Ever since MiFID II outlawed bundling research costs with other brokerage services in 2018, asset managers across the European Union and UK have seen research budgets slide, but a new report shows they are now lagging their US counterparts by as much as 500 per cent.
Findings from market data and analytics provider, Substantive Research, show that for large asset managers with over USD150 billion in assets, US firms now spend an average of USD8.6 million more per year than their European competitors.
In some cases, US research budgets are five times higher than those of European firms with similar strategies and sizes.
The research reveals that almost three-quarters (73 per cent) of asset managers believe that European firms are at a competitive disadvantage compared to their US counterparts when accessing research in the current P&L funding environment.
Following widespread consultation with the industry on the potential damage unbundling had caused to the buyside, in May 2025 the UK’s Financial Conduct Authority (FCA) revised the rules to permit fund managers to pay for investment research and execution services jointly, subject to certain “guardrails”.
The proposals mirrored a similar reform introduced for MiFID investment firms in July 2024, and form part of the government’s broader project to improve the UK investment research market.
However Mike Carrodus, CEO of Substantive Research, said for the buyside in the UK and EU to switch to client-funded research during 2026, there needs to be conviction that “adding of a couple of basis points to clients’ trading commissions would be heavily outweighed by the potential benefits for their end investor clients paying for them, in terms of performance and risk management”.
“Guidance and encouragement are needed from regulators as asset managers decide how viable this move [to joint payment] is in the short-term. A few small buyside firms have already adopted commission sharing agreements in Europe, and when larger firms follow suit later this year, it is very likely that the vast majority of their peers join them in rapid succession.”
Carrodus added that anything that impacts what the client pays is “obviously sensitive” but noted this is an important issue that merits debate now that the regulators in the UK and the EU have softened the rules.
“Do investors think a small added cost to the commissions they pay is worth ensuring that their asset managers can access research and crucially, research-related tech, more flexibly throughout the economic cycle? The buyside believes that moving to joint payments can reverse MiFID II’s damage to their global competitiveness and dramatically improve their ability to access research and meet with corporates.”
The UK government has been vigorous in its efforts to boost growth in UK capital markets, encouraging pension schemes to invest in British companies to enhance financial outcomes for members.
Rachel Kent, Financial Regulators Complaints Commissioner, said the joint payment option is a way of helping meet those aims “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”.
However, she added: “Understandably some asset managers are yet to take the leap, owing to frictions such as the time it takes to operationalise the change or concerns over investor reaction, but the prize of greater growth for investors and boosting investment in UK capital markets means it is worth the effort. Going forward, it would be helpful in forthcoming consultations and policy discussions if the government and regulators could provide positive support to this growth initiative by supporting those asset managers who wish to take up the payment flexibility offered by the joint payment option.”
