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As part of the famous global research settlement, Wall Street brokerage firms are supposed to give their clients free, independent research. The problem is, nobody wants it.

Reports by outside consultants, the first since the 2003 settlement, show that 10 Wall Street firms collectively spent nearly $74 million to provide clients with "independent" research -- reports generated from outside analysts -- through mid-2005. Yet the reports suggest the research isn't a hit.

"Usage by the expected prime beneficiaries of the settlement, individual investors, is not as high as one might have thought it would be," wrote Lehman Brothers Holdings Inc.'s consultant. Lehman's data show less than 1% of hits to its Web site are for independent research.

Merrill Lynch & Co. spent $13 million on independent research, but consultant Bridget Macaskill said it has received little feedback from investors to the Web site where it is posted. However, she said it appears the reports are used "extensively."

Credit Suisse Group's Credit Suisse First Boston spent nearly $10 million on independent research, but feedback has been "infrequent," wrote consultant Patricia Chadwick. Most of the 10,000 hits to CSFB's independent research Web site were from its brokers. Just 110 retail customers accessed the site in its first year, which Ms. Chadwick attributes to CSFB's relatively small retail client base.

Goldman Sachs Group Inc.'s Goldman Sachs spent $8 million on outside research and makes it available through three Web sites, which generated 408 "unique visitors" in July 2004, its consultant said. Usage rose to a monthly high of about 722 visitors in 2005.

Wait a minute! Eight million clams for 408 unique visitors a month! Did everyone else’s head explode or was that just me? You guys hit me more than that in a day (way more), and I’m willing to be paid...say...$6 million? I really am a bargain.

At $500 an hour, independent consultants don't come cheap. UBS's consultant was paid $1.6 million for about 3,700 hours over two years and Morgan Stanley's consultant made $1.2 million in 18 months. Merrill's consultant logged almost 2,000 hours over two years and made nearly $1 million.

Please excuse me while I go light myself on fire. Folks, the best independent research is already free and it’s on the Web. Which reminds me; please check out some of my links. There are lots of great stock bloggers out there. Also, keep those e-mails a-coming. You guys totally rock. The feedback (and stock tips) I get is invaluable.

P.S. OK, $5 million. That’s as low as I go.

Posted by edelfenbein at November 27, 2005 1:26 AM