New Survey: 85% Of Asset Managers Expect MiFID II Compliance in Q4/17

Jun 23 2017 | 4:41pm ET

More than eight out of ten institutional asset managers will wait until the fourth quarter of 2017 to comply with MiFID II rules concerning the unbundling of research, according to a new survey by research aggregator RSRCHXchange.

MiFID II’s regulations are scheduled to come into effect in January 2018 and impose a wide range of new requirements on asset managers as well as the brokers and research providers who service them. 

A general lack of compliance and applicability guidelines has meant many in the industry have opted to wait for greater clarity around MiFID II before implementing large-scale changes in their businesses, although many have begun to reflect the new rules in their back office, IR and research budgets. 

The new survey is among the largest of its kind, according to RSRCHXchange, and polled 562 respondents representing over 450 firms with AUM ranging from under $1 billion to $100 billion and more. The survey, which followed a similar one conducted in the last quarter of last year, was conducted by Survation in Q2/2017. 

Key points:

  • In the Q2/2016 survey, 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.
  • More than 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 research payment account (RPA), an RPA funded by a direct charge to the client, P&L, or a hybrid model.
  • In the Q2/2017 survey, 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 very popular in Scandinavia and 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.
  • Setting and assessing research budgets was seen as a challenge by 40% of respondents. The process is being held back by a lack of information on research pricing, the survey revealed, with 23% of respondents 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.
  • Other highlights: 54% of respondents felt they still didn’t have enough information on the MiFID II regulations themselves; 77% of respondents expected the number of research providers to fall, and 27% anticipated a fall in the use of email as a delivery method for research.

“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,” said Jeremy Davies, co-founder of RSRCHXchange, in a statement. “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.”

Founded in 2014, RSRCHXchange is a MiFID II-compliant research aggregator and marketplace for institutional research, purpose-built to be an unbundling solution.  Designed in consultation with asset management institutions and research providers, the RSRCHX platform enables asset management firms to read, purchase and monitor research services from banks, brokers & boutique providers in an efficient and transparent way. The firm’s user base is more than 1,000 buyside firms and 200+ research providers. 

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