REGULATION

JP Morgan to pay for client research ahead of MiFID II unbundling

MiFID II’s unbundling rules could see huge costs transferred to the buy-side.

By Hayley McDowell hayley.mcdowell@strategic-i.com August 14, 2017 11:15 AM GMT

JP Morgan Asset Management will pay for the cost of external research under MiFID II instead of passing on the costs to its clients.

The move was confirmed in a statement seen by The TRADE which said research costs will be "paid for by the business and not by MiFID II client accounts".

JP Morgan is the latest asset manager to choose this method of compliance ahead of MiFID II’s unbundling requirements, alongside Vanguard, M&G, Aberdeen and Jupiter.

The statement explained a ‘substantial’ amount of resources is already committed to the internal research department at JP Morgan Asset Management and there will be no changes to the internal teams due to the policy change.

"We also utilise external analyst research where we believe it can add value to client portfolios," JP Morgan added.

The majority of asset managers currently receive research paid for through execution commissions or commission sharing agreements, rather than paying for it directly.

This method is not allowed under MiFID II and unbundling could potentially see huge costs transferred to the buy-side.

Deutsche Asset Management recently created its own internal research division in a bid to control its research costs come January 2018.

Deutsche’s research unit will help fund managers identify investment opportunities and provide clients with regular analysis on macro-economic developments.

Last month, Barclays became one of the first investment banks to put a price on its research, through a tired structure costing anywhere between £30,000 and £350,000.