A significant majority of EU and UK asset managers believe that the softening of MiFID II rules on payment for investment research will be in asset owners’ interests, according to a new survey.
In the UK, the Financial Conduct Authority has now finalised its framework for allowing firms subject to MiFID II to combine payments for third-party research and execution, paving the way for research costs to once again be passed on to end investors.
Similar changes to MiFID II rules are being implemented in EU member states by 5 June 2026.
New data from Substantive Research, an investment research and market data discovery and spend analytics firm, suggests that asset managers will avail themselves of the new flexibility to return to client-funded models of research procurement.
In Substantive Research’s survey of 40 major asset managers, 73% agreed with the statement that European asset managers are at a competitive disadvantage to their US counterparts regarding access to both analyst research and corporate management.
Only a slightly smaller proportion (69%) agreed with the statement that “improved research and corporate access validates the charges being passed on to asset owner clients”, and 80% stated that “performance is what really matters, and if budgets increase slightly but have a leveraged effect on performance, then asset owners reap the rewards”.
Substantive Research also highlighted that 59% of respondents stated that adopting a joint payments approach could “lead to increased buy-side flexibility for asset managers to invest in any future developments/offerings in the research space”.
It said this was significant because the average medium-sized EU/UK asset manager spends $700,000 (€604,000) a year less than their US peers on technology-driven research tooling and analytics.
“There is strong conviction that CSA-funded research is in asset owners’ interests”
Mike Carrodus, CEO of Substantive Research
According to Mike Carrodus, chief executive officer of Substantive Research, the survey captures the conclusions asset managers have come to after a period of deep internal engagement with the new joint payment rules.
“We didn’t know what responses we would get, but the survey shows that there is strong conviction that CSA-funded research is in asset owners’ interests,” he told IPE.
“And when you consider how much research budgets have shrunk over the last few years, it’s no wonder that asset managers are feeling that the benefits to the investment process will dwarf the costs.”
Q2 2026 kick-off
According to Carrodus, the first wave of moves to client-funded research budgets will begin in the second quarter of next year and gather pace through to the beginning of 2027.
Before MiFID II, commission-sharing arrangements (CSAs) allowed asset managers to compensate a broker-dealer for trade execution while allocating a portion of the commission for research. They have continued to be used in the US to pay for research and elements of them are being reintroduced in the UK and the EU under the new joint payment rules.
Steve East, global head of equities at broker Rothschild & Co Redburn, said: “MiFID II unintentionally cut research budgets, limiting access to differentiated views and hindering performance. Joint payments [are] seen as a way to restore flexibility and transparency, enabling high-quality research without the operational burdens of past unbundling rules.
“Momentum is clear – major asset managers and dealing desks are preparing CSA agreements,” East added. “This change ensures better-informed investment decisions and positions UK and EU fund managers to compete on the global stage.”
Connecting the dots
In the UK, the new rules on investment research funding follow a recommendation included in the 2023 Investment Research Review, led by Rachel Kent, financial regulators complaints commissioner.
On the back of Substantive Research’s new survey, she called on governments and regulators to provide support to those asset managers who wish to take up the payment flexibility offered by the joint payment option.
“As part of the government’s efforts to boost growth in UK capital markets, pension funds are being encouraged to invest in UK-based growth companies to enhance financial outcomes for pension savers,” she said.
“The Joint Payment Option is a way of helping to achieve this as it supports the facilitation of further investment research coverage, thereby providing investors with the information they need to assess a company’s value as an investment.”
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