MiFID II’s changes to research payments could provide an opportunity to data-rich custodian banks, according to HSBC’s head of global custody.
The unbundling of research under MiFID II saw a move away from asset managers paying commission to brokers from their fund which was also used to pay for research. Under the new rules – which came into force in January 2018 – research now has to be priced separately from execution.
Speaking at the Network Forum in Vienna, Jane Karczewski, managing director, head of global custody at HSBC Securities Services, said that given the amount of market data and sources custodians have, they could play a part in the front-end decision-making process for clients.
“How can we make sure our custody offering contributes to the profitability of our clients. An example of this could be using data sources to provide solutions facilitating the investment process and helping front-end decision makers,” said Karczewski
“This could be an opportunity for custodians to leverage their local infrastructures, data analytics, and research providers and integrate and distribute content to our clients. Such thought leadership could clearly reposition the value proposition of custodian banks over the next 10 years.”
A recent survey from RSRCHXchange suggests that the buy-side is concerned about the quality of this research now that resources have been cut and access to research has been reduced.
The panel discussion covered the future of the securities services industry and how to sell a unique value proposition. Servicing new asset classes was discussed – including private equity, real estate and cryptocurrencies – while artificial intelligence and robotics also came up.
On the subject of unique value propositions, BNP Paribas’ head of brokers market strategy, Alan Cameron, said any new solutions will not last long as they will be replicated by the competition.
“If you have a unique sales proposition it won’t be unique for very long. I don’t see us or any banks as having a unique sales proposition,” he said.
“The best you can do is have first mover advantage but it will be copied. You can differentiate yourself though, and in securities services sometimes it’s not very glamorous, but it’s doing the same thing well every day and being able to respond to changes. It’s about hard work and doing more things particularly well. A good example is centralisation.”