FCA has published the results of a multi-firm review looking at whether the research unbundling rules brought in under MiFID 2 have improved asset manager accountability over costs.
FCA’s research has found that most asset managers now pay for research themselves, and do not charge clients for it. The changes have also had the effect of making firms look more closely at both research and execution costs, which has resulted in significant savings for investors.
Other findings included that
- firms’ research budgets have fallen by 20-30% yet firms are still getting the research they need
- firms use differing research valuation models, some very sophisticated but others focusing too much on quantity, with only limited evaluation of the product
- some managers have taken a cautious approach to accepting “non-monetary benefits”, sometimes not accepting things that they reasonably could
- controls over external services providers used for compliance services or portfolio management differ significantly and FCA found evidence of breaches of SYSC 8
- research pricing is still evolving.
FCA is monitoring competition impacts and research coverage of SMEs, although there is no indication of a material reduction.
FCA will carry out further work in 1-2 years’ time, to check how pricing and compliance has evolved.