Conclusion, the transformation is far from over v2

It is only the beginning of the necessary transformation, since:
▪ On the regulation side
▪ This requirement is bound to expand to collective funds as well as to other legislations.
For instance, in the US market, major Asset Managers have asked the regulator, the Securities and Exchange Commission (SEC), to enforce a similar rule, in order to lower costs for US investors and create a level playing field with EU competitors.
Indeed, as US laws require US firms selling research for hard dollars to be Registered Investment Advisers, which increases compliance obligations, US research providers are generally reluctant to apply for this status; therefore, US Asset Managers are not able to unbundle research, even if they wanted to. And since the SEC, to address MiFID II, issued a temporary reprieve of 30 months to allow US banks and brokers to charge their EU Asset Manager clients directly for research without having to comply with this law, they are still not encouraged to offer unbundled research to their US clients as well.
The Council of Institutional Investors (a lobby group of 120 pension funds with $3tn in combined assets under management) also warned that US Asset Managers will be disadvantaged if they are unable to pay for research directly, whereas their EU counterparts can — as it will result in them paying more for research and, therefore, subsidizing research used by EU Asset Managers.
▪ Even ESMA’s chairman has declared that the increased competitive pressures on Asset Managers in general should lead to unbundling becoming a more standard model globally.
He even went as far as conveying that he is in favor of research to be fully paid from P&L.
On another note, he also added that he expects the ongoing pressure on fees to continue, and now on research as well, as it becomes unbundled.
▪ On the supplying side
▪ Providers and fintechs are reinventing the way research is distributed and priced.
▪ On the consuming side
▪ Fees reduction will remain a main concern.
▪ Non-EU Asset Managers will want to create a level playing field with their EU competitors. The fact that many Investment Management groups should end up globally implementing the approach designed for the entities having to comply with MiFID II could snowball into pressuring non-EU firms to adopt similar practices even faster.
Thus, in the US, to accommodate US Asset Managers requesting it, some research providers have already indicated they will offer them unbundled research as well, therefore confirming that “the trend is probably movement towards that fiduciary standard worldwide,” as BlackRock’s CEO declared.

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