MiFID II: The Grand Experiment Meets the Crisis

I want to start this piece with a quote: 

“Judge public policies by their results, not their intentions.” – Milton Friedman

There has been a lot of change in finance over the last ten years – on both the product/business side, but also on the policy side. Some of these changes were welcomed, and some were not. 

Over the last few years, there has been a growing discussion and rumination about how some of the new policies and business models would react to a crisis – there was talk of the “death of robo advisors” (as people would demand to talk with a human), there was the “death of crypto” (as everyone would fly to ‘safe’ assets), and there was the “death of passive investing” (as market volatility would reward active investors). Some of those might be true, some look to be true, and some clearly were wrong. Wall Street missed one potential though – something that was so taken for granted, that it was never on the discussion list: 

The death of MiFID II

MiFID II (following MiFID I) had good intentions: market reforms to drive more transparency to the industry. One of the big pillars of MiFID II was the unbundling of payments for research (and research services) and payments for execution. The idea was that funds should be able to clearly articulate what they were paying for in each of the two buckets, and take on some of the costs themselves (vs. passing them on to investors). That was the intention, but as Milton Friedman pointed out, we must judge policies not by their intentions, but by their results.

The results were clear: for fund managers that fell under the purview of MiFID II, as a result of the policy, they had access to less research, covering fewer companies and topics. Ultimately, they had less access to information. 

It was a simple lesson in undergraduate economics: research demand decreased (as firms had to begin paying out of pocket, eating into already thin margins), and given the research supply originally stayed quite flat (no firms would willingly exit the business overnight), the price dropped. As prices dropped, firms struggled to maintain healthy economics, and some left or were forced out of the business, causing supply to drop. Unfortunately, prices were capped, so the market didn’t rebalance, and prices didn’t increase – they just stayed flat. Rinse and repeat over the last few years, and we now find ourselves in a very different landscape.

Enter COVID, stage left. 

With the pandemic restructuring and impacting the entire world, and every single government, industry, company, and individual within it, there was a race to understand what the implications would be – and this was a race whose core competitive advantage would come from access to information. Specifically, the speed and velocity at which that information could be accessed, consumed, and acted upon. 

Each investor needed to understand which companies would be impacted, how they would be impacted, and where the opportunities would be. In times like these, you don’t have time to do a deep dive into each individual company, and learn about them from the bottom up – you need to lean on experts, and those experts exist at research firms. Unfortunately, many European investors found that they no longer had access to the information they needed.

All of a sudden, one of the most unintended intentions would lead to one of the most painful results: investors in markets dominated by MiFID II would be at a massive information disadvantage. Bloomberg is already reporting on the fallout, as US firms dominate their European peers, but my guess is that this is just the beginning. 

While I’m no regulator (and I don’t think I ever could be), I believe the misstep in MiFID II, while well intended, was the wrong optimization. Instead of optimizing for the costs investors paid out of their assets under management (such as for research, and execution) as a way to drive performance, they should have been optimizing for the returns that investors ultimately received. Yes, they are very closely tied together, but no, they are not the same. Optimizing costs assumed that performance would stay flat given a reduction in costs, thus driving a net benefit to investors – and it looks like that assumption was wrong. When you have less money to spend on information, you also, incidentally, get less access to information.

In the current regulatory environment, the onus is on investment managers to rationalize how much a piece of research should cost, not how much value it creates. As any investor knows, sometimes the biggest ideas can come from the smallest places – a quick note, a trade idea, a call. It can lead to portfolio rebalancing, position changes, or a myriad of other decisions – but under MiFID II, you can’t really reward someone for that ‘small’ value – no matter what the ultimate impact was. By trying to standardize the cost of every piece of information, we’re losing the forest from the trees – that’s simply not how the human brain works. The bigger the mountain of information you’re mining, the more likely you are to find a gold nugget. 

In the current crisis, we find ourselves in a world where one half of the market is starved for information, and one half isn’t. We find ourselves in a market where many research firms have reduced coverage, or ultimately exited the market. We find ourselves with fewer companies being covered, and the ones that still remain covered having less coverage. 

While the intentions were amicable, we must now look at the results – and to me, they seem quite clear. The Grand Experiment of MiFID II has met its first crisis, and the crisis has won.

Blair Livingston
Street Contxt

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How Covid Will Change Communication in Capital Markets

TL;DR (too long, didn’t read)

  • Covid is ushering in an era of change for communication tools in Capital Markets
  • This might finally break the resistance to truly allowing ‘work from home’, and that in turn will usher in a whole new era of technologies and opportunities
  • Those new technologies and tools will create a new universe of data points and metrics, allowing firms to better understand and personalize their client’s experience, allowing new approaches and tools to emerge, creating a virtuous loop
  • Some of my personal view and ideas are below including how it will change analyst calls, corporate access, and information distribution
  • Firms must also ask themselves: are we covering clients the way that used to make sense before Covid, or are we covering clients the way that makes sense now when everyone is quarantined at home?

The coronavirus certainly is putting a lot of strain on the capital markets infrastructure – and specifically, the communication infrastructure. I have been having a lot of conversations with business group leaders over the last few weeks about how they are adjusting to the new norm, and the one theme I can take away is just how unprepared the industry was for this. 

If you look at previous ‘disaster recovery’ and ‘business continuity’ playbooks, it was “move everyone from site A to site B, and then maybe put some at site C,” which was “move the trading floor from Manhattan to Connecticut and then some to Atlanta.” It always assumed you could move the trading floor, and it was never contemplated that you might have to dissolve the trading floor. That made sense though – it was a fair approach to all the previous issues – but something like a pandemic has presented a new set of constraints: what if people can’t travel? What if people can’t be in the same room? What if people aren’t allowed to leave their homes? Welcome to the current situation.

Add this to the fact that everyone said “work from home is impossible in this industry.”

Of course, there have also been very creative approaches. One Hedge Fund (Citadel) actually rented out a hotel to quarantine in so they could keep working. It makes sense though: you get sleep, food, and recreation all in one place, in a fully controlled environment. 

For the majority of the industry though, renting out hotels isn’t an option. Instead, we’ve been sequestered to our homes, and are adjusting to the new norm of working from home – and what an adjustment it’s been. 

Let’s take a look at where we were pre-covid. First, almost no one in this industry actually owns a laptop – the front office lives off a combination of a desktop and mobile phone, which the phone is often just for triage in-between desktop access. Complex and legacy compliance needs have kept the old systems in, such as fax machines, and the new systems out, such as video conferencing and messaging. Phone and email have continued to dominate the industry, as they don’t require ‘compliance approval’ to use – they are existing (vanilla) systems. Anything that requires special approval to use has usually died the slow death of a thousand cuts as it works its way through the approval process. 

But here we are, six or so weeks later, and we’re now grappling with the reality of what the new remote looks like. New system and tool approval timelines have been shortened from years to weeks. Everyone is trying to roll out new systems, hardware, and software at a breakneck speed as they help their teams adjust to the new normal. 

All of a sudden, work from home doesn’t just seem possible, it seems essential.

We have traders working from home, sales people, strategists, research analysts, portfolio managers, and everyone in between. The unthinkable just a few short months ago is now a reality. 

The Path Ahead – a Fork in the Road

Ultimately, this will eventually pass, and the world will return to normal. My view now is that this is going to go one of two ways on this, and I think it will be relatively extreme at either end: we’ll either lean into these changes, including remote working, new communication tools and technologies, and new norms, or we’ll rush back to the previous status quo, and hope this never happens again (and try to forget it ever did). 

There is a very real possibility that the industry collectively decides they want to ‘go back to the way it was’. That would be a shame. There has been so much positive change, innovation, and strides forward that it would be upsetting if we went back to the way things were – but it’s possible.

On the other hand, what if things do change? If the momentum continues, and the quarantine period ends up running longer than expected, or the industry collectively decides that we want to keep running in this direction, think about how many things that were “unchallengeable” are suddenly up for grabs. This could be the great dislocation of ‘standard practices’ in this industry. Here are a few that I’m thinking of:

  • Analyst calls: using new tools and applications, we can move away from “I’ll call you or you plus a few others” to more dynamic and structured calls. There are a number of applications already available (to the broader world) which could be repurposed: these include question submission (“Ask me anything” or AMA), voted questions, transcribing (so you get a transcript of the call after automatically), voting or value allocation tools during the call (which could be tied to the transcript), and a lot more
  • Corporate access: what does digital corporate access look like? Obviously there is video conferencing (which is well under way), but how do the connections/discovery happen in the first place? Where can people vote/nominate companies they want to connect with? Is there a place for presentations/slide share decks, where corporates can see what the ongoing engagement looks like? What tools are investment banks going to make available to their corporate clients to not only differentiate their offerings, but also improve their experience?
  • Morning note distribution: one of the most iconic emails, the morning note has a lot of opportunity – can you instantly click through to instantly join a ‘queue’ to talk to the author, or a given analyst/contributor? Can you click through to find more commentary similar to what you consumed? Can you upvote/tag for voting?
  • Research subscriptions: given the massive surge in digital touch points, how are those going to impact research subscriptions? Hopefully they will begin to feed back in, changing the subscriber’s preferences based on engagement. Which analyst calls have they been joining? What sections have they upvoted? What morning distribution content have they been consuming? What companies have they indicated interest in?
  • Trading flow distribution: trading flows go out today over many channels, but email is a major one – but who do these flows go to? How do the subscribers get updated? Can these be through push notifications to phones (or apps) or to another desktop application?
  • Event invites: calendar integration is going to be essential, but what about a calendar application for capital markets that makes event suggestions? Looking at what content you’re reading (via Email, Bloomberg, etc.) and other application interaction (voting for commission, analyst calls, etc.) a calendar application could suggest upcoming events, and help manage RSVP/attendance
  • Recruiting: with all these new data points, surely recruiting is going to become more science, and less art – individuals will be able to point to key metrics such as engagement scores, call attendees, performance, and other quantifiable metrics that will be able to supplement and colour the qualitative metrics. There is a massive opportunity to build new recruiting tools and marketplaces in capital markets, leveraging this data (and I’m sure some are already underway)
  • Commission allocation: perhaps one of the biggest areas of focus for the last few years: what does commission allocation look like in the new world? With way more data points across all the above, I would expect it to become much more sophisticated, such as new tools which bring in not only binary data (i.e. attended or didn’t, opened or didn’t) but complex data sets as well (listened for 45 min, upvoted 6 sections, relative to 85 upvotes given out that week, and a normal listening span of 22 min). 

Overall, the adoption of new technologies in this industry will have one key improvement: more quantitative data points. This will allow the industry to build more elegant and complex tools and technologies, to improve the experience for everyone involved. These experiences will follow two main vectors: automating low value tasks (like data entry), and augmenting high value tasks (like calls).

Personally, I’m hopeful that this period of chaos is going to open the floodgates for a period of change. Once business leaders see what is possible in such a short period of time, they are going to be a lot more open to what is possible over a longer period of time. 

Communication tools in Capital Markets suck… mostly because it’s so hard to get anything new in the door – hence the staying power of fax, email, and phone. For now though, it looks like the doors have opened just a crack, meaning that a few new tools will get through, and hopefully that will lead to a cambrian explosion of change – but only time will tell. This period is going to be a huge opportunity for those firms which can act fast, bring in new tools and technologies, and improve on their client’s experience in the new norm, while all their competitors try to service the same clients with the tools and strategies from the previous era. 

The world is changing quickly, make sure you are too!

As always, we’re here to answer any questions and provide you with our thoughts, don’t hesitate to reach out, and stay safe out there,


PS as you send more emails to your clients, and adjust to working remotely, we’re giving all of our existing clients unlimited free licenses to ease the transition, and leverage our email intelligence solutions – reach out if you have any questions, or read more here

Blair Livingston
Street Contxt

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The Great Calendar Dislocation – Working From Home

Much like everyone else around the world, I’ve been adjusting to the new norm of working from home. It felt a little jarring at first, but I’ve settled into a routine now, and I’m actually finding that things are picking up again, and I’m sure others are feeling the same way. However, I have noticed the first major change: there seems to be a huge uptick in the amount of asynchronous communication (i.e. non real time). For me, that has manifested itself as way more email. I was wondering why that might be happening, and I came to one clear conclusion: everyone’s work hours and availability is going through a great dislocation.

When you literally go to work it means that most people in the same time zone have the same potential availability – roughly 8am to 6pm – and they are at work, with a single focus. However, when most people are working from home, along with everyone else in their household, it means calendars are thrown into flux. All of a sudden work and personal life are mixing, meaning that calendars must adapt. There is no clear delineation between work time and personal time, and the two become much more intertwined. It means some people may only be able to work very early, and very late, with family responsibilities in between. It means some people may start sleeping in, and working later. It means some people might have to adapt every day. Throw into that mix the closing of every school, and it only gets messier. This is perhaps the greatest calendar dislocation that has ever happened in the working world. You can no longer assume that people are ‘working’ between 9am and 5pm.

What does that mean? It means you have to pass the ball back and forth, and allow people to respond on their own schedule. It means less real time communication, and more dislocated communication. While it’s a little self-serving to our view of the world, it fundamentally means more email. Email represents the best asynchronous communication channel in the world, and as people adapt their schedule and availability to a litany of demands, that channel is only becoming more important. I was once told that “email is a to-do list that other people set for you” – and right now, that couldn’t be more true.

It also means that timing around when to have real time communication is going to become more important. Knowing when to call is perhaps going to become the most important piece of tactical information. You don’t know when your client is going to be available anymore, so any data or indication you can leverage to that end will be better for you, and your client. Is your client catching up on emails at 8pm when the kids are finally asleep? That might be a good time to call.

This pandemic is having impacts on the markets, working structures, and communication styles that we can’t even appreciate yet, and I’m sure it will take a long time for them to set in. One thing I can already tell is that individuals are having to re-arrange their schedules and challenge traditional working hours in order to manage their personal commitments. This means that communication is going to shift away from real time, to non-real time channels, such as email. It means timeliness will become even more important. It means adjusting to the schedule of your clients, and making sure you’re placing that call at the right time – which may no longer be inside traditional norms that existed only a few weeks ago.

The world is adjusting quickly, and the only thing that is certain is there is more change to come. Traditional working hours are gone. What will be next?

Stay safe out there,


PS as you send more emails to your clients, and adjust to working remotely, we’re giving all of our existing clients unlimited free licenses to ease the transition, and leverage our email intelligence solutions – reach out if you have any questions, or read more here

Blair Livingston
Street Contxt

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Coronavirus Will Only Drive the Email Problem (and Opportunity) on Wall Street

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As Coronavirus fears spread around the world, there have been some clear and obvious impacts. Everyone is evaluating their work from home policy, travel plans, conference attendance, and other engagements. Fundamentally, people are trying to limit their in-person human interaction. There are some big winners in all of these changes – look no further than video conferencing solution Zoom, who has seen their stock skyrocket since January – and it looks like those changes might be here for a little while still. There have also been those who have suffered, such as the poor team over at SeaWorld

Of course, the world keeps spinning, demand for products around the world won’t disappear overnight, most industries press forward, and the markets are open to trade – but exactly how business will be conducted in the near to short term might change. The biggest change that we expect to see is a drop off of in-person communication, and a push towards ‘digital communication’ channels – including phone, email, and video conferencing. 

Which brings us to the capital markets. On Monday, we broke every internal record we have in terms of active users, emails sent, and overall volume by a wide margin. We’re talking about a 20%+ increase over past records. It makes absolute sense though. The communication that would have happened in person needs to happen somewhere else. It seems as though there may be a shift underway to email as people have less in-person meetings, but still need to communicate with their clients (for what it’s worth, those records were broken again yesterday). 

By our analysis, email already is the largest communication channel that brokerages have with their clients by volume, but it appears as though it’s set to become even larger. I believe the next few weeks will highlight the wide spectrum of firms as it relates to their current implementation of email intelligence solutions. The coming weeks will drive a huge spread between firms who still have a blindspot on email (even though it’s their largest communication channel with clients) and those firms who are able to leverage email intelligence tools to better understand and service their clients, save time, and improve the overall client experience. 

It makes sense – everything related to email will just become more. The biggest opportunity of email intelligence tools is to drive actionable and revenue generating conversations with clients. As email volumes go up, that means there will be more data points being captured, thus more opportunities to have those conversations. Fundamentally more data points means more targeted conversations, and more targeted conversations means more business. 

On the other hand, firms who still have a blindspot on email (or at best, have very primitive intelligence tools in place) will suffer across the board. Email volumes will increase, which will slow down everything with no upside. That’s because the channel doesn’t generate any actionable intelligence as is. Putting more through the channel (i.e. sending more emails) doesn’t help anyone. A blindspot with more volume is still a blind spot. Distribution list updating and management will consume even more time internally. The client experience will suffer. Potential insights and actionable opportunities will slip through their fingers as they continue to reach out blindly. 

While it’s always hard to appreciate the wide array of impacts something like Coronavirus will have, I have one hypothesis: people in the capital markets will continue to do more communication via email. As email becomes an even larger channel, the downside – and upside – to properly understanding it and implementing the right tools becomes even more important. Those who are well positioned stand to further differentiate themselves with clients, driving revenue, saving their own time, and improving the client experience.

The question I would pose to everyone reading this is: how effective are you at leveraging your email communications to drive conversations, save time, and improve the client experience?

I have no doubt the answers would widely vary.

Blair Livingston
Street Contxt

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Reframing Build vs. Buy Discussions in Capital Markets

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It feels like we’re at an interesting inflection point in the capital markets discussion of build vs. buy. Ten years ago, maybe even just five years ago, the industry was split into two buckets of firms: those who built all the technology they needed in house, and those who didn’t have all the technology they needed, because they didn’t have the budget to build it in-house. 

The largest brokerages in the world leveraged their size and global platforms to get economies of scale and build the solutions they needed in-house. These could range from trading tools and applications, through to compliance solutions, and CRMs. If you didn’t have the budget to build it in-house, you had to buy something off the shelf, or make do with ad hoc solutions – but the unfortunate reality was that there weren’t too many ready products available off the shelf. The build vs. buy discussion was usually relatively straight forward: if you want it to work well, you build it. If you need to compromise, or don’t have the budget internally, you buy it.

Fast forward 5-10 years, and we find ourselves at the start of 2020. There are two major themes that are radically re-framing the build vs. buy discussion. First, margin compression. In an industry that is increasingly under margin pressure, having massive technology teams building everything bespoke becomes more challenging. Firms are being forced to re-evaluate what is a core offering and truly differentiates, which they should continue to build, versus what isn’t a differentiating product, and what they should think about replacing with an off the shelf solution. 

The second theme is perhaps more important though: machine learning (data scale) and network effects are making the build discussion ever more difficult. Applications built in house will never have access to the same scale and scope at market solutions. It’s just a reality of building something. The potential client base is limited to one. In a world that is increasingly driven by machine learning and artificial intelligence, that means that those in-house solutions will never be as ‘smart’ because they will never reach the same scale as a market solution. Build vs. buy becomes challenging when some parts of the problem can’t be solved with just resources – they need scale. 

The second part of that challenge is the network effect. As products are reaching more data scale, they are also becoming networks. Networks inherently benefit from increasing the number of participants, as they centralize value for participants. Look no further than an Exchange for an industry example. Thus, it is very hard for each firm to ‘build’ their own network. 

Reframing the build vs. buy conversation

Around a month ago, I was in with one of our largest prospective clients (who is now a client) and was having a discussion with one of our sponsors. The topic of build vs. buy came up, and they asked me: how do you think about the trade-offs?

I thought to myself for a moment, then framed the question in a different way, which I think really captured the thought for me:

“If you build what we have, you’re essentially choosing to start a competing company who will only ever have one customer. Sure, you get to control the product roadmap, and you can make it a little more bespoke, but you’ll never have more than one customer (yourselves) so you’ll never get any scale, and you won’t benefit from any network effects. If you think this is a core competitive advantage or differentiator, I would encourage you to consider that option, but if you think this is infrastructure or a commodity, then I would consider you to re-evaluate. It’s like deciding to build your own airplane versus building your own airport as a plane manufacturer. Building your own airplane makes sense. That’s your differentiation. Building your own airport doesn’t. That’s infrastructure.”

That framing and analogy seemed to really resonate. 

It makes sense though: how can you expect to build a competitive product, when you are inherently limiting the customer base to just yourself, and then expect to do so for cheaper or more efficiently? There is no way that Airbus could afford to build their own network of airports. Instead, you can leverage the existing network – thus splitting the cost across all the clients, but also get the scale and scope when it comes to intelligence and machine learning. 

The build vs. buy conversation continues to evolve as the industry evolves. More and more we’re encouraging our clients to think about whether or not the product in question provides a unique advantage or differentiation. Should you build core infrastructure, plumbing, and applications in house? Probably not. Should you build intelligent recommendation engines, analytical tools, or other personalization engines in house? Probably. 

It feels like we’re reaching that tipping point where the conversation is starting to tilt away from “build” in the majority of cases, towards buy. The true value will come from stitching together all the ‘buys’ into one central view in house, and providing that truly unique analysis and holistic view of all the data sets and insights together.

Perhaps the conversation will evolve to “buy, then build.”

Blair Livingston
Street Contxt

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Your Content Strategy in Banking – A Practical Guide

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Just before the holiday, I put out a piece titled “Building a brand in banking” and it got a lot of really positive feedback. I had several follow up conversations about how content is being leveraged (increasingly in banking), the value of that content, and what firms were getting out of it – specifically, how did they measure or think about ROI? Many of the conversations started at a high level, but at some point we got to the “okay, so how do I implement this with my banking team?” I realized more and more that people were asking me for a somewhat tactical guide, and based on the number of times I was asked, I figured – why not write one?

Now, before I begin, let me state that I’m not a ‘how to’ writer – this might not be perfect, but it’s simply one way I see a content strategy tactically working in banking. Additionally, it’s not just my opinion – some of the top investment banks in the world (and specifically, top banking teams at those banks) have been quietly running an astoundingly successful content strategy for years. It’s not unusual to hear that certain MD’s have distribution lists in the tens of thousands, with an individual or team who’s full time role is to manage that list, the responses, and the follow ups. It’s a powerful strategy. As one banker explained to me, “it’s a massive source of insight and business for us – it’s basically our pre-pitchbook stage”. 

So, on to the tactics. 

First, which banking groups should read this? Sector teams are the most obvious, but it could just as likely be leveraged by product teams as well.

Second, who should be reading this within a sector team? There are two important people. First, the MD/sector lead who is building the brand, looking at the engagement data, and responding to clients, and second, the junior team member who will likely be putting together the content, managing the distribution list, and sending it on behalf of the MD.

Content Strategy in Banking 101

Most bankers have two types of clients: existing relationships, and prospective clients. Your role as a banker is to get in front of them, stay top of mind, establish yourself as a trusted expert, and be ready to provide assistance, whether thematically or for a transaction. There’s more to it than that, but let’s consider that the 50,000 foot view. 

A good content strategy can help you do all of those things.

Here’s what you need to do:

Step 1: Put together a list of your top clients and your top prospects, and their email addresses. Put them into one single distribution list (this is likely the only step the MD needs to do for now). If you’re feeling extra ambitious, you can sort them into two lists: “clients” and “prospects”.

Step 2: Decide on the cadence at which you’re going to send out commentary. This can be anywhere from daily to monthly. It’s up to you. I would suggest you start with monthly and build the muscle, then perhaps go to a weekly or bi-weekly cadence.

Step 3: Now it’s time to assemble the actual content. Have an analyst or associate put together a piece of content with a couple different sections, with the content of course depending on your sector. For the sake of this example, let’s say you’re in TMT. Your content could include 1) a section highlighting top research from the firm in that sector, such as a new industry piece analyzing the growing tech industry, 2) a section highlighting top news in the sector, such as M&A, announcements, or anything else, and 3) a highlight of recent deals or transactions that your team has been involved in. Link to the relevant articles/pages.

Step 4: Review and approve the content. This should likely be done by the MD.

Step 5: Send the content. The ideal situation here is if the junior analyst can send it on behalf of the MD. With sophisticated solutions (like Street Contxt!) this is really easy – but for others, it might require some manual work, or might not be possible at all (you might not even have distribution list management). If you have no tools in place, simply copy and paste the emails into Outlook (BCC) and send.

Step 6: Follow up and take action. Follow up with key prospects and clients based on engagement. Who is reading? Who is engaging? What are they engaging with? Use this to drive personalized conversations. Be ready to respond to incoming emails and responses, and to answer questions. 

Step 7: Repeat. Now that you have the distribution list in place, you can simply put together the content, send it out, and follow up/respond as needed. Now you have your branding and prospecting efforts running full steam. Build it into a repeatable practice.

Bonus Step: This one’s a bonus – include an invite link. As your content invariably gets forwarded around, you want to make sure that the recipient can subscribe themselves (and passively grow your distribution list and reach). If there is no clear way to subscribe, then people won’t bother. You can use tools like the one built into our platform (we have a branded invite link), or you can hack something together with a custom web page. 

Down the road, you can start to monitor and evaluate your content strategy performance over time. How did you do in Q1? How many prospects did you manage to get in front of? How much engagement are you getting from key clients? Have you seen no engagement from someone in a long time, which might warrant a reach out? These are all powerful questions that you will now be able to answer.

It’s that easy

So there you have it – a strategy that is so easy to tactically implement that you could do it this afternoon, but can provide so much value to your teams brand, prospecting efforts, and leads. What makes it even better is that you can have the team do it during those quiet hours in the morning, and once you build the habit, it will be easy to continue. 

I’ve heard bankers refer to their content strategy as their “secret weapon” – but now you have an easy playbook on how you and your team can implement it. The reality is that a very small portion of will actually start this strategy – but if you do, I can promise the results will more than make up for the effort.

Good luck as you review your firm’s content strategy for 2020, and as always, we’re here to help!

Blair Livingston
Street Contxt

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MiFID II and Unintended Consequences

It’s 2020 and it feels like this is going to be the year of change. While 2019 definitely had a lot of change, it still felt like there was ‘resistance’ – I put it in quotes because it’s hard to define, but it felt to me like some people were still holding onto the old world of institutional finance. It felt like there were people who thought things would go back to the way they were. The new year, and the new decade, and the fact that it’s 2020 seems to have changed that. I can feel a general acceptance around the table that the world is changing, and a new shift to looking forward to new shores, instead of looking back and trying to keep our eyes on an ever disappearing land. 

I have a number of thoughts about what 2020 holds in store (which I’m still working on), but I think one of the biggest themes will be a lot of recent changes ‘flushing out’ – there has been a lot of new initiatives in the industry over the last few years, and 2020 feels like it’s the year that they flush themselves out – including the impact of the intended consequences, but also the impact of the unintended ones.

Let’s look at MiFID II as an example. That piece of legislation was predicted to have a monumental impact on the industry – among other parts, it was set to fundamentally unpack and unbundle the connection between research and execution. New businesses and platforms were started to facilitate that new world order – research marketplaces, commission management systems, interaction recording tools. Now, a few years in, we see that while the impact is definitely there, it was less than expected – the industry didn’t change overnight and everything hasn’t unbundled just yet. In fact, with Brexit on the horizon, it looks like there is increasing appetite by the remaining EU parties to revisit the fundamental tenets of MiFID II (including unbundling), and an increasing view that the impact of the regulation has largely been negative

One of the impacts that is front and center is the declining amount of coverage, especially outside the large and mega-cap names. Yes, Apple will always have plenty of coverage – but what about everyone else? The number of covering analysts is declining in almost every other corporate segment. What does that mean? There is less ‘information absorption and processing’ happening with those companies. If a company had 10 analysts covering it, and now has 5, that means that there are half the number of people actively absorbing, processing, writing, and sharing insights and information on the company. That means the story won’t be as broadly or deeply understood, everything being equal. It also means that ‘unexpected’ events are more likely to happen. Earnings will surprise, or underwhelm. Numbers will be different than expected, as models become out-dated. The markets will react more

What does that mean? More volatility – and it seems like some participants couldn’t be happier. As the WSJ highlighted, hedge funds are finding more opportunities as coverage drops among mid-cap and small-cap companies. To paraphrase the quote, it seems that “one group’s regulation is another group’s opportunity.”

When the regulators put together MiFID II, I’m sure they had the best of intentions, and they thought deeply about the consequences. They may or may not have seen the impact the regulation would have on research coverage levels, but that was a semi-predictable impact. What they likely did not see at all was the resulting price volatility it would create within those companies, as coverage fell. I don’t think anyone believes that this regulation was intended to give active managers an olive branch, but it has created opportunities for savvy, timely investors to find alpha. However, it has also created challenges for the companies themselves, as they find it harder and harder to communicate with the market, share important updates, and connect with investors. In an era of increasing regulation, it’s not the intended consequences that you have to watch out for – it’s the unintended and indirect ones.

I believe that we’ll continue to see these second or third derivative impacts this year from regulatory changes over the last few years, evolving market structures, and industry pressures. The good news is that everyone now seems to be fully committed to looking ahead, and planning for the future – 2020 looks like it will be one of the most exciting years to date. I personally cannot wait to see how it unfolds.

Happy 2020, and as always, we’re here to help!

Blair Livingston
Street Contxt

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Building a brand in banking, and information distribution

On the Capital Markets side of the business, and especially within Sales & Trading, the morning note has become almost sacrosanct. It’s essentially a given – you need to be putting our regular content to clients, and ideally in the morning when they are planning how to spend their day. Its purpose is unchallengeable, and it’s value never questioned.

For what it’s worth, I agree with the concept of a morning note. It’s massively valuable for the sell side, and massively helpful to the buy side – but when did you last take a step back, and ask yourself why it’s so valuable? I have a couple of theories:

  1. Synthesizing information – at the very core of it, anyone in a client facing role has one major objective: take the resources and services being produced by your firm, filter them down to what is relevant to your clients, and deliver as much of a personalized experience as possible, with the goal of getting their business. Furthermore, not only deliver what’s important, but also help save your clients by summarizing and synthesizing, and helping them decide where to allocate their most precious resource: time. Our findings would suggest that ‘system emails’ that come from research have an open rate that is 10-25 times lower than sales readership. Why? Too many single topic emails, with no filtering or personalization. Very few people on the buy side read system emails – they filter them into a folder just in case they want to go back to them in the future, but they are instantly ‘removed’ from their main inbox. On the other hand, people really do read notes that summarize, synthesize, filter, and are personalized.

  2. Sparking a conversation – something in a note might spark a conversation, lead to a follow up, or drive an engagement (such as attending a meeting, talking with an analyst, etc.). The more high quality touch points you have with a client, the more opportunities you have to spark a conversation – the genesis moment of all transactions.

  3. Building a brand – this is perhaps one of the most underappreciated or unrecognized parts of sending out a morning note, and it’s the one I wanted to spend some time focusing on today. We’ve done a lot of research on what drives content consumption, and there seems to be a general consensus that it is two reasons: the content and topics  (which you could have guessed), and the sender. The more valuable content you produce, the more likely people are to open your future content – regardless of the topic (that might be why you’re reading this right now!). But building a brand is also a core element to driving higher engagement with your content, and publishing regularly is a major part of building a brand. People are more likely to open information from readers they recognize and have received valuable information from historically.

Building a brand: the venture capital example

Have you ever heard of Fred Wilson? He’s perhaps one of the most successful VC’s today, and he has a blog at avc.com. His fund, USV, is one of the top performing funds in the world. He has prospective LP’s and start-ups fighting to get his attention. He has established a powerful brand – but can you guess one of the ways he really did that, and what he still does every day, and has been doing for years? He blogs. Every. Day.

So, why does he put out a piece of content every day? I can’t claim to read his mind, but if I had to guess I would say there are a few major reasons: to stay relevant, to show his expertise/knowledge, and to build his brand. He wants to make sure that the next Facebook or the next $50M LP knows who he is before they even think of going to market, and that they have a favourable opinion of him. He wants to stay top of mind in the broader community and ecosystem. He’s not alone. Many other prominent VCs, PE funds, and other investors are now turning to daily content production (which is usually delivered via email).

Bringing it back to banking

One of the interesting trends we’re seeing emerge is brand building in banking. Increasingly sector teams are starting to put out regular notes – whether weekly or bi-weekly. They are sending summaries of what has been happening in their sector to corporate clients, whether those updates refer to public news or internal research. They are using that content to drive conversations and inbound, but more importantly, they are using that content to build a brand. If you’re a corporate client, receiving a regular industry update with some unique industry perspective is invaluable. It’s something you’re likely to engage with and respond to. More importantly, as other investors have discovered, it keeps you top of mind with your existing and prospective clients. We’ve already seen growth in distribution lists as these notes get shared and additional corporate clients request to subscribe (in a perfect parallel to what has been happening with desk content for years).

It’s about time

I always find it interesting when something is so obvious in one area of the bank, but for some reason hasn’t made the transition to other parts. It’s so obvious that salespeople need to send out a morning note. It’s a given for everyone on the desk. In banking though, it’s seen as ‘different’ – many banking teams believe they can simply focus on deals. They don’t realize that building a stronger brand, and using content to spark conversations can be the ultimate ‘pre pitch book’ process. Many teams are starting though… and they are getting the first mover advantage.

Some sector teams might respond with “well, we don’t put out content” – and that’s the problem. I’m sure many investors said that when Fred Wilson got started – that they didn’t put out content –  but now his lead is so big that no one starting from scratch today will ever catch him. It’s still early though, and I wouldn’t say this tactic is broadly adopted yet (although some teams have been doing it for years, very quietly). That means the ball is still in the air, and anyone can grab it.

I would encourage you to ask your banking teams how they are building their brand with content and thought leadership, or think about it yourself if you happen to sit in that seat – it’s a question that will become increasingly important in the future. Some of the best practices from the capital markets side of the business are coming over to banking – and it’s just getting started.

Good luck on your journey, and as always, we’re here to help!

Blair Livingston
Street Contxt

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Sales technology still hasn’t come to capital markets

The Capital Markets is an industry going through massive and accelerating change. That change seems to be everywhere – new technology, new tools, new markets – it goes on and on. However, one part of the business hasn’t changed at all in the last 10-15 years: the tools and technology used in client facing roles. Sure there have been little flares of evolution, and some new entrants are looking promising, but it’s still mostly the same. The suite of tools and technology used looks almost identical to what it looked like 10+ years ago. I always joked that if you took a trader from 10 years ago, and teleported them to today, they would be lost – there has been so much change in OMS, EMS, algos, and other trading tools. But take a salesperson from 10 years ago, tell them the accounts they cover, and they would be off to the races – the tools, technology, and tactics are almost identical. It’s not meant as a slight – it’s just a reality of the business and where we are today.

Before I get into why I think that is true in the Capital Markets, let’s take a moment to look at the rest of the world. Sometimes we get so myopic in this industry that we lose context on the change happening outside our industry. For sales in many other industries (especially those in technology), there has been massive changes – here is a sample of the ecosystem of tools that have evolved to empower and augment client facing efforts more broadly across the board:

And that’s only from 2017 – and only the major tools in each category. There are literally 1000’s of tools in each category, with more coming out every day. What’s even more concerning though, aside from the lack of tools and technology, is that there are terms in there that have never even been uttered in capital markets. Content Sharing. Predictive analytics. Data Automation. Lead Generation. Lead Intel. Development. Customer Success. These new areas of expertise have developed within sales organizations across industries, building into ecosystems of tools and best practices, but for the most part haven’t even been discussed within the capital markets.

To really send this point home, ask yourself a few questions for a moment, regardless of your role:

  • What is your firm’s lead generation strategy? How are you measuring the effectiveness of it? How many leads did you generate last month or quarter?

  • What has been the conversion of those leads? How effectively have your leads converted from Q1-Q3 this year?

  • What is the average time it takes a client to go from a lead to an active client? What does that cycle look like, and what is the trend over the last 12 months? Is it growing or shrinking?

  • How do you approach client success? What are you doing to ensure you’re building deep, long lasting relationships with clients, vs. surface level transactional ones? How do you measure the health of those relationships?

  • What is your sales technology stack? How many of those buckets is your firm leveraging one or more tools in?

Now, sometimes I hear objections to the above – that the Capital Markets is just different – but is it really that different than other industries? In a client facing role (and in sales) your job is to deliver a tailored set of value added services and products in order to service the client, with the ultimate goal of driving a transaction event. Sure, there might be some nuances of the business, but the fundamental role of anyone in a sales capacity – whether Capital Markets sales or technology sales – is to sell the products the firm produces.

Finally, you might be saying “well, we have a CRM!” and that’s a good start – but as you’ll see from the above graph, the CRM is just one piece of the puzzle. You need to have the entire ecosystem working together. This isn’t about ticking a box and having a solution in place. It’s about building an orchestra of tools and technologies that all work together to drive the business forward and produce the results you’re looking for.

It was hard for me to make the change myself, coming out of the industry. There are a lot of new terms, a lot of new tools, and just a whole lot of change. That change needs to come – and it’s going to eventually. You will need to start thinking about your broader client facing organization, and specifically your sales organization, and start to think about what metrics you’re trying to drive. Revenue (or commission) is great – but it’s usually a lagging indicator. You want to start thinking about leading indicators, what you want to measure, and how you will provide the tools and technology to capture that data. That will help you see around the next corner, and plan more effectively.

On implementation, it will be a consolidated push between educational efforts (teaching teams about how sales is evolving, and new best practices) and experimenting with new tools and technologies to see what works best for your people and end goals.

As a final note, I’ll leave you with a story from a recent interaction I had this summer. A global head of sales at a major IB ask me a question: “Blair, what would you do if I brought you in tomorrow to run sales in X asset class?” I paused for a moment, considering the question. Then I answered him: I would go out and hire 50 software salespeople to augment his team. Have the existing industry salespeople teach the nuances of the business to the software salespeople, and have the software salespeople bring in best practices around technology, process, and structure. Build a hybrid team that brings the best of both worlds together. I think the answer was well received (and actually might be implemented!).

Technology still really hasn’t come to the client facing side of capital markets – which means there is a huge opportunity for those who can harness it, and master it first. This is a massive area of low hanging fruit. The square is open, now it’s just a matter of who will get there first and lift the offer.

Good luck on your journey!

Blair Livingston
Street Contxt

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Fax Machines and Unsubscribe

I find the diffusion of technology across capital markets both fascinating, but also perplexing. On one side of the business (the trading side), you have what appears to be an unlimited appetite to invest, innovate, and spend. You have firms pushing the limit to get ahead: building radar towers to speed up execution, and there was even talk of building a particle accelerator to shoot order through the earth, making trading just a little bit faster (you can go through the earth a lot faster than you can go around it).

Then we look at the communication side of the business. Information is being distributed and consumed in essentially the same way it was 10-20+ years ago. There are still several brokerages who print and distribute hard copies of written research. I’m sure there are still clients who prefer to receive and consume it in the same medium. That being said, email was the last major innovation in information distribution technology, but how we use it largely hasn’t changed since it was first introduced.

For brokerages, email has become the main way they distribute information. For an industry that was thinking about building particle accelerators to trade, it’s a little bit perplexing to consider that most information subscriptions in this industry are managed off of Outlook distribution lists, or a combination of Excel, Word, and CRM. While many equity research distribution lists have migrated to a centralized CRM, almost no other lists have. Lists on the sell side exist in a number of locations, all isolated, and rarely accessible to anyone but the owner, including those who find themselves on one and might want to get off.

For funds, email has become a necessary evil. It’s where they manage all the information they receive externally and internally, but it’s a disaster to organize and control. In fact, email has gotten so bad for clients that I had one client (a notable PM in the US) show me his fax machine. That’s right, he’s getting so many emails that he’s given up on even trying to control his inbox. He has only given the fax machine email address to a few people, and it auto prints. If it prints, he knows its important. In addition to the fax machine, he’s also gone through around eight email addresses, each one was supposed to be ‘secret’, but once an email address is known, there’s nothing you can do to stop someone sending to it. I can only guess that, as of this writing, he’s on his 9th.

However, you might be one of those poor individuals in this industry who decides you’re going to try and manage your inbox. After all, the email client isn’t a single application – it’s a series of applications intelligently bundled together. It’s your calendar, content management system, collaboration system, contact management system, distribution tool, compliance system, and a whole suite of other applications that are hard to live without.

What do those poor souls do who try to manage their inbox? They use one of the only tools they have at their disposal: Outlook rules. These rules allow you to set conditions around when content comes in, and what to do with it based on a variety of parameters. One of the most commonly used rules is to sort content based on the sender (i.e. who it came from). Let’s say you receive an email from “blair@streetcontxt.com” – you can tell Outlook to file that email directly into a folder (“Street Contxt Thoughts”), or even (gasp!) trash. Individuals will use these Outlook rules until they run out of space, or give up trying to manage them (it’s quite common to see clients who have 100+ rules).

The need for rules is obvious though – since there is no way for recipients to easily control what they are receiving from the point of production (i.e. they can’t access the distribution list or their subscriptions), they have to manage it at the point of consumption. While it will take some time to make subscription and interest management more elegant (we’re working on it!) there is still some low hanging fruit that is much faster to implement. This industry really hasn’t adopted one of the most basic practices of effective email communication: the unsubscribe button.

In every other facet of your life, including your personal life, it’s easy to manage what you are being sent. At the bottom of every bulk/blast email there is a little button that says “unsubscribe”, which allows you to remove yourself from the list. In fact, with the new CAN-SPAM regulation (US FTC regulation), it’s actually a requirement for any kind of ‘commercial communication’. In capital markets, however, at best you often see “if you wish to unsubscribe, please email so and so at our firm”. That’s neither easy nor quick – and sometimes, it doesn’t even work. Most of the time however, you won’t see anything. Most recipients who wish to be removed will simply reply to the author, and say “please take me off your list”. If that doesn’t work, they’ll fall back to the Outlook rule, and essentially put the sender on auto-delete. If that doesn’t work? Give up and try to ignore it (or buy a fax machine!)

Now, if you’re on the sell side, many of you are thinking “but I want to stay in front of my clients – I’m not sure if I want them to be able to unsubscribe” – but the problem is that by sending them content they don’t want, you may end up either on auto delete, or labelled spam. Then when you really have to get through (for a deal, for instance), you won’t be able to. Isn’t it better to allow the client to manage their subscriptions, and let them see what they are getting, and adjust it as their interests change? Unsubscribing is perhaps one of the strongest indications a client can give you that they aren’t interested in that particular topic or theme.

I can tell you I see this first hand all the time. Even for myself, everyone who I send to (you!) can unsubscribe from my list at any time – in fact, there is a link at the bottom of this very email (please don’t all rush there at once!). I’m not holding anyone hostage, and I encourage you to unsubscribe if you don’t find it valuable – for selfish reasons. It helps me understand the effectiveness and interest in the content I’m sharing.

One of our missions is to improve the way that subscriptions and interests are updated, shared, and managed. Short term, that means simply bringing an industry that lives off distribution lists the ability to add ‘unsubscribe’ to their notes. If you’re already a Street Contxt user, that can be turned on for your account at any time and it’s included with your license. It’s fully whitelabeled, and branded with your logo. So if you don’t already have unsubscribe functionality in your content, think about adding it. Want to know how? Just reach out and I can connect you with our support team. Sorry if you’re not a client, you’ll just have to figure it out on your own!

It’s better for the sender, and it’s better for the recipient.

For an industry that wants to build particle accelerators, subscription management, and an unsubscribe button, shouldn’t be too much to ask for.

Blair Livingston
Street Contxt

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