Investment managers are also likely to increase their direct-to-client offerings and investment in digital solutions. This is already a trend in the UK and Deloitte expects it to become so in Continental Europe.
The ‘squeezed middle’
These regulatory changes will result in a ‘squeezed middle’ emerging, Deloitte predicts.
Strachan continued: “Larger investment managers with greater economies of scale will be better able to absorb the costs of MiFID II, and small niche firms may be less affected by certain rules.
“Managers that employ passive and quantitative strategies, which do not rely on investment research, will also be relatively less affected, although that will depend on where the Commission comes out when it adopts the Delegated Acts, expected in November.
“They will then need to undergo further scrutiny by the Council and European Parliament. To gain a competitive advantage, investment managers should be thinking strategically about how they can optimise their business under the new rules.
“Possible strategic responses to MiFID II include mergers and acquisitions, or changing product ranges or distribution strategies,” Strachan concluded.
