MiFID II: The beginning of research price discovery
MiFID II There is currently considerable confusion surrounding investment research pricing and large price ranges for services are emerging with some very public announcements.
"The need for clear measurement of services is vital for the demonstration and creation of value for any product."
We have now seen many research producers lay down their initial markers on pricing and fee structure but despite vast differences between them we are extremely encouraged that the process of price discovery has now begun. We are under no illusion that this process will take time but as in any industry, the need for clear measurement of services is vital for the demonstration and creation of value for any product. And so, MiFID II’s research unbundling requirement is the catalyst needed to better enable value creation and value discovery in the research space.
The potential for research providers to create value is unquestionable; we have spoken to hundreds of asset management firms, and broadly speaking, it is clear that without external research providers they would be at a considerable disadvantage. The investment horizon is too large, too varied and evolves too quickly for all research to be created in-house effectively. However, it is also clear that the amount of value that research providers can create can be unclear for both the producers and the consumers. Both sides need to accurately measure where value is being generated both internally and externally, and where the demand is and will be, to ensure the efficient production and consumption of research products.
"It is essential that both sides have accurate consumption metrics which will allow those who provide value to reflect this in price."
We are at the beginning of a journey towards price discovery where historically there has never been a need for it. For any market that requires a price for a good or service to transact, it is essential that both sides have accurate consumption metrics which will allow those who provide value to reflect this in price. Free market forces will sculpt the research products of tomorrow, for the good of the entire market.
There is a surplus of latent intellectual capital within the research producers. The process of price discovery initiated by MiFID II will allow this talent to emerge and to be fairly compensated for the work they produce, benefitting all sides involved. Research is like any other service: you pay for value. All you need are the tools to understand this, FeedStock provides these.