The investment research ecosystem is going through a structural reset. The shrinking commission pools on the sell-side, along with persistent fee compression on the buy-side, are creating a cost-pressure wave that is reshaping how research teams operate. Firms are now reassessing hiring, reducing single-coverage roles, and shifting to outsourced, scalable research models.
Here, the equity research analyst is right at the center of this disruption. Expectations are growing, while budgets are not, and demands on productivity have never been higher.
Why Research Costs Are Under Pressure
Cost pressures have mounted as the industry undergoes a structural shift toward low-cost investing. Passive products make up over 40% of global equity fund assets, from less than 30% five years ago. In markets such as India, passive AUM has crossed ₹12 lakh crore in 2025, growing over six times since 2019. As more money flows into index products, fee pools for active managers continue to shrink, leaving less budget for traditional in-house research teams.
Industry Trends Putting Pressure on Research Budgets
Simultaneously, the operational cost of high-quality research production has increased. Compliance, data subscriptions, ESG reporting, and alternative data needs have increased the estimated research costs upwards by 15–20% over the past three years. As margins contract and workloads increase, both buy-side and sell-side firms are consolidating coverage and cutting sector specialists. This turns increasingly toward outsourced research support to stay efficient.
Sell-Side: Shrinking Commission Pools
Brokerage firms are making substantially less from traditional trading commissions-a revenue source that subsidized large analyst teams in the past. In the U.S., institutional equity commissions fell 17.5% in 2022, declining from about US$8.9 billion to US$7.3 billion. Across Europe, the total equity commissions fell by 14% in 2023, which reduced the commission pool to approximately US$2.2 billion.
With asset managers trading less frequently, relying more on low-cost electronic platforms, and demanding greater transparency, a research desk now has to operate with a tighter budget and more stringent productivity metrics. The result is clear: fewer sector specialists, more generalist coverage, and increased pressure on analysts to deliver differentiated insights at lower cost.
Buy-Side: Ongoing Fee Compression
Asset managers nowadays suffer from real pricing pressure due to the rise of passive funds, robo-advisors, and other low-cost alternatives. Passively managed funds currently make up about 43% of the total fund market share worldwide, up sharply from ~23% in 2015. Consequently, management fees have been falling industry-wide. The average asset-weighted fees for mutual funds are projected to decline by almost 20% in 2025 compared to 2017 levels.
In this environment, research departments at buy-side firms come under increasing scrutiny. As fee income per AUM shrinks, justifying full in-house research teams becomes increasingly difficult, particularly when needs for coverage fluctuate. Many firms now outsource repetitive or maintenance-heavy work so that internal resources are only invested in strategic, high-value research work. This helps them control costs while retaining core analytical capabilities.
How This Changes the Role of the Equity Research Analyst
Today’s equity research analyst works in an environment where expectations keep growing, yet resources do not. Global coverage requirements have sharply increased-there are now 44,000 listed companies globally as of 2024. And over 16,200 growth-company listings across 59 jurisdictions, a segment that has steadily been ramping up its share of global equity markets. This increasing universe, coupled with accelerated disclosure cycles and information-heavy earnings seasons. It forces analysts to churn out more updates and integrate more comprehensive information flows despite leaner teams. Although firms do not disclose publicly the number of companies each analyst covers, industry-wide downsizing and steady listing growth make it clear that the workload per analyst has materially intensified, even as internal headcount has not kept pace.
From Sector Specialists to Multi-Coverage Analysts
Fewer analysts are doing more today. Headcount at major global investment banks fell about 30% over the last decade, as equity-research teams shrunk from roughly 4,600 analysts to about 3,000. This has put pressure on many firms to consolidate coverage-analysts handle a broader universe of companies, including more small- and mid-cap names. As a result, analysts are under greater pressure to produce frequent updates, across more companies, often at the cost of deep, sector-specific research.
Higher Demands for Speed and Insight
Today’s equity research analysts are fighting against the clock because expectations for rapid, high-quality output keep rising. Portfolio managers now expect instant earnings takeaways, intraday commentary, quick-turn models, and deeper thematic insights-all delivered with accuracy and context. Meanwhile, reporting cycles, news flow, and market volatility continue to accelerate, each forcing analysts to respond faster and cover more ground. With limited support and expanding responsibilities, analysts are required to constantly balance speed with depth, They often produce more in less time while striving to deliver differentiated insights that will shine bright in a crowded market.
Reliance on Technology and External Research Partners
Analysts also use automation, sophisticated data platforms, and partners for outsourced research to keep pace with rising analytical demands. The mundane model refreshes, data pulls, and first-draft notes are increasingly done outside; the in-house analyst focuses on deep insights, idea generation, and high-impact coverage. In fact, this tech-enabled hybrid model has become a requirement to maintain speed and quality without expanding internal teams.
Why Outsourcing is Becoming a Strategic Necessity
Outsourcing has transformed from a cost-cutting strategy to a strategic enabler. Today, about 80% of asset managers outsource or will outsource portions of their research workflow. It represents one of the fastest-growing front-office support sectors. The middle-office outsourcing market is also growing fast, at an estimated value of approximately USD 9 billion with forecasts for a near doubling in the next ten years. With the help of specialized partners, firms can outsource key data-heavy and repetitive tasks. This to maintain quality, increase coverage, and free up internal teams to focus on higher-value analysis.
Outsourcing Market Growth & Regional Snapshot
Flexible, On-Demand Research Capacity
Firms are increasingly relying on outsourced research capacity to stay agile. In fact, an industry survey conducted in 2025 showed that around 52% of the boutique asset managers plan to outsource key functions over the next 12-24 months. This is because of the pressure of regulations, coverage, and workload. The global financial-services outsourcing market is projected to reach $181.6 billion in 2025. Many institutions outsourcing operations in a bid to reduce costs and boost scalability. This flexibility enables firms to scale up their research support during earnings seasons, sector-wide events, or special situations-without having to commit to permanent headcount increases. It makes outsourcing not just a cost-saving tactic but more of a strategic necessity as well.
Coverage Expansion Without Headcount
Many firms are increasing sector and geographic coverage without adding to their internal headcount. One recent industry survey shows that more than 50% of boutique asset managers intend to outsource front-office functions as they enter new markets or launch global products. This model lets firms cover frontier markets, emerging themes, and lower-priority names quickly, without the cost and delay of hiring and onboarding new analysts.
More Time for High-Value Work
By outsourcing routine tasks like data pulls, model updates, and basic research, firms free up their in-house analysts to focus on deeper analysis and high-impact insights. With many asset managers currently outsourcing pieces of their research workflow as a way to better drive efficiency. Internal teams can invest more time in strategic work that directly supports investment decisions.
The Road Ahead
Cost pressures will not abate anytime soon. Both buy-side and sell-side firms will keep rebalancing their cost structures, moving toward hybrid research models, and expecting more from analysts with fewer resources.
The firms that will thrive in this environment are those that can build a research model blending in-house expertise with scalable third-party support. It’s a hybrid approach that’s fast becoming the new norm.
The future of the modern equity research analyst isn’t to do more, but to do the right work and find the right partners to handle the rest.
How Magistral Consulting Fits Into This Shift
Magistral Consulting positions itself directly at the intersection of cost pressures and research efficiency. As research teams shrink or restructure, the need for a scalable, high-quality external partner becomes essential.
End-to-End Research Support
Magistral supports equity research analysts with model building, financial forecasting, sector analysis, comps, valuation work, and recurring earnings updates. This strengthens internal research output without expanding payroll.
Cost-Efficient Research Bench
Our delivery model reduces research costs by 60–70% while maintaining the same level of analytical rigor. This is particularly valuable for firms dealing with reduced commission pools or squeezed management fees.
Speed and Consistency During Heavy Cycles
Earnings season, rapid market events, or large pipeline workloads require additional hands. Magistral’s teams act as an extension of in-house analysts, ensuring deadlines are met and output remains consistent.
Support for Multi-Coverage Analysts
As analysts take on more companies, Magistral assists with the “overflow” updates, model revisions, quick-turnaround requests. It enables analysts to protect their bandwidth for deeper coverage and thesis-building.
About Magistral Consulting
Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research
For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact
About the Author
Prabhash Choudhary is the CEO of Magistral Consulting. He is a Stanford Seed alumnus and mechanical engineer with 20 + years’ leadership at Fortune 500 firms- Accenture Strategy, Deloitte, News Corp, and S&P Global. At Magistral Consulting, he directs global operations and has delivered over $3.5 billion in client impact across finance, research, analytics, and outsourcing. His expertise spans management consulting, investment and strategic research, and operational excellence for 1,200 + clients worldwide
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