Deutsche Bank Forced To Slash Fixed-Income Research Price By Half On Lackluster Demand

One by one over the past several months, Europe’s largest investment banks have each rolled out their new pricing models detailing how they’ll charge for research in 2018 once the new MiFID II regulations go into effect.Pricing strategies have varied from expensive all-in packages costing nearly $500,000 a year to pay-as-you-go plans that charge for each research report individually.Here are a couple of recent examples:

That said, ever since the first pricing plans hit the market we’ve maintained that the finance world’s masters of corporate valuation might ultimately find themselves shocked by the bid/ask spread between what they think their daily pearls of financial wisdom are worth versus the value that asset managers are willing to ascribe to those services.Here’s how we summed it up in one of our first posts on the topic:

Literally no one knows the true ‘value’ of research, not even the investment banks that are selling it.Up until now, equity research has been treated as a ‘freebie’ given away to institutional clients in return for trading commissions but that is all about to change thanks to the European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments.

Unfortunately, at least for the Investment Banks of the world, while the cost of generating equity research may be substantial, it turns out that the true ‘value’, as defined by institutional clients’ maximum willingness to pay for reports, may be much less.Which is shocking given the creativity required to constantly generate new variations of daily reports politely suggesting that you “Buy The Fucking Dip.”

But, as banks try to figure out their ‘value add’, the bid ask spread ranges from about $50,000 for a basic, annual fixed income package up to $600,000.In other words, at least 1 investment bank thinks their research is worth roughly 6 full-time, dedicated junior analysts.

Of course, as we said before, almost any amount of money seems, at least to us, to be too much to have the same people give you the same advice over and over again, namely “buy more stocks, faster.”There, we just summarized 90% of all equity research that will ever be written for the rest of history in 4 simple words and completely free of charge.You’re welcome.