Jeffrey Parker, a friend who’s here to help you. If you are an analyst, a fund manager or an investor relations officer, Jeff is the chum you’re looking for. Who knows if he believes in fortune-tellers or crystal balls, but his capacity to foresee the future of financial communications has made life much easier for many on both sides of Wall Street.
‘He is a hard worker,’ says one of his employees, while staff in both Boston and London see him as ‘a charming guy’. Indeed, he exudes enthusiasm, and working for him seems almost a calling because he does what he most likes to do – ‘organizing and delivering information’ to the finance industry, as he puts it. And this former Fidelity fund manager has been doing it most of his professional life, setting up five different companies so far, all with that same aim.
Parker is probably best known as the founder of First Call, which he sold to Thomson Financial. Such a simple concept: gather earnings estimates and research notes from sell-side analysts and bundle them into one data feed for institutional investors. But such a powerful result. Some observers say First Call estimates helped turn the market into the momentum-driven quarterly earnings guessing game that it became at the height of the tech boom.
In the mid-1990s, with the increasing interest that companies were showing towards the internet, Parker saw corporate web sites becoming a primary channel for IR. ‘So in 1997 we [Parker and co-founder Robert Adler] decided to deliver a business that helped companies do a better job by outsourcing the maintenance, design and ongoing customer service of IR,’ he recounts. Thus CCBN was born, creating one of the leading internet-based shareholder communications firms, of which Parker is CEO.
More or less simultaneously, the US SEC started moving slowly towards Reg FD, boosting the internet and webcasting as much more important vehicles for the disclosure of price-sensitive information to a broader audience.
With both First Call and CCBN, Parker has proven his perspicacity. So what’s next?
‘Video,’ he asserts. ‘Right now some 10 percent of all our webcasting is video. In two or three years this figure will increase to 50 percent.’ He explains that web-based video has developed to a point where it’s dependable and fast. While acknowledging that video is still very expensive, he suggests company management should commit to the new medium.
As rationale, Parker points to the growing role of companies as direct sources of information for the investment community. It used to be most financial information got to money managers through Wall Street. Investors rarely called the company to talk to management; they just consulted sell-side analysts, who were most in touch with companies. Now, the scenario has completely changed, with analysts no longer the stars they were in the 1990s.
Sell-side retreat
Parker sees the number of sell-side analysts falling dramatically. New guidelines and regulations already being adopted mean analysts are no longer in a privileged position. These days they have a hard time coming up with any information the rest of the world can’t get. ‘So why do we need so many analysts covering one sector now?’ Parker wonders. The infamous Chinese wall that proved so thin at Merrill Lynch and other investment banks needs to be raised again, demolishing the idea that analysts are the pitchmen for banks.
Will any sell-side analysts survive? Only those who ‘go back to basics,’ Parker says. That means a return to real analysis instead of just scanning the numbers while trying to get information nobody else has. ‘It’s now going to take more time for analysts to decide whether or not an investment in a particular company makes sense and how it fits within its sector. They should look at secular trends and not just at how are they are going to trade in the next 24 or 48 hours. They have to be more fundamentalist in their research,’ he sums up. ‘Will the analyst industry get better? It certainly will. Will it be perfect? Certainly not,’ he says with resignation, asserting that Merrill Lynch’s fine is just the first of many on Wall Street.
Still, the scandals have triggered a ‘renaissance of corporate honesty’. In this environment, the IRO’s role is becoming more and more important as the ‘corporate police force’, Parker concludes.
