MiFID II Causes Research Sales to Fall Again in 2019


According to Integrity Research’s latest annual forecast, research sales are expected to fall 5.5% in 2019 following the more significant decline seen in the prior year as asset managers continue to right size their investment research budgets in response to the research unbundling requirements mandated by MiFID II.

Integrity’s 2019 Research Industry Outlook

As we mentioned above, we expect that research industry sales will fall 5.5% or $813 mln to $13.8 bln in 2019 from prior year levels due, in large part, to weakness in Europe brought on by MiFID II.  We project that research payments in Europe will fall 8.5% as many of the asset managers subject to MiFID II will reduce the number of research counterparties they use in 2019 versus just cutting their research payments to each provider as was done in the prior year.

We project that research spending in North America will fall, albeit a less dramatic 5.0% as fewer asset managers in this region are subject to MiFID II and will be able to continue using client commissions to pay for their sell-side and independent research.  Asian research sales are expected to slip a mere 2.5% in the Asian markets as continued interest in these markets supports research payments.

Sell-Side Research Forecast

The team at Integrity Research projects that buy-side payments to investment banks for their research will fall $808 mln or 6.5% to $11.7 bln in 2019 when compared to 2018 driven by a 10% drop in Europe and a 6.0% decline in the U.S.  As mentioned previously, we expect that the weakness seen in 2019 will be driven primarily by the fact that many asset managers will look to eliminate duplicative research coverage, thereby reducing the number of sell-side firms they pay in 2019.  This should impact the number of large investment banks that asset managers choose to use to provide research.  We project that spending on sell-side research from Asia will fall 2.6% during 2019.

Independent Research Forecast

Our 2019 forecast for independent research firms reveals a 1.6% or $35 mln drop to $2.19 bln in revenues from the previous year.  One of the primary factors enabling spending on independent research to post a relatively stronger performance in 2019 than sell-side research is the fact that once asset managers cull their research lists, they will be looking to fill in their research gaps.  We suspect asset managers will bring on new IRPs to do just this in the latter half of the year.

The bulk of the 1.6% drop we project for IRP revenue in 2019 will be due to weakness in fundamental (-5.3%) and economic (-7.2%) research.  As mentioned in the past, EU regulators have deemed that macro-economic research openly available to any asset manager wishing to use it could be seen as a minor non-monetary benefit and therefore not classed as an inducement. This has led a number of sell-side firms to give away their macro-economic research product free creating an unlevel playing field for independent research firms.  Spending on fundamental research will continue to suffer as EU asset managers view sell-side research and fundamentally oriented independent research to be competitive products.

The one category of independent research we expect will hold up relatively well in 2019 is primary research.  We project spending on primary research will actually rise 6.5% in 2019 as asset managers value highly differentiated inputs to their research process including expert networks, channel checks, and formal survey research.   Generally, asset managers cannot acquire these inputs from sell-side firms.

Consequently, we expect that 2019 global buy-side payments for various types of primary research will hit 36% of total spending on independent research, continuing to eclipse the 29% share that will be spent for IRP provided fundamental research.


Integrity Research projects that the second full year of MiFID II implementation will prompt buy-side spending on research to fall 5.5% in 2019.  This will be driven primarily by continued weakness in spending on European sell-side research – particularly as many EU asset managers decide to cull their list of duplicative investment bank research.  However, we don’t expect that asset managers in North America or Asia will slash their research spending so precipitously, particularly as many of them will continue to pay for research through the use of commissions.



About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email: Michael.Mayhew@integrity-research.com

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