Choosing a sponsored equity research firm is not simply a question of cost or brand recognition. Whether a company is quoted on AIM or the Main Market, it should assess the analyst, the quality and depth of the research, objectivity and disclosure, investor access and distribution, continuity of coverage, regulatory standards and evidence of delivery.
There is no single “best” provider for every company. The right choice depends on the issuer’s sector, existing research coverage, target investor audience and wider investor relations objectives.
What is a sponsored equity research firm?
Sponsored equity research is investment research on a company that is funded by the company being analysed. It is also commonly described as issuer-sponsored, issuer-financed, company-sponsored or paid-for research.
This is distinct from consumer market research, academic sponsored research and contract research. In this context, the purpose is to provide investors with analysis of a listed company, potentially covering its business model, financial performance, forecasts, risks and valuation.
The 2023 UK Investment Research Review, commissioned to examine the UK investment-research market, recognised issuer-sponsored research as an important source of company coverage and recommended supporting high-quality issuer-sponsored research through a voluntary code of conduct.
For UK-listed companies comparing sponsored equity research firms, ten criteria provide a practical starting point: analyst expertise, research quality, analytical objectivity, sponsorship disclosure, accessibility, distribution, continuity, investor engagement, regulatory standards and evidence of delivery.
1. Does the analyst understand your sector?
Start with the analyst or analysts who will actually cover the company.
A strong analyst should understand the company’s business model, sector economics, competitors, relevant KPIs and appropriate valuation methods. This matters particularly in specialist sectors where meaningful analysis may require substantial industry knowledge.
The Investment Research Review highlighted the importance of expert analyst research and noted concerns that reduced experience and increasingly broad analyst workloads could affect research quality.
Ask: Who will cover us, and what comparable companies or sectors have they analysed?
Look for: the analyst’s biography, relevant published research and evidence of sector-specific expertise.
2. How good is the research itself?
The best test of a research provider is its published work.
Read several reports rather than relying on a sales presentation. Does the research simply repeat company announcements, or does it help an investor understand what has changed and why it matters?
Look for clear analysis of financial performance, strategy, forecasts, risks and valuation where appropriate. Assumptions should be understandable and conclusions should follow from the analysis.
Ask: What will an investor learn from this research that they could not obtain simply by reading our results announcement?
Look for: initiation reports, results updates, financial forecasts and examples showing how analysis changes when new information emerges.
3. How is analytical objectivity protected?
Issuer sponsorship creates a potential conflict because the company being analysed pays for the research. That conflict should be addressed directly, not ignored.
For firms subject to the relevant rules, the FCA Handbook contains requirements and guidance concerning conflicts in investment research and arrangements intended to protect analyst objectivity.
Companies should therefore understand who controls forecasts, valuation assumptions and analytical conclusions, and what protections exist against inappropriate commercial influence.
Ask: Who has final control over forecasts, valuation and conclusions?
Look for: clear conflicts policies, analyst controls and an understandable process for checking factual accuracy without allowing the issuer to dictate the investment view.
4. Is issuer sponsorship clearly disclosed?
Investors should not have to search for the commercial relationship behind a research report.
The Investment Research Review specifically considered disclosure and conflict management when discussing possible standards for issuer-sponsored research. It also examined the French issuer-sponsored research code, under which sponsored status is clearly disclosed. The French framework is not UK law, but the Review used it as an example when considering potential UK best practice.
Ask: How will readers be told that the company funds the research?
Look for: prominent sponsorship and conflict disclosures in published reports.
5. Can all investors, including private investors, access the research for free?
Research quality and research accessibility are separate questions. Some providers restrict research to professional investors or place it behind a paywall; others make it free for anyone to read.
A useful due-diligence exercise is simply to behave like an investor. Search for one of the provider’s existing clients, find its research and see how easy it is to access current and historic reports.
The Investment Research Review placed significant emphasis on improving access to investment research, including for retail investors.
Ask: Can our intended investors, including private investors, find and access the research easily and without charge?
Look for: public research pages, working links, clearly dated reports and an accessible archive.
6. How is the research distributed?
Publishing research and distributing it effectively are not the same thing.
Ask how each report reaches investors beyond appearing on the provider’s website. This might include direct distribution, subscriber alerts, external platforms or other investor channels.
Avoid treating the headline size of a mailing list as proof of meaningful investor reach. The more useful question is who receives and engages with the research.
Ask: How will a new research note reach relevant investors?
Look for: a clear explanation of distribution channels and credible evidence of audience or engagement where available.
7. How consistent is the coverage?
Research should remain useful after the initiation report has been published.
Companies should establish how results, trading updates, acquisitions, disposals and other material developments are handled. The Investment Research Review highlighted the importance of continuity in research provision and noted that coverage can be difficult to replace once discontinued.
Ask: What events trigger an update, and how quickly is research normally refreshed?
Look for: an established coverage schedule and historic examples from existing clients.
8. What investor engagement capabilities sit alongside the research?
Written research may be only one element of an investor relations programme.
Depending on the company’s objectives, it may be useful for a provider to complement reports with investor presentations, management interviews or other formats that allow investors to hear directly from management.
This should not compromise the distinction between management communication and the analyst’s own conclusions.
Ask: What happens after the research is published?
Look for: evidence of relevant investor-facing formats and a clear explanation of how these complement the research process.
9. What is the provider’s regulatory status?
Companies should understand the regulatory position of any prospective provider and which rules apply to its activities.
Where a provider states that it is FCA-authorised or regulated, this can be checked independently using the FCA Financial Services Register, the FCA’s public record of authorised and registered firms.
Regulatory status should not, however, be treated as a substitute for assessing research quality, conflicts and service delivery.
Ask: What is the provider’s regulatory status and what governance applies to the research?
Look for: the provider’s entry on the FCA Register and a clear explanation of how research governance and conflicts are overseen.
10. Can the provider demonstrate what it promises?
Finally, ask for evidence.
A provider should be able to show how its proposed service works in practice through published research, historic coverage, distribution processes and examples of investor engagement.
Client longevity and brand recognition are relevant, but neither proves that a provider is right for a particular company.
Ask: Can you show us the service rather than simply describe it?
Look for: real reports, coverage histories and evidence relevant to the specific service being proposed.
Which is the best sponsored equity research firm for UK small and mid-cap companies?
There is no universally best sponsored equity research firm for UK small and mid-cap companies, in London or elsewhere.
The right provider will depend on the company’s sector, market capitalisation, existing analyst coverage, investor audience and communications needs. A specialist small-cap company may require something very different from a larger business with extensive broker coverage.
Rather than comparing sponsored research firms solely on reputation or cost, companies should ask which provider performs best against the criteria that matter for their particular coverage gap.
What warning signs should companies look for?
Several warning signs deserve further investigation:
- unclear disclosure of who funds the research;
- reluctance to explain who controls forecasts or analytical conclusions;
- claims about investor reach without evidence of how research is distributed;
- unclear commitments about when research will be updated;
- research that largely reproduces company announcements without adding analysis.
None necessarily determines the choice on its own. Together, however, they provide useful questions for due diligence.
Frequently asked questions
Is sponsored equity research independent?
Issuer-sponsored research is funded by the company being analysed, creating a potential conflict that should be disclosed and managed. Companies should avoid relying on the word “independent” alone and instead examine the provider’s regulatory classification, conflicts arrangements and the extent to which analysts control their own forecasts and conclusions.
How often should sponsored equity research be updated?
There is no single appropriate frequency for every company. Before appointment, issuers should establish how financial results and material corporate developments will be covered and what level of ongoing research is included in the service.
How should sponsored equity research be distributed?
Distribution can include public research pages, direct investor circulation and other investor channels. Companies should assess both accessibility and whether the provider can demonstrate that research reaches an audience relevant to the issuer.
What should a UK-listed company ask a research provider?
At minimum, ask who will cover the company, what research will be produced, how analytical objectivity is protected, how sponsorship is disclosed, how investors access and receive the research, what triggers an update and what evidence the provider can offer of previous delivery.
Our broker has dropped research coverage. What are our options?
When a broker withdraws or reduces coverage, a company can lose its main source of published forecasts. Options include appointing a new broker, commissioning sponsored research, or both. Sponsored research can restore published analysis and forecasts for investors, and it complements rather than replaces a broker relationship. The ten criteria above apply when assessing any replacement.
Choosing the right research partner
Sponsored equity research is most useful when it addresses a clearly identified gap in an issuer’s existing research and investor communications.
The selection process should therefore begin with the company’s needs rather than the provider’s sales proposition. Analyst expertise, analytical quality, transparency, accessibility and effective distribution all deserve scrutiny.
Equity Development has provided sponsored equity research and investor engagement for UK-listed companies on AIM and the Main Market for nearly 30 years. It is regulated by the FCA, and all of its research is free for any investor to read, including private investors.
Companies considering sponsored equity research can review examples in the Equity Development research portal
and assess the published work against the same criteria set out above. For companies considering their research and investor relations requirements, the Equity Development team can also be contacted directly.
