Poll of 562 asset managers reveals that two weeks before the regulation enters law, 54% of funds still feel they don’t have enough information on research unbundling, indicating that more education needs to be done.
RSRCHXchange, the aggregator and marketplace for institutional research, today released headlines from the results of their latest survey analysing the readiness of asset managers for the MiFID II research unbundling rules coming into effect in January 2018. The survey was conducted in Q2 2017 by polling company Survation, who canvassed the views of 562 respondents, representing over 450 firms with AUM ranging from $100bn+ to less than $1bn, making this the biggest survey of its kind. The survey follows a similar poll carried out in Q4 2016.
The 2017 survey indicates an increased awareness of the upcoming MiFID II research rules since the last survey, with only 2% of respondents now unaware of unbundling.
At the same time, the survey shows a significant slippage in terms of the timing for MiFID II compliance, with the vast majority of asset managers leaving this until the final quarter of 2018 or later.
In Q2 2016 just over 50% of respondents expected to be MiFID II compliant during the last quarter of 2017 or early 2018. Half way through 2017, this number has grown, with 85% of respondents who knew their compliance date, expecting to become compliant by Q4 or later.
That’s not to say that funds haven’t begun the hard work of implementing unbundling. Over 60% of respondents have already set or begun to set their research budgets and decisions are also being made on which payment method to use: transactional RPA, RPA funded by a direct charge to the client, P&L, or a hybrid model.
In Q2 2017 just under 36% of respondents had not decided how they will pay for research, down from 50% in Q4 2016. Opinions are split with the UK, Benelux and Germany preferring payment from firms’ own P&L while the direct charge to the client was naturally very popular in Scandinavia but also in Spain. The CSA-like model of collecting research payments alongside transactions was only really popular in the UK where CSA penetration has historically been quite high, unlike continental Europe.
Once again, setting and assessing research budgets was seen as a challenge by 40% of respondents, with roughly the same percentage of firms currently engaged in setting a budget. That process is being held back by a lack of information on research pricing. Overall 23% of respondents have not received pricing information from any of their research providers. There remains a large disparity in pricing information received by the largest and smallest asset managers.
The survey shows a continued consolidation in the number of the top nine investment banks, with 80% of respondents looking at taking 5 or fewer of the 9 banks listed.
Technology is playing an increasingly important part in buy side research consumption. The big winners are aggregators and provider portals, with the use of email seen as lacking in terms of consumption tracking and leaving firms open to inducement risk.
Additional findings include:
- 54% of respondents felt they still didn’t have enough information on the regulation
- 77% of respondents expected the number of research providers to fall
- 27% fall anticipated in the use of email as a delivery method for research
Jeremy Davies, Co-Founder of RSRCHXchange, said:
As we rapidly approach the MiFID II deadline, it is clear that decisions are being made and the largest asset management firms are the most advanced in their process as they already transition towards MiFID II compliance. And although we see overall MiFID II readiness slightly pushed back towards Q4 2017 or early 2018, there is no doubt that the unbundling process is well underway. At the same time, the onus of setting a price for research rests firmly with providers; as of now this process is not yet well advanced.
Vicky Sanders
Vicky Sanders, Co-Founder of RSRCHXchange, added:
Some of the results of this survey will come as a surprise to the industry, especially the expected decline in the number of research providers. In anticipation of these unbundling changes we have set up an aggregator and marketplace than can ensure asset management firms can maintain the diversity of views that they require to generate alpha. Backed by NEX, we make investment research from more than 200 banks, brokers & boutique research providers available to over 1,000 asset management firms.