Call it clickbait for Wall Street. But instead of 17 Cat Vines That Will Slay You Every Time, Bank of America Merrill Lynch is putting its hard-won reputation as a top-ranked researcher on the line as it seeks to redefine how to sell ideas to the financial elite.
Gone are long-winded daily market summaries and thinly read reports. In their place, global research head Candace Browning is pivoting to primers and thematic pieces with snappy titles to get readers’ attention. Most importantly, she is pushing her team of almost 700 to make bolder predictions. That mandate comes with a warning, though: Get it right. Repeated flops can cost analysts their jobs.
“The only research that’s worthwhile is original, anticipatory ideas" that generate returns, she said in an interview at the bank’s office overlooking Bryant Park in Manhattan. “You have to tell clients something they don’t already know."
It also helps to show some personality. David Woo at Bank of America, for instance, likened the dollar-yuan exchange rate to a bad marriage in one report.
With more than half a million jobs vanishing from the biggest banks since 2008, researchers are under pressure to prove their worth by making recommendations that are both prescient and memorable. European Union rules that will require investors to pay for research may create even more incentive to stand out.
At Bank of America, the push for out-of-consensus predictions is evident in research from Woo, a foreign-exchange, rates and emerging-market strategist in New York. In The Great Divorce, published in November 2015, Woo argued that China’s currency could tumble as much as 10% against the dollar in 2016. The estimate was the fourth-most pessimistic of more than 40 forecasts. The onshore yuan has fallen about 7% since, reaching an 8-year low last month and leaving rival strategists racing to catch up. “The most powerful recipe for a great trade is when you have a contrarian view and the market is so positioned in the opposite direction," Woo said. “If you get it right, you can hit a home run."
Pop culture references are also in vogue. Shahab Jalinoos, Credit Suisse’s global head of foreign-exchange strategy, prefaced a July report with lyrics from the Notorious B.I.G. to illustrate the limits of Japan’s unprecedented monetary easing: “It’s like the more money we come across/The more problems we see."
Bank of America’s Browning said hiring diverse staff is key to challenging Wall Street’s consensus. Her roster includes aerospace engineer Ronald Epstein, known as Rocket Ron; Timna Tanners, who has a masters in journalism; and former medical chemist Ying Huang.
Power of Ideas
For clients, there can be value in these aggressive calls even if they don’t trigger a change in investment strategy. Brendan Murphy, a Boston-based director at Standish Mellon Asset Management Co., likes how Woo’s analysis pushes him to rethink assumptions.
“Even if you don’t agree with him, he argues his position very strongly and very confidently," Murphy said. “It’s very good, particularly if you disagree with him, because it makes you question your own views."
Even after topping Institutional Investor’s global research rankings for five years, Browning said Bank of America analysts who play it safe won’t stick around. Researchers who make two or three big calls a year will be judged—and paid—based on their success. When calls go bad, analysts are expected to scrutinise and revise them if needed, and any strategist who fails to produce a track record of good investment ideas will be shown the door.
“This isn’t about making a splash, it’s not about the analyst becoming famous, it’s about the power of ideas for our clients," Browning said. “There’s nothing more fun as an analyst than creating an investment insight and seeing it work on the tape."