Systems and method for determining the cost of a securities research department to service a client of the department

• US 20060041456A1
• Filed: 05/28/2004
• Published: 02/23/2006
• Est. Priority Date: 05/28/2004
• Status: Active Grant

• Current Assignee: Morgan Stanley Services Group Inc. (Morgan Stanley)
• Original Assignee: Morgan Stanley
• Inventors: Hurewitz, Barry Scott
• Granted Patent: US 7,734,517 B2
• Time in Patent Office: Days
• US Class Current: 705/7
• CPC Class Codes: G06Q 10/06 Resources, workflows, human or project management; Enterprise or organisation planning; Enterprise or organisation modelling
• CPC Class Codes: G06Q 10/06398 Performance of employee with respect to a job function
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

Embodiments of the present invention are generally directed to two different techniques for determining the cost of an equity research department to service a client of the department. The first technique generally includes estimating the time spent by each analyst of the department servicing the client over a specified period of time. The time spent servicing the client may then be adjusted based on the compensation of the analysis provider (or providers) servicing the client. Then, the compensation-weighted time of each analyst provider that serviced the client may be summed to thereby arrive at an estimate of the time and cost to service the client. In the second technique, the standard cost per unit of the different types of client touch that the equity research department produces is estimated. Then, the number and type of client touches a particular client receives over a given period of time (e.g., three months, one year, etc.) can be determined and multiplied by the standard cost per touch for the different touch types of to arrive at the total cost of servicing the client over the time period.

Claims

1. A method of determining the cost of an equity research department to service a client of the department, comprising:

estimating the time spent by each analyst of the department servicing the client over a specified period of time;

for each client, calculating a compensation-weighted time spent by the analysts servicing the client over the specified period of time; and

for each client, summing the compensation-weighted time spent servicing the client over the specified period of time by each analyst servicing the client over the specified period of time.

2. The method of claim 1, wherein estimating the time spent by each analyst servicing the client includes surveying the analysts, wherein the survey asks each analyst to:

estimate time spent collectively servicing a number of listed clients of the department and the time spent collectively servicing non-listed clients of the department over the specified period of time;

categorize the listed clients based on consumption of the analyst'"'"'s time into one of a number of client-use categories; and

estimate the time spent by the analyst collectively servicing the listed clients for each client-use category over the specified period of time.

3. The method of claim 1, wherein calculating a compensation-weighted time by each analyst includes:

for each analyst, allocating the percentage of time spent servicing listed clients over the specified period of time across each listed client based on the percentage of time that the analyst estimated is spent with each client-use category;

for each analyst, allocating the percentage of time spent with listed clients over the specified period of time across each listed client based on the percentage of time that the analyst estimated is spent servicing the client-use category of the respective clients; and

for each analyst, calculating a compensation-weighted time spent servicing each listed client.

4. The method of claim 3, wherein calculating a compensation-weighted time for each analyst includes:

calculating a percentage of the compensation that the analyst receives of the total compensation pool; and

multiplying the estimated time that the analyst spent servicing each listed client over the specified period of time by the compensation percentage.

5. The method of claim 2, wherein the client-use categories include heavy users, medium users, light users and immaterial users.

6. The method of claim 2, wherein the survey lists the listed clients in alphabetical order.

7. The method of claim 2, wherein surveying the analysts includes surveying the analysts via an on-line survey.

8. A method of determining the cost of an equity research department to service a plurality of clients of the department, comprising:

surveying analysts of the department, wherein the survey asks each analyst to;

estimate time spent collectively servicing the plurality of clients and the time spent collectively servicing other clients of the department over a specified period of time;

categorize the plurality of clients based consumption of the analyst'"'"'s time over the specified period of time into one of a number of client-use categories; and

estimate the time spent by the analyst collectively servicing the clients of each client-use category over the specified period of time.

for each analyst, calculating a compensation-weighted time spent by the analyst servicing each of the clients over the specified period of time; and

summing the compensation-weighted time of each analyst for each of the clients.

9. A method of estimating the cost per unit of client touches for an equity research department, the method comprising:

estimating the number of units of one or more client touch types produced by the department over a period of time;

allocating costs of support resources of the department over the period of time to the client touch types;

allocating costs of time of analysis providers of the department over the period of time to the client touch types;

estimating the cost of per unit of the one or more client touch types by, for each client touch type, dividing the sum of the costs for the client touch type by number of units of the client touch type to create a standard cost per unit for the one or more client touch types; and

allocating costs to the client based on the consumption of client touches by the client and the corresponding standard cost per unit for the client touch type consumed.

10. The method of claim 9, wherein the client touch types include at least one of:

a phone call with a client;

a one-to-one meeting with a client;

a small group meeting including a client;

a tailored email to a client;

a tailored voicemail sent a client;

a custom research project for the client;

a blast voicemail sent by a client;

a conference call attended by a client;

a conference attended by a client;

a seminar attended by a client;

a published document received by a client;

a blast email sent to a client; and

a web cast sent to a client.

11. The method of claim 9, wherein the analysis providers include at least one of analysts, research associates, strategists, economists and accountants.

12. The method of claim 9, wherein allocating the cost of the time of the analysis providers of the department to the client touch types includes:

determining time spent by the analysis providers over the period of time performing various activities; and

allocating the cost of the time spent by the analysis providers over the period of time performing tasks related to particular client touch types to the particular client touch types.

13. The method of claim 12, wherein determining the time spent by the analysis providers includes surveying the analysis providers regarding the time spent performing the various activities over the time period.

14. The method of claim 13, wherein determining the time spent by the analysis providers includes tracking the time spent by the analysis providers performing the various activities.

15. The method of claim 12, wherein allocating the cost of the time of the analysis providers of the department to the client touch types further includes allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types.

16. The method of claim 15, wherein allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types includes evenly allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types.

17. The method of claim 15, wherein allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types includes allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types on a pro rata basis.

18. The method of claim 9, wherein allocating costs of support resources of the department over the period of time to the client touch types includes evenly allocating costs of support resources of the department over the period of time to the client touch types.

19. The method of claim 9, wherein allocating costs of support resources of the department over the period of time to the client touch types includes allocating costs of support resources of the department over the period of time to the client touch types on a pro rata basis.

20. The method of claim 9, wherein the cost of support resources includes management expenses over the period of time.

21. The method of claim 9, wherein the cost of support resources includes indirect costs incurred over the period of time.

22. A method of estimating the cost per unit of client touches for an equity research department, the method comprising:

estimating the number of units of one or more client touch types produced by the department over a period of time;

allocating costs of support resources of the department over the period of time to the client touch types;

determining time spent by analysis providers of the department over the period of time performing various activities;

allocating the cost of the time spent by the analysis providers over the period of time performing tasks related to a particular client touch type to the particular client touch type;

allocating the cost of research time spent by the analysis providers over the period of time to the one or more client touch types; and

estimating the cost of per unit of the one or more client touch types by, for each client touch type, dividing the sum of the costs for the client touch type by number of units of the client touch type to create a standard cost per unit for the one or more client touch types; and

allocating costs to the client based on the consumption of client touches by the client and the corresponding standard cost per unit for the client touch type consumed.