Van Eyk Research chief defends subscriber-pays model

The chief executive of van Eyk Research believes “the market has decided” which remuneration model is appropriate for research houses, and says his group’s subscriber-pays model has won.

Van Eyk Research chief Mark Thomas made the comment in response to recent discussion about research house business models. Thomas said a subscriber-pays model ensures independence of thought by investment analysts, while also allowing the research house to control the ratings universe it operates in.

He said in a pay-for-ratings model, research houses can “only rate people who are willing to pay, whereas when the client pays you define your model”.

“It comes down to who has control of the message in the rating and also who has control of the universe that you’re rating. When the product promoter pays for the rating, it’s more like marketing than education,” Thomas said.

Standard & Poor’s yesterday released a whitepaper examining different remuneration models for research houses.

In it, the research house questioned whether the industry could financially support a subscriber-pays model.

“If, for example, the industry moved exclusively to a subscriber-fee model, how would advisers gain access to the full coverage they currently receive from research houses employing the manufacturer-fee model? Only the large players able to pay for research would have access to it. Or smaller players would have to live with reduced coverage and potentially an increased research bill, as the cost of research would not be carried by product manufacturers,” the S&P paper stated.

But Thomas disputed this point, saying “smaller groups have been our heartland”.

Thomas said financial planners not owned by institutions represent the majority of van Eyk Research’s client base by number of planners.

Thomas also believes market share, and therefore influence with advisers, is a key motivating factor in fund managers agreeing to be rated by a research house, paid or unpaid.

“The motivation is distribution — they’re product promoters, there’s no doubt about that. So unless you’ve got decent market share your rating is useless to them.”