The FCA’s chief executive Andrew Bailey has said that investors should save around £1bn in charges over the next five years thanks to Mifid II.
In a speech yesterday, Bailey noted that the vast majority of traditional asset managers had moved to fund research from their own revenues – instead of using their clients’ funds – as a result of new research cost disclosure rules under the EU directive.
He said the FCA’s work so far suggested that both research and execution costs on the buy-side had improved in terms of accountability and discipline.
Research budgets have decreased by some 20 to 30 per cent, Bailey estimated, and dealing commissions have fallen as research costs have dropped, but also because “managers are increasingly using more electronic, ‘low-touch’ channels”.
He added: “Overall, we estimate that the reduction in charges incurred by investors in equity portfolios managed in the UK was in the region of £180m in 2018. Assuming similar savings going forward, this equates to nearly £1bn over the next 5 years.”
Bailey said: “Importantly, buy-side firms have indicated they can still access the research they need. This may reflect the low ‘entry level’ prices for written research, alongside more thoughtful consumption across the board.
“We want to see independent research providers continue to play a key role in this landscape and will listen carefully to your concerns.”
Bailey noted that the FCA maintains “strong support” for the Mifid II reforms.
He said: “The unbundling of research remains one of the most debated aspects of Mifid II.
“Other regulators around the globe are looking on with interest at how things are developing here, and we have heard that asset owners outside the EU are putting pressure on asset managers to unbundle research from execution costs, to follow the example set in Mifid II.
“Overall, we consider that the rules are already having a positive impact.