costs are likely to fall because in the past a lot of that
was done by humans, but in the future this may become far more automated, but clients will have to pay
more for that human touch,” he explains.
Research sales platforms have become far more
prominent since MiFID’s unbundling rules were first
announced, with many hoping to fill a gap that will
enable firms to purchase a wide variety of research
from different sources, rather than simply relying on
what brokers were willing to give them. While they
might rely on investment bank subscription services
for day-to-day activity, more specialist research could
be purchased on an ad-hoc basis and more competitively than before.
Sanders agrees that the industry is still evolving and
warns it could be some time before the full effects of
unbundling become clear.
“Setting a price in preparation for MiFID II’s introduction in January will not be the end of this story. It’s
a very dynamic and iterative process and it’s likely to
take three to five years before the market will stabilise
and find its natural price points,” she says.
MiFID II can be seen as creating a completely new
market for a very familiar product. As with any new
market, it will take time for it to find its feet, become
fully competitive and provide pricing that works for
both clients and providers.
It won’t be an easy process for many firms and some
may have to adapt to not having the same service levels
as they previously experienced under the bundled regime. New ways of working may need to be developed
and some firms might consider bringing more of their
research activities in-house.
However, over the long-term, these changes should
result in a more competitive, accessible and diverse
research market. Specialist research firms should get
more of a look in, as will freelance analysts, while
banks will need to rationalise their offerings to make
sure they provide genuine value to clients and both
sides of the Street will have to take a more conscious
approach to their research costs. Ultimately, the end
investor should win from all this and ultimately, that’s
what the investment industry is all about.
of firms plan to pay for
research from the P&L
plan to directly charge clients
for research, while
will use a CSA-like model and
will operate a mixed model