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Capital Markets Research and Consulting: Time to Catch Up

Jay Biancamano

Jay Biancamano

A 25 year plus financial services veteran and managing director of Digital Assets and Blockchain in Capital Markets at State Street.
This is NOT an article about MiFID II, so breathe a sigh of relief for now. It is an article about Capital Markets Research (CMR), more specifically, Market Structure and Product research. Research that is used for Corporate and Product Strategy.

As a frequent consumer (and contributor) of CMR I have lately found there is a certain irony in the fact that CMR providers are so good at presenting pieces on new technologies, but have not been able to move away from the traditional sourcing and dissemination of that insight. Means such as Surveys, hard copies, interviews, blog posts, pod casts and the like. 

Let’s face it,“hard copy” and “powerpoint” research presentations are not made for the world we live in today. The world now is you have two minutes to “tell me what I need to know” and then “How can I use this to help my business”. It is basically the same means we have for more than two decades. While the digital revolution has transformed how other industries gather and disseminate intelligence, the CMR industry has been a laggard. 

As Capital Markets employment sees it’s demographics shift toward Millennials on both Trading desks and in Portfolio Management, CMR is going to have to change for that audience. That audience is going to force innovation and do so very quickly. Innovation that will change both how it is sourced, the quality of it and how it is disseminated. 

You could argue that Capital Markets take full advantage of digital tools and other technological sources of “Democratized Knowledge” but I would argue that there is nothing unique about that. In other words, that information is already Democratized, its just being repackaged for convenience.  

The Millennial and soon to be post Millennial population will no longer want hard copy, broad based information, but will look for more individualized insight, that is both curated and convenient.  I believe that two profound changes will occur in the CMR space that will increase the Quality of the insight and how users “interact” with it.

i. Pro-active Sourcing and Curating of Authoritative information 

Technology that allows for Subject Matter Experts (SMEs) to be sourced, attributed and readily accessed. The attractiveness of such insight is that it’s both quantifiable and accountable. Information of this type is be valued by both its accuracy and availability; reputation will pay a crucial role in just how much people use these new sources, thus the knowledge they provide will need to be greater than 99% reliable.  

That may sound high, but accuracy is the key here. For example no one would risk their reputation solely on using Wikipedia, because Wikipedia is subject to misleading information. However it is quite accurate and depending on the subject is usually accurate over 90% of the time. IBM’s Watson is close to 95% accurate, but even 95% is not good enough. When you are contemplating which direction to take your $100 million business, then CMR consumers have to demand 100% accuracy or it’s not worth the risk. 

For this advance to happen, it will require cooperation and the onus is on the individual SMEs or Institutions to create singular closed domains of knowledge that are attributable to them. These will be closed domains of knowledge that they alone are responsible for eliminating the scrutiny that comes with anonymous information that other open systems and surveys are susceptible to.   

These singular domains of knowledge could be looked at as a federation of independent research providers, along with a “staff” of SME’s that the Capital Markets will use anytime they need insight from defining a regulation all the way up to formulating product strategy.

ii. Seamless interaction and dissemination using Natural Language to access that Authoritative Information 

The same technology that allows insight and expertise to be dynamically curated, and updated must also allow for that knowledge to be presented in a way that makes it available immediately to subscribers, and lets them share that information easily and succinctly to anyone at anytime. For that information to be truly embraced by the end user it must be queryable. It must be able to understand a “concept” and respond to queries about that concept. It has to allow for variance so the query can be understood whether it be phrased in the form of a sentence or as an instruction. In other words, anyone with the right entitlements using Natural Language should be able to drill down and find the actionable insight they need quickly, and (always) receive the correct intended response. 

Their incentive will not only be for them to be seen as adopters of new technology, but it will also allow them to monetize their expertise in a way previously unavailable. It will not only knock down barriers to previously inaccessible knowledge, it will also eliminate geographic and media barriers that have prevented some of the most brilliant minds from being available to anyone. 

It will be very interesting to see how the current CMR providers incorporates these changes over the next few years. It will also be interesting to see what new players will enter the space.

Jay Biancamano

Jay Biancamano

A 25 year plus financial services veteran and managing director of Digital Assets and Blockchain in Capital Markets at State Street.