08.07.2017

Vanguard to Pay for Research

Global asset manager Vanguard has thrown the gauntlet to its rival regarding the funding for investor research.

The asset manager reportedly has decided to pay for third-party research out of its profit & loss account rather than passing the cost onto its clients and will make the change before MiFID II’s January 3, 2018, deadline, FTfm reports.

“Under Mifid II, we will not charge investors for external research,” a Vanguard spokesperson told FTfm. “Any associated costs will be absorbed by the business, not by clients, or Vanguard’s funds.”

Company officials estimate the change in funding will cost Vanguard and additional $100 million annually.

By internalizing the costs, other asset managers will find it difficult to justify passing the cost of research through to clients, noted one industry observer.

“Our view is ultimately: pay for this stuff yourself,” Benjamin Quinlan, founder of consultancy Quinlan & Associates, told FTfm. “Stop using client money to do it. In general, there is an expectation among investors that asset managers should be paying the research themselves.”

Several European asset managers, such as Jupiter, M&G, and Aberdeen, already have decided to take the same approach and forgo establishing client-funded research payment accounts.

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