Over 70% of asset managers will be
re-examining their sources of research under MiFID II, as the
January 2018 MiFID II deadline approaches, according to new
survey by Electronic Research Interchange (ERIC).
ERIC’s European Asset
Management Survey suggests that while financial institutions
anticipate a significant overhaul in investment research
provision, they do not have a clear idea of the scale of scope
of the changes.
74% of asset managers will apply greater
scrutiny to sources of research from January 2018, with the
same percentage foreseeing a reduction in investment bank
38% of buy-side firms are considering
expanding their internal research teams. At the same time, the
buy-side is generally resistant to the idea of spending more
money on research. A quarter of respondents believe that
research spending will increase, while the remaining 75%
predict that spending will either remain the same or even
In a similar survey conducted by
RSRCHXchange, 65% of respondents expected the top nine
investment banks to constitute less than 60% of their future
research spend, as reported by Global Investor on 13
January. Just 13% expect to pay for research from all nine of
the largest banks and 72% expected to use research from five or
Pre-MIFID II investment banks can bundle
research notes and other services, such as access to analysts,
with execution costs so they do not usually attract an explicit
fee. Post-MiFID II research must be unbundled and charged for
The ERIC survey, carried out in the fourth
quarter of 2016, found that both the buy and sell side
anticipate the need to adapt to a world in which research fees
are transparently reported and unbundled from trade execution
fees. But the questions of how their businesses will be
affected and how they will adapt remain unanswered with just
under a year to go until the MiFID II implementation on 3
74% of asset managers surveyed by ERIC
agree with the impending MiFID II rules, believing that the buy
side should bear the cost of research. But only 40% of managers
expect that this greater research fee transparency will have a
positive impact on clients.
One year out, ERIC found that 38% of asset
managers are not confident of being prepared for MiFID II
unbundling. Even more worryingly, 42% are not even entirely
sure of their obligations.
The new survey from ERIC raises the
question of how asset managers will be able to access the
variety and quality of research they need, should sell-side
distribution decline, without them investing it their own
There is a "third way" of utilising
research platforms, according to ERIC, itself a UK-based
marketplace for research for regulated institutional investors.
It has a similar business model to RSRCHXchange.
ERIC says 57% of respondents to its survey
highlighted the rise of alternative research distribution
platforms, through which asset managers will be able to access
specific and targeted pieces of research for a clear fee.
"MiFID II has kick-started a drive for
transparency that will recognise the value of high quality
research, but there is still significant work to be done to
meet regulatory obligations and ensure the investment research
market functions effectively in an unbundled world," said Chris
Turnbull, co-founder of ERIC.