Strategy

UK Investment Manager Says It Will Absorb MiFID II Research Costs

Josh O'Neill Assistant Editor 22 August 2017

UK Investment Manager Says It Will Absorb MiFID II Research Costs

Deciding who will pay for investment research ahead of MiFID II is hot on the minds of money managers across the world.

T Rowe Price International will absorb the price of third-party investment research once MiFID II is implemented, the latest in a string of money managers to outline how costs will be covered once the European directive enters into force.

T Rowe Price Group, the parent group of the UK-based investment manager, said yesterday it would pay for investment research as of 3 January 2018 - when MiFID II takes effect - rather than pass costs onto its clients. 

“With this decision, we have ensured that our clients’ best interests are protected while preserving our globally collaborative investment process and our access to important third-party research,” Rob Sharps, co-head of global equity and group chief investment officer, said. 

MiFID II, an acronym for second iteration of the European Union's Markets in Financial Instruments Directive, will require money managers for the first time to “unbundle” the costs of investment research, separating them from service and trading fees. 

T Rowe's announcement comes amid a flurry of others made by various asset managers, as each weighs up whether they or their clients should pick up the bill for research. 

Some larger firms, including JP Morgan Asset Management, Jupiter, M&G and Aberdeen Standard Life, have said they will also cover the costs.

However, there are concerns that the regulation risks pushing smaller players to the wall as they could struggle to absorb the costs and may have to pass them onto clients, potentially causing them to lose business to larger rivals. 

Meanwhile, some investment banks - which are often asset managers' first choice for equity research - see an opportunity to cash in on MiFID II. 

Barclays, for example, has quoted some small-and medium-sized clients $450,000 for firm-wide access to its premium research offering. JP Morgan is reportedly proposing to charge as little as $10,000 a year for equity research - the lowest price to emerge so far.

Last week, Bank of America was tight-lipped when probed by this publication about media reports it was planning to charge asset managers up to $80,000 a user per year for full research services.

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