Buy-siders are keen to see integrated high- and low-touch services from brokers and enhancing synergies between the two roles will be key for broker development in coming years, according to new research from consultancy Woodbine Associates.
Woodbine asked 41 US asset managers to evaluate various coverage models, including having single high- or low-touch professionals, a single point of contact relationship manager or an integrated team of both high- and low-touch specialists, almost two thirds of buy-siders said they prefer an integrated option.
However, if brokers are going to integrate their low- and high-touch offerings to better serve their clients, there are several potential concerns among the buy-side that will need to be resolved.
The biggest concern among asset managers was a diminished level of service resulting from greater collaboration between execution consultants on the low-touch side and sales traders in the high-touch arena. Almost half of respondents to Woodbine's survey were worried about the impact on service levels, with respondents particularly concerned of the potential for high-touch service levels to be reduced.
The second area of major concern is anonymity and information leakage. Many buy-siders are worried about the potential for low-touch trading activity to leak out via the high-touch desk, and is another issue brokers looking to align their services will need to consider.
While sales-traders and execution consultants offer very different kinds of services, buy-side demands of those services were not significantly different when using high- or low-touch, according to Woodbine's research.
For example, 53% relied on their low-touch desk for pre-trade analytics, compared to 50% for high-touch. Similarly, intra-day feedback was heavily relied on from both desks, though it was particularly evident among sales-traders. Woodbine argues that this means there is enough in common at the macro level for both desks to be integrated.
It said the ideal brokerage would integrate its high- and low-touch services in such a way that it uses a team of experienced specialists that are able to control between them the issues of conflicts of interest, leakage and anonymity that arise from this approach.