniorisation trend of recent years is now reversing, with 1,400 years of experience returning to the top 30 brokers.

In terms of research payment rankings, JP Morgan maintains their top spot, with Jeffries rising to second place. This represents a large advancement in market share for Jefferies, as the research market concentrates significantly at the very top. In Substantive Research’s 2023 study into the investment research market, JP Morgan and Morgan Stanley held the top two positions in market share, with Jefferies in third place overall. At that time, market share gains were a direct result of investing in hiring and retaining skilled research analysts, against a backdrop of post-MiFID II price deflation and a move towards juniorisation of research.

2024 Study Findings

Overall, hiring talent remains a key priority for the research market and investment in new talent is considered a key way to increase market share in a market driven by consumption of analyst and corporate access meetings.

• The pace of hiring analyst talent has increased, indicating that the market still puts a high value on human insight vs AI. Moreover, our research found that those firms prepared to invest in the right people, reap the most rewards in terms of market share.
• Jefferies rises to second place in terms of research payments and is top in terms of net headcount increases this year. It was still able to make these market share gains, despite being only seventh in terms of driving client meetings with its sector analysts – this is a significant result in a market where the number of analyst meetings traditionally drives much of the remuneration/value calculations.
• JP Morgan continues to top the list in terms of market share as well as analyst interactions, but when it comes to headcount, it has only grown its team modestly when compared with the peer group. Despite JP Morgan’s much-publicised low rates for access to written research post-MiFID II, the firm dominates the market for analyst and corporate direct access, areas where the vast majority of each budget is allocated.
• The juniorisation trend in research analyst headcount is reversing, with 1,400 years of net experience returning to the top 30 brokers from niche providers, the corporate sector and the buy side. The market has cleared since the ‘brain drain’ – a loss of 7,500 years of net experience between 2018 and 2021 – only a handful of firms juniorised their teams in 2024. Brokers are looking for targeted, experienced hires in a market which has ‘turned the corner’, but has stabilised at a much lower base post-MiFID II.
• Mid-tier brokers are also beginning to hire and “seniorise” certain teams where they feel they have comparative advantage or where they see new opportunity.

Since Substantive Research’s 2023 study,  the investment research industry has witnessed significant changes.  A particular area of development was that payment optionality is now available to all asset managers in the UK, updating the MiFID II rules mandating that research costs had to be ‘unbundled’ from execution costs.  The new payment optionality means that, in theory, asset managers will once again be able to pass research costs back on to the end investors. However, the majority of the market remains hesitant, waiting to see how any changes are received by asset owners, and subsequently, which method is employed by the largest firms.

Mike Carrodus, CEO of Substantive Research, said: “What remains to be seen is how much of this renewed hiring is a natural stabilisation from previous years, and how much is due to optimism around the recent efforts by the UK and the EU regulators to help reflate research supply and coverage. Both sets of regulators are making it easier for asset managers to return to charging their end investor clients for these multi-million-dollar research budgets, however the buy side is currently in “wait and see” mode as it assesses the potential risks of making this move.”

He added: “The risk in the short term is that the regulatory softening seen in the FCA’s Payment Optionality and the EU Listing Act doesn’t translate to the increased pricing and higher research budgets that 2024 hiring trends could be relying on. While a move from asset managers in Europe to charging their end investors once again won’t guarantee a rise in research pricing, many brokers hope that the buy side does make the transition in 2025, and budgets become more flexible once again. Brokers at the top of research provider lists with the accompanying market share and resources can be patient while this all plays out – those further down who are investing will no doubt have a sharp focus on which way the buy side decides to go in 2025.”

Universe of firms covered by the research:

• 45 of the largest asset managers surveyed
• AUM : > $16 Trillion
• Geographic split: 33% N. America, 18% EU, 49% UK
• Predominant Research Funding method in UK/Europe : 80%P&L, 13% Mixed P&L / client-funded, 7% client-funded

Source: Substantive Research