Brokers gain market share by increasing analyst headcount and experience, study finds

Rick Steves

“What is also clear, is that brokers that increase both their analyst headcount and average experience levels in their teams are guaranteed to increase market share from their previous positions.”

Since MiFID II came into effect, in proportionate terms, European brokers had shrunk their analyst teams at least three times more than their US counterparts, according to a 2020 study conducted by Substantive Research.

The report concluded there had been a 12% loss of analysts in Europe vs a 4% loss in the United States on account of decreased budgets among buy side firms globally but more significantly in Europe.

Now, the latest equity Analyst Mapping study, covering data spanning the first three quarters of 2021, shows that the brain drain in investment research has stabilized.

Brain drain in investment research decelerates

Study findings show that the brain drain in investment research has rapidly decelerated in 2021, with only 296 years of net experience lost to the supply side of the market globally, compared with almost 7,500 over the previous 3 years.

As to analyst headcount, Europe has now stabilized with an increase of 1% in 2021, coupled with net 45 years of experience lost compared to analyst team headcount in the US which has decreased by 1%, with a net loss of 251 years of experience in the market.


The post-MiFID II shock initially hit all providers similarly in terms of lower research payments. The now fragmented market has each broker having its own unique experience in terms of its pricing power and ability to commit to quality and coverage from a cost perspective.

The buy side’s research valuation processes get more rigorous and their remuneration for external research is much more sensitive to changes in quality and resourcing by brokers, the report stated.

Retaining senior analysts – Broker market share

Mike Carrodus, CEO of Substantive Research, commented: “In 2021 we saw broker research cost-cutting stablising overall. This has been driven by a subset of brokers retaining and hiring senior, quality analysts which has offset continued cuts among other sell side firms. The buy side’s research valuation processes have matured in the last three years and now ensure that payments quickly reflect changes in quality and breadth of coverage. They are tracking and rewarding broker commitment to investing in the sector coverage they care about most within each broker.”

“What is also clear, is that brokers that increase both their analyst headcount and average experience levels in their teams are guaranteed to increase market share from their previous positions. However, increasing headcount without an accompanying rise in experience is not correlated with larger payments from clients.”

Brokers which have stuck to robust pricing structures and have taken the opportunity to grow teams with quality analysts are now seeing the rewards in terms of market share.

According to the report, Jefferies is an example of the high correlation between investment in retaining senior analysts and broker market share.

Jefferies increased analyst headcount in 2019 and 2020 against the overall market trend and increased experience by a net 73 years, versus an industry average of a net loss of 31 years.

At the same time, the broker jumped into the top 10 research brokers by market share in payments during 2020, and rose to 7th position during 2021 despite strong competition and significant market churn around them.

In March 2021, Substantive Research released its second Analyst Mapping study, covering the movements in experience levels amongst sell side equity research analyst teams, from Jan 2018 – Dec 2020. The results painted a clear picture of a market that had undergone significant retrenchment in tenure, with nearly 7,500 years of net analyst experience lost to the market during that time period.

Read this next

Metaverse Gaming NFT

Despite crypto winter, Fastex grabs $23.2 million in Fasttoken token sale

Fasttoken, part of the Fastex web3 ecosystem, has secured $23.2 million in financing through the private and public token sales of its native cryptocurrency Fasttoken (FTN).

Digital Assets

Iran to repay Russian debts in gold-backed stablecoins

A high-ranking member of the Russian parliament confirmed reports that his country was in talks with Iran to create a stablecoin for foreign trade settlements, to replace the dollar, ruble and Iranian rial.

Digital Assets

SEC denies Cathie Wood’s bitcoin ETF for second time

The approval of a regulated crypto derivative is still looking far less likely, as the US regulators have once again denied Cathie Wood’s application for a long-awaited spot bitcoin exchange-traded fund (ETF).

Executive Moves

Pavel Spirin promoted to Scope Markets CEO following Rostro acquisition

Belize-based FX and CFDs brokerage Scope Markets has promoted Pavel Spirin to take on an expanded role as the company’s chief executive officer. He replaces the outgoing CEO Jacob Plattner, who has also been a major shareholder since he resigned his position as managing director at GKFX.

Retail FX goes all-in on alternative investing, launches Rare Sneaker Portfolio

“The concept of curated Portfolios means that our members will be able to invest in categories like art, trading cards, royalties, and real estate without needing to become subject matter experts on individual assets.”

Industry News

State Street taps AWS and Microsoft for cloud and infrastructure solutions

“By standardizing and simplifying our technology operating model, we will be able to more quickly deploy client environments and launch new products and services, while continuing to enhance the resiliency of our technology environment and our business operations.”

Institutional FX

Bitpanda launches Investment-as-a-Service business for banks, fintechs, online platforms

“Financial institutions today have to ask themselves how they aim to cater the increasing demand for modern investing solutions. Building these Individually, means a high startup cost, and products that are often outdated before they are even launched.”

Institutional FX

Options expands market data feeds after partnership with Tools for Brokers

“Our integration with ACTIV Financial marked the beginning of a new era in market data availability and infrastructure. Our teams have come together to provide unparalleled, fully managed market data services alongside Options’ global connectivity and infrastructure.”

Industry News

Recruitment in financial services sector buoyant despite planned mass layoffs

“It remains to be seen what impact this will have on hiring levels within the financial services arena this quarter”, said APSCo, regarding the expected mass layoffs within the financial services sector in England & Wales.