By Joshua Maxey, co-founder, Third Bridge
For many investors, expert networks are now a core part of their due diligence processes, and are particularly beneficial to those carrying out deep fundamental research. So how do investors pay for them? As the industry has expanded and innovated, so too have the number and types of payment models. Here, we compare credit-based, pay-as-you-go (PAYG), subscription and “at cost” models.
The most common model today is the credit-based package. Credits are universally accepted in the expert network industry as equivalent to a one-hour call. With this approach, the investor buys a certain number of credits, and each time they conduct a call, one credit is deducted from their account.
- The investor can clearly see what they are spending and they also commit to the expert network, enabling them to enjoy the full client experience.
- The credit-based model also typically allows greater flexibility for ancillary services, such as call transcription and translation.
- Supports greater flexibility to accommodate premium experts or longer calls.
- Right sizing credit packages and any discounts associated with larger packages.
- To what extent the package allows unused hours to be rolled over.
- The “rounding rule”, which means calls are typically rounded up to the hour (i.e. a 45-minute call will cost one credit). Although the rounding rule may seem unfair, there is a good reason: by guaranteeing the specialist’s time, there is a higher chance that the investor will be able to secure the specialist that best fits their requirements.
- There may be “multipliers” for premium experts, where more than one credit is required per call.
Next is the PAYG model, where the expert network charges investors per interaction – with both variable and fixed charges used. With the former, clients are charged an hourly fee based on the expert’s honorarium, experience or qualifications, and this fee is presented to the client before they choose the expert. With a fixed fee, the hourly rate remains the same regardless of which expert is chosen for the call, but there may be a multiplier to allow for more premium experts to be charged at a higher rate.
- For investors, this model requires no upfront commitments, and there is no risk of oversubscription or of losing unused credits.
- There is also a defined cost per call, so the investor can easily determine the cost of each call.
- The PAYG model can be more costly in the long term if the investor’s usage changes dramatically.
- Clients want best execution – often under tight timelines – but without an upfront commitment delivering this can be challenging for the expert network.
- Ultimately, the level of service may therefore vary vs those with a subscription or credit-based package.
With subscription models, investors pay an upfront sum for typically unlimited access to experts, but subject to a fair usage policy. The package may include other services, such as surveys and private meetings. Subscriptions are also sometimes tiered, with additional products such as surveys bundled in at specific levels.
- The provider can learn more about the investor’s needs and better tailor their research services accordingly.
- The investor does not need to worry as much about usage during the subscription period – but they may face an upgrade request at renewal if they exceed the fair usage assumption.
- The investor will often have the ability to dip their toes into ancillary services or products, such as interview transcript content (click here for an overview of those models).
- As there is no defined cost per call, cost allocation in a subscription model can be challenging.
- Given the tendency for a higher call volume, there can also be less pressure on the provider to deliver the investor the best expert available.
- Investors should beware of “soft caps” and other parameters where they may be subject to upticks in charges if the provider believes they have violated a ceiling in the agreement.
- Investors will also end up paying significantly more if they under-use their subscription.
Lastly, there is a newer model now available to investors: at cost. Here, investors enjoy a much lower premium, but the call transcript is made available to the other investors.
- Investors enjoy access to interview transcripts and expert calls for one price, which is substantially lower as compared to the other models discussed.
- The investor must be comfortable with the transcript being accessible to other investors – even when anonymised and with an embargo period.
- Some of the expert networks offering this model are relatively new and therefore may not have accumulated the expertise and resources yet to source the best experts. This may lead to inconsistent quality and an inferior client experience overall.
In summary, expert networks have been growing rapidly over the past two decades and also innovating, with more offerings and therefore more payment options available than ever before. When choosing a provider, investors should make sure they understand the nuances of each model, and think about their long-term research needs as they weigh up the advantages and considerations.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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