Investment bank research faces $240m losses by 2020

Research reveals a shift towards independent research providers could see huge losses across investment banking research departments.

MiFID II’s unbundling rules could see some investment banking research departments face potential losses of up to $240 million by 2020, according to research.

A report authored by Quinlan & Associates explained independent research providers’ (IRPs) ability to provide high-quality, in-depth and low-cost research has seen them gain significant traction.

The migration from research provided by brokers towards IRPs alongside high costs with sustaining a research team has seen increased pressure at large investment banks.

“We have seen a host of new IRPs emerge, with analysts from bulge bracket firms capitalising on low barriers to entry to set up their own firms, as well as consolidation amongst existing IRPs,” said Benjamin Quinlan, CEO of Quinlan & Associates and author of the report.

In a bid to ease the pressure on research departments, the report suggested alternative research models for brokers including operating out of a separately owned entity or outsourcing research to IRPs.

“The most important priority for brokers now is to start making decisions around the structural make-up of their investment research offering,” Quinlan added.