New Survey Shows Independent Research Least Harmed By A Research Commission Ban


Independent research providers will be the least likely to see cuts if European regulators carry through plans to delink research payments from commissions, according to a new survey Integrity Research released today. Mid-sized and regional investment banks are most likely to see research payments reduced in an unbundled environment according to survey respondents.

The latest draft of Europe’s Markets in Financial Instruments Directive (MiFID II) bans the ability to pay for investment research with client commissions, heralding major changes in the way asset managers pay for investment research. In response, Integrity Research conducted a global survey of asset managers to gauge their likely reactions to the new legislation.

We polled commission managers and trading heads in March and April 2015 through an anonymous online survey. The survey had ninety nine asset manager respondents of which nearly 80% of respondents were investment managers with 11% being asset owners and 10% hedge fund advisors. Over three quarters of respondents managed at least US$10 billion in assets, with 25% managing over US$100 billion. In aggregate, respondents reported spending US$1.9 billion in equity commissions in 2014 of which US$884 million were for research payments.

Nearly half of respondents (48%) were registered in Europe with 40% in North America and 11% in Asia.

In the survey, asset managers were asked to rank research providers based on those types most affected and least affected by potential reductions in research payments. Mid-sized and regional investment banks were ranked as the providers most likely to be affected by cuts while independent research providers were ranked as those least likely to be affected.

The twenty-seven question survey covered a wide range of commission management practices from compliance due diligence, voting systems, budgeting and expected use of proposed Research Payment Accounts being proposed by European regulators. Subscribers to Integrity’s ResearchWatch service can access the full 35-page report at

Our Take

Asset managers are uncertain about how to react to the new regulation. Respondents were pretty evenly split between those who would plan to adopt research payment accounts — the alternative payment process proposed by regulators; those who would simply pay for research out their own fees; and those who were undecided. Given that the regulatory details are still in flux, their confusion is understandable.

Although asset managers based in Europe will feel the brunt of the new regulation, we’ve been surprised how closely U.S. asset managers are watching developments. It appears that no matter the outcome the new MiFID regulation will have global impact.

Survey respondents appear to already be moving in the direction of implementing budgeting for research payments. This is prudent because stricter budgeting will be required under the new regulation under irrespective of whether it completely severs the link between client commissions and research payments.

Our new survey underscores the far-reaching impact of the new European regulation, and the fact that the global asset management industry is reacting as best they can.


About Author

Sandy Bragg is a principal at Integrity Research Associates. He has over thirty years experience as an investment research professional. Prior to joining Integrity in 2006, he was an Executive Managing Director at Standard & Poors, managing S&P’s equity research business and fund information properties. Sandy has an MBA from New York University and BA from Williams College. Email:

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