However, Integrity analysts also say they expect this rise in buy-side analysts will actually lead to an increase in the use of external research in the future as these analysts search for tools, proprietary data and content to help them analyze the large universe of companies they must cover.

Most sell-side investment banks and broker-dealers have slashed their coverage of U.S. publicly traded companies in recent years as equity commissions have fallen and IPO volumes have shrunk, the analysts say. According to data from Thomson Financial, the number of investment analysts working for the 10 largest investment banks declined 21% to 2,641 as of November 2006, from 3,364 analysts in 2001. This trend is consistent with estimates provided by The Tabb Group, which estimates that the total number of sell-side analysts fell from 16,200 analysts in 2000 to 9,300 in 2006. They expect this trend will continue as the number of sell-side analysts fall to 6,000 by 2008.

This decline in the number of sell-side analysts has resulted in a sharp reduction in the number of companies that receive research coverage. According to Reuters Research, between January 2002 and June 2006, 703 public companies were orphaned by research analysts. As a result, almost 35% of all public companies receive no analyst coverage at all, while an additional 30% of all publicly traded companies are "under covered" (they have fewer than three analysts covering them).

Integrity Research Associates pointed out that its analysts’ outlook is consistent with a recent survey conducted by Greenwich Associates, which revealed that U.S. buy-side institutions increased the number of equity analysts they employed from just under 10 analysts in 2006 to between 11 and 12 analysts in 2007. This result reflected no change in the number of equity analysts at hedge funds, while mutual funds saw close to a 50% increase from just over 12 analysts in 2006 to slightly more than 18 analysts in 2007. The Greenwich survey shows that 47% of buy-side firms plan to increase the number of equity analysts they hire over the coming 12 months.