MiFID II: First State team ends client charges for research

Calculating_feesA specialist Asian investment team within First State Investments is to pay future broker research costs itself rather than charge clients.

First State Stewart Asia, which has offices in Edinburgh as well as Asia and invests $22 billion (€20.6 billion) for a global client base, is making the move in line with MiFID II rules on unbundling research costs from commissions paid to brokers.

The unbundling rules, which commence in January 2018, are intended to make fund managers’ costs more transparent and could put pressure on firms who take a different approach and charge clients.

Asked about the wider unbundling policy of First State Investments, a spokesperson said that the firm, which manages the equivalent of €138.6 billion, is to roll out its approach to commission unbundling on a “team-by-team basis supporting the different investment philosophies and styles of each”.

The other teams’ approach will be communicated to clients ahead of the MiFID II deadline of January 3, 2018.

First State Stewart Asia started to unbundle research costs from April 1. All broker-related research and advisory services consumed by the team will no longer be paid for from client dealing commissions. Instead the team will compensate the providers of research by making separate payments directly from their own resources, the firm said.

As a result, all portfolios managed by the team are moving to execution-only dealing charges.

“This change reflects what we believe is in the best interests of the clients of First State Stewart Asia and will help to meet the requirements of the changing regulatory environment; in particular MiFID II,” a statement said.

ITG, a broker, recently found evidence suggesting 18% of French asset managers will pay their own research costs.

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