Investment banks risk losing large pieces of the ‘Research’ business as MiFID II regulations change the way research is prices, valued and used.
Under MiFID II, investment banks must unbundle fees and charge fund managers an explicit fee for Research. To mitigate the impact, banks can choose to transition from the current “fully-integrated” model to operating Research out of a separate unit such as a joint venture or outsourcing Research to independent Research providers.
Also independent Research firms are steadily growing, reflecting their capacity to produce analyses at a considerably lower cost than major sell-side firms. Some investment banks have already retrenched staff away and / or reduced their ‘Research’ divisions. Along with the gradual shift to independent researchers and the costs associated with sustaining ‘Research’ divisions, pressure is building on large global investment banks.