Dealer groups broaden their scope with a range of research providers

Dealer groups across Australia are choosing to broaden their scope by using up to seven research providers. Despite the additional cost, more groups have chosen to use external services this year instead of conducting research in-house.

For the 72 dealer groups in the Money Management Top 100 Dealer Groups survey that revealed the research providers they are currently using, the most popular in 2004 were van Eyk and Morningstar (for investment) and Boss and ProPlanner (for risk). In 2003, van Eyk and Morningstar were the favoured providers for both investment and risk.

For investment research, 40 per cent (29) of the dealer groups are using van Eyk and 17 are using Morningstar. For risk, 19 are using Boss and 13 are using ProPlanner. Since last year, there has been a significant increase in the number of research houses dealer groups are choosing to use, with 64 of the 72 dealer groups using more than one provider and some groups even using up to seven. Reasons given include breadth and depth of research, speed of delivery of updates and cost-effectiveness.

Of the eight remaining groups using just one research house, three chose van Eyk over all the other providers and just one preferred to conduct their own research entirely in-house. The other four chosen sole providers were Lonsec (one group), AXA (one group), and Investorweb (IWL) (two groups).

Premium Accounting Group general manager Helen Bridgewood says its dealer group chooses to use van Eyk “because they have a fairly wide scope, but we choose to use others as well, as they provide coverage where van Eyk don’t. Where there’s an innovative or structured product, for example.

“We’ve always used more than one provider, right from the beginning. Cost is a consideration, but breadth is more important because we don’t do any in-house research ourselves. Our main objective is to give advisers all the tools they need to give their clients advice.”

Several dealer groups, however, feel they already have a strong in-house research team and only use external providers to add value to their own work.

Goldman Sachs’ dealer group, Strategy, prefers the integrity of its own research and uses company links to gain further insight.

“We do get research from Assirt, van Eyk and Morningstar, mostly for quantitative overlay, pricing and performance. But in terms of what we’re looking for, the provider needs to complement our in-house research, and give quality and depth,” a spokesperson for Goldman Sachs says.

Van Eyk director Mark Thomas believes it’s the experience of its team members and the thought processes it has developed over time that give the research house a competitive advantage. The fact that it is an independent research house paid by clients that subscribe to their service, rather than receiving payment for ratings or being owned by an institution also helps, he says.

Thomas believes this gives van Eyk a much better idea of what clients want.

“It’s the breadth and depth of our coverage that makes the difference,” he says.

“We don’t think about our competition too much, we think about our customers, who need broad coverage of the constituents of each universe. Also, nobody else publishes quarterly. We’re trying to improve how we do things — it’s a trade-off between quality of output and putting something out for the sake of it. If in doubt, we’ll err on the side of quality.”

For Morningstar communications and editorial manager Phillip Gray, the depth and data integrity the firm offers is what makes its research so popular, along with the fact that it is an international company.

“We’re also recognised to be unbiased and independent, which I do think is important for a lot of advisers,” Gray says.

“All of our stuff is very hands-on and online delivery has really been a continuing project for us over the last two to three years. I think the future for research is moving rapidly away from research in the conventional sense where you have a book sitting on your desk, to integrated online research and in that respect, we feel Morningstar is ahead of competitors in terms of portfolio construction.”

The least popular research providers in 2004 for investment were Counterpoint, Iress and AdviserEdge, with just one dealer group choosing their services.

For risk, Omnium was the least popular — again, being the research provider of choice for just one dealer group. In 2003 overall, they were Broking Investment Services and Barra.