Macquarie Loosens Trading-Research Link With a la Carte ServiceBy
Macquarie Group Ltd. is trying a new way to charge clients for research: unbundling it.
The Australian bank introduced a service this year that helps solve two problems facing asset managers: they have to trade a lot before getting access to research from big brokers; and regulations taking effect next year will prohibit that kind of arrangement. The new a la carte system, called “Macquarie Dimension,” provides access to research reports, corporate meetings and phone calls with analysts on a pay-as-you-go basis alongside its usual equity-research offerings.
The move is part of a broader trend where specialized financial companies are struggling to find ways to pay for work their clients used to fund with trading piggybacks. The new approach meets Macquarie’s goal of servicing more accounts and monetizing its content, Peter Bentley, managing director at Macquarie Dimension, said in an interview last week at Bloomberg’s New York headquarters.
Bentley sees opportunity in what he calls “regulatory tailwinds” and a chance to service under-appreciated clients. Macquarie isn’t “trying to be particularly disruptive about how people consume research, but we are trying to be innovative in how to commercialize it,” he said.
Bentley wouldn’t disclose how much clients are expected to pay for discussions with analysts. He did say fees will be in line with booking time with consultants and lawyers. Pricing won’t be “the $10,000 for a call” that’s been reported, he said.
With new rules from the European Union called MiFID II -- Markets in Financial Instruments Directive -- taking effect in January 2018, banks are assessing how they can tweak decades-old research models that rely on trading commissions to cover the cost of providing research. An October white paper, published by Bloomberg Intelligence, with Edison Investment Research and Frost Consulting, predicted the equity research industry will be transformed after years of failing to innovate.
Without the backing of trading commissions, some asset managers who manage less money and trade infrequently are increasingly ignored by big banks, and that will probably be exacerbated by MiFID.
Those are the mid-tier clients Bentley says Macquarie Dimension is targeting. They can’t get what he calls “white glove service” because they don’t make it onto what larger peers call focus lists, whose precondition can be meeting minimum trading thresholds of hundreds of millions of dollars.