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MiFID II regulation in Europe and Commission "unbundling" in the rest of the world is driving significant change in the commercial model of full service broker-dealers and investment banks. Regulation requires all research consumed by an asset manager to be "paid for" in explicit terms, rather than "bundled" in the brokerage commission (as it has been for years). Any research delivered (from research providers to asset managers) without an attached price tag will be seen as an "inducement to trade" by the regulators and therefore considered illegal under the new regime.

This move to explicit pricing of all research and related services is bringing profound changes to the broker-dealer and asset management industry. Being able to manage entitlements (for clients), and then delivering on that specific mandate will become increasingly critical for all broker-dealers and banks in the client-service working relationship of the future. While MiFID II may only specifically apply to operations within the European Union (UK remains a player despite Brexit), its relevance to both service providers and asset managers cannot be under-estimated in the rest of the world. Asset Managers may choose the most stringent regulatory environment as a benchmark to streamline their compliance function and may even see some of these requirements as best practice to remain competitive in the market place. If the latter plays out in reality, then all broker-dealers will be forced to make changes to their working practices.

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Regulatory changes in European financial markets are driving significant shift in ways banks and brokers engage their clients (we refer here to the Asset Manager clients). Some of the changes, particularly around Market Abuse Regulation (MAR) is being brought about to ensure the marketing of financial products (and investment advice) is objective while providing a boost to investor confidence and protection. As a broker-dealer providing investment research and advice – Are you ready for the new regime?

Implementation of MAR has consequences for firms transacting business and providing investment research as a service to their clients. While some may view these regulation induced changes to be Euro-centric and therefore of little consequence elsewhere, we believe the implications could be far-reaching and could be adopted as best practice by many firms, and their internal compliance organization.

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On the 3rd of November 2016, over 300 investment professionals got together at the "Unbundling Uncovered" conference of Substantive Research in London. ANALEC as one of the co-sponsors of the event was an active participant. The conference was centered around the main issue of MiFID II compliance and its implications for the global broker-dealer and asset management industry, in particular the challenges of timely compliance for European players. Various panels over the course of the day, covered a range of topics – CIO perspective on the impending changes; RPA practices; the regulators’ perspective on the impact points; charging for FICC research; and the role of technology and platforms to facilitate this change.

ANALEC as a technology company presented its views on a panel that centered around (service) delivery, payments, tracking and permissioning. As a lead into the conference Substantive Research conducted a short Q&A with ANALEC, which is enclosed here for your access.

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The advent of "unbundling" commissions and MiFID II compliance in Europe will change the client service model (from broker-dealers to asset managers) forever. Full service brokers as well as asset managers will have to evolve to remain competitive and viable. Research and related services from broker-dealers to asset managers have to be "priced" explicitly. Additionally, asset managers have to be more accountable to their asset owners when it comes to paying brokers for their services. Consequently, the use of data and related analytics as part of the client service value chain is likely to grow in its importance. Intelligent technology solutions to manage the evolving client relationships will be integral to long-run commercial sustainability for broker-dealers, while helping with the accountability requests of the buy-side.

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Investment research organizations have to work harder for their money. Add to that the compliance and regulatory challenges, the cost of business remains high. Leveraging the evolving landscape of digital technologies to expand your ability to get closer to your customers should be a high priority. In other words, are you ready for the future of investment research?

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Institutional stock brokers globally are facing significant business transformation pressures from the market place, driven by economics, technology and regulatory change. Their customers want more transparency in their commission payments ("unbundling") while turning more selective in their service needs from broker-dealers. We believe a traditional CRM approach will fail to deliver the necessary results to aid the business of a broker-dealer.

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MiFID II calls for the banning of trading commissions to pay for research and research related services, to create more transparent and competitive financial markets regime. Some wonder if the unintended consequences of this move could lead to greater concentration of the market structure and reduction of choice.

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Why is the issue of investment research unbundling important to you and the firm?

Unbundling of commissions is hugely important to our firm. We help brokers and investment banks use software and technology to achieve cost efficiencies as well as service their clients better. When the commercial model of full service brokers goes through a metamorphosis (as "unbundling" would suggest), we believe technology innovation in service delivery and customer engagement can help our clients fight the competitive challenges better in the market place. ANALEC continues to innovate to help its client base remain competitive in the market place.

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Traditional client engagement and servicing models in the broker-dealer industry are increasingly under attack. Technology has a role to play to align broker-dealers more closely with their clients’ needs and aspirations. However, there is lot more to the challenge than merely implementing the right technology.

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High costs, regulatory challenges, and lack of differentiation in a competitive marketplace, are raising serious questions on the long-term commercial viability of sell-side research.

The sell-side investment research industry has been structurally challenged for the best part of the last decade. Yet, little has come about in the industry in terms of innovation or step-change in business process, to address these structural challenges.

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Merely delivering information adds little value to the research consumer, as information is abundantly available at the press of a mouse click. To win greater mindshare, investment research firms have to look at interactive engagement tools within their research offerings and research reports.

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By Joe Vaccarella (CIA-Omnigage) and Indy Sarker (ANALEC)

At the core of any financial technology provider must be flexibility. Financial institutions rely on their fintech partner’s nimbleness when it comes to addressing unexpected market turbulence and seamlessly navigating the evolving industry landscape. With global issues such as COVID-19 impacting business continuity and daily workflows, flexible and easy-to-deploy-and-use technology has never been more important.

Omnigage and ANALEC recently partnered to address business continuity and communication hurdles that traders and analysts are facing with their client base as firms continue to operate remotely during the Coronavirus pandemic. By providing secure and compliant multi-channel communication solutions, the collaboration is allowing institutions to access new peaks of productivity during a time of uncertainty.

Tools that Turn the Tides
The needs of a financial institution can change overnight and a solution that provides everything in one secure and compliant location is essential. Having the right tools that can be deployed quickly can be the difference between a new client relationship and a lost one.

Services like detailed call tracking, click-to-dial, and compliant, role-based permissions go hand-in-hand with platforms like Omnigage, and with ANALEC’s call list management with its CRM, data can be leveraged for strategic decision-making without any loss of engagement time. Omnigage’s multi-channel communications platform integrates seamlessly with any commercial or native CRM, enabling firms to increase productivity across the organization. When paired with ANALEC’s CRM capabilities, investment banks and brokers get a significant leg up when it comes to tactically engaging their clients and delivering their high-value services like Corporate Access.

A Secure Environment
As many vendors adjust their solutions to address data security concerns and ensure that everything falls within compliance parameters, expectations of a flexible fintech solution have increased. Systems that provide multi-faceted communication tools must first address the rampant cybersecurity issues that firms are encountering in the work-from-home dynamic. If security and compliance parameters are not addressed, flexible technology quickly becomes an afterthought.

To continue performing at optimal levels, financial institutions need to foster a workplace that not only streamlines communication and investment research delivery, but also provides relationship risk management for clients and employees. With Omnigage and ANALEC, solutions can be deployed overnight as opposed to over several months. Firms are never left scrambling to find their next solution and will always have access to the best data and communication tools.

As financial institutions continue to adapt to what has become the new normal of a remote and virtual workplace, the marriage of Omnigage and ANALEC not only provides the security and flexibility firms need – but the peace of mind that their technology will not hinder their ability to service customers in the most secure and engaging manner.

By Joe Vaccarella (CIA-Omnigage) and Indy Sarker (ANALEC)

Customer and service provider dynamics are evolving and as a result, so must the way in which firms evaluate the customer experience. Companies are beginning to enact long-term remote working practices and with the right tools in place, the customer experience can be analyzed, quantified, and improved over time to ensure workflows are always at optimal levels.

After exploring the importance of flexibility in Part 1 of our Communications and Fintech series, Part 2 will examine how to quantify the customer experience, how this can improve best practices, and how engagement analytics can help personalize and ultimately maximize every experience.

Why Numbers Matter
Quantifying customer engagement with clean data in a secure environment with a user-friendly and modern interface was the genesis of the Omnigage platform. Omnigage’s partnership with ANALEC provides the broker-dealers and investment research service providers with an added layer of security and quality control on their client engagement activities. Numbers always tell a story. Converting interactions with clients into data-points and triggers allows far effective follow-up and greater levels of accuracy in meeting customer needs and aspirations over time. Incorporating these data-driven insights into strategies allows firms to turn intel into action and proactively address customer needs.

Through data and machine learning capabilities, a good multi-channel communications platform can suggest and create customer engagement campaigns that fit workflows and provide significant bespoke content delivery to enrich the client servicing experience. Smart analytics and consumer preferences are a key facet of Omnigage that gradually enhance its intelligence.

Quantifiable data not only creates more opportunities for the customer and service provider, but it helps foster more personalized relationships.

The Ultimate Customer Experience
Deciphering the "ultimate customer experience" can be tricky under current circumstances, but Omnigage and ANALEC make it simple. ANALEC’s proactive management reporting and ability to tag conversations with relevant insights and inferences paired with Omnigage’s best call times and granular metrics offer a best-in-class service that fully understands the scope of any customer's needs.

For instance, the Corporate Access process has historically been driven by in-person meetings coordinated by major banks that connect institutional investors with corporate management teams. With these events occurring in a virtual-only environment the past three months, data can illustrate which communication tools are being enacted, how long they are being used, and what facets of these tools may need to be improved so that the overall experience is more personable and efficient.

Our Bigger Picture
Customer engagement dynamics will continue to evolve as companies gravitate towards long-term remote working conditions in a post-COVID environment. Blast messaging, SMS, email, webinars, and other methods of digital communication will become integral parts of the daily workflows.

As workflows and habits evolve, so will the data. The firms that take a hard look at the details these data insights provide are those that will prosper in this increasingly remote and digital ecosystem that will undoubtedly become the new normal.