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Most of the brokerage business is very slow in how it adjusts its business model, which is basically to trade shares and float new issues. Big bucks are at stake and regulatory issues severely limit flexibility. Typically research analysts spam commoditized reports to clients who never read them. Then they follow up with a blast voice-mail that never gets listened to.
In fact, information overload is the top issue for many fund managers, according to a survey our firm conducted last fall.
Yet today's WSJ shows how Lehman Brothers is tweaking its business model in a small way in equity research to generate a big change: No more reports. This is a disruptive strategy in a consensus-driven industry.
Instead, the analysts move to the trading desk, where they operate as traders' left-brains, generating instantaneous analysis for their own desk for for clients on the phone.
Net effect for Lehman is:
- reaching clients in new ways
- helping solve the information overload problem
- focussing where the value is
- not playing the commoditized research game
- reducing regulatory constraints
Wall Street Journal excerpt:
<<Desk analysts -- the name for analysts who now sit on client-trading desks -- don't publish stock research...
There are 15 people on Lehman's desk-analyst team, including three former stock analysts. Lehman says its decision to move analysts to the trading desk is aimed at bolstering the advice it is giving to its best trading clients and firm traders, which mainly facilitate client trades but also take positions for the firm.
Staffing trading desks with top research analysts long has been common in the bond market. That corner of the financial world caters almost exclusively to institutional clients, and many firms have done away with virtually all of their publishing bond analysts in favor of the desk-analyst model. >>
**Other Information**
CEO Guide to the Benefits of Disruption (pdf) and other tools for managing disruption at The Disruption Group's site.
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