Euro IRP Survey Shows Modest Improvement in Research Fees • Integrity Research

By Sanford Bragg November 29, 2022

The six annual survey conducted by trade association Euro IRP found that the average fees charged to buy-side clients by European independent boutiques increased from $22.5k in 2021 to $28k in 2022.

The latest Euro IRP survey asked member firms for the average price per client for their research services. Research fees have been declining since the implementation of MiFID II’s unbundling rules in 2018, which prompted many European asset managers to pay for research from their own P&L rather than from client transactions. Average research fees declined from $45,000 in 2018 to $23,000 in 2021 before rebounding this year.

MiFID II attempted to force explicit pricing for research with limited success. Investment banks, the primary source of research, set token subscription fees for access to written research to satisfy new regulatory requirements, while encouraging buy-side clients to continue to pay generously for higher-touch services through interactions data. European asset managers tended to concentrate their research spending with the largest banks while reducing payments to other research providers, including independents and lower-tier banks.

Looking at the distribution of average fees charged by European research boutiques, most firms have average client fees below $30,000 per year. Only a handful of independents participating in the survey receive higher average client payments.

The survey also asked Euro IRP members the range of their client fees. Most of the respondents offered entry level fees at $10,000 or lower. Minimum fees, typically charged for basic access to written research, were pressured heavily by banks such as JP Morgan which responded to MiFID II by reportedly setting a $15,000 fee for access to its global written research.

The upper end of European boutique fees was more diverse, with a few firms reporting maximum fees at a quarter of million dollars or higher. However, nearly two-thirds of respondents had high end payments under $100,000.

The Euro IRP survey was conducted in June and July 2022 with participation from forty-one independent research firms, representing 70% of the trade association’s membership.

Our Take

The uptick in research fees recorded by the Euro IRP is a hopeful sign for European boutiques negatively impacted by MiFID II. Perhaps clients are more appreciative of independents’ willingness to issue sell recommendations now that markets have turned downward. However, as illustrated by the fact that boutique fees remain significantly lower than when MiFID II was implemented, the damage done by MiFID II has yet to be reversed.

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