The introduction next year of MiFID II, the EU’s revised capital market rules, could lead to distributors in southern Europe providing advice on a more restricted number of funds, according to a study published today.
Boston-based consultancy firm Cerulli Associates said that its annual survey of the funds industry had found a consensus around the expectation that product choice will fall as a result of the increased regulation because it will be more difficult to set up new asset management companies or funds.
The report concluded that the EU’s revised Markets in Financial Instruments Directive “is set to have a marked impact on distribution, primarily as a result of the new rules on product governance, the appropriateness test, inducements and disclosure to investors”.
Industry players surveyed said that southern Europe would be hit harder than the north, mainly because of the dominance of large banking groups in the south.
These institutions are most likely to react to MiFID II by reducing access to third-party products, the report found.
Nevertheless the report’s authors said they were confident that there will still be opportunities for third-party managers, particularly in funds of funds and sub-advised mandates.
“In the wake of MiFID II we expect a more restricted form of architecture to largely replace the open one,” said Barbara Wall, Europe managing director at Cerulli.
“Even then, distributors will likely work with fewer asset managers. Third-party sales volumes may not suffer a significant fall in volumes, but the managers will have to work harder as there will be fewer entry points for sales and smaller buy lists.”
She added: “It is largely the low end of the investor base that will end up with fewer third-party funds in its portfolios.”
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