UK: Navigating MiFID II - Strategic Decisions For Investment Managers

Last Updated: 1 November 2015
Article by David Strachan, Nikki Lovejoy, Rosalind Fergusson and Kateryna Bobrova

Most Read Contributor in UK, August 2017

MiFID II will have significant and wide-ranging implications for the strategy, operations, conduct and governance of a broad range of firms in Europe. It raises many important questions for the investment management industry. What are the key challenges and implications of MiFID II? How can investment managers gain a competitive advantage? And how much progress have investment managers made in implementation? We discussed these questions with 15 investment managers and two independent external experts to inform our new paper Navigating MiFID II - Strategic decisions for investment managers. The key findings are highlighted below.

Key challenges and implications of MiFID II for investment managers

Out of all the European regulations to affect investment management, all but one of our interviewees thought that MiFID II will have the greatest impact on their strategy over the next two years. The investment research rules, in their current form, were viewed as a key strategic challenge by the majority of our interviewees. These propose unbundling research from dealing commission and have been a contentious part of the implementing measures; the European Commission has delayed publication of the Delegated Acts, expected in November, which will provide further clarity. The increased requirements in relation to transaction reporting were viewed as an operational challenge by all firms we interviewed. Other key conclusions included the following:

  • We anticipate that some firms will launch more 'non-complex' products relative to 'complex', mainly as a result of the re-definition of complex products under MiFD II and the stricter sales rules that apply to them. Some interviewees were considering restructuring their product offerings.
  • Investment managers are likely to want multiple distribution channels which serve specific client segments. This in turn may drive an increase in direct to client offerings and investment in digital services. This has already been a trend in the UK and we expect it to become so in Continental Europe.
  • The way investment managers interact with the market will change. We expect that the number of systematic internalisers will increase and that there will be a reduction in OTC trading. All-to-all trading venues can provide investment managers with an additional source of liquidity and so several interviewees thought that their use will increase. 
  • The MiFID II rules on investment research, if implemented in their current form, will make the price of research more transparent. We expect this to lead to investment managers increasing their scrutiny of the quality of research and decreasing their research budgets, resulting in more specialised offerings by research providers. 
  • In implementing MiFID II, the firms in the survey indicated that they will no longer choose to delegate their reporting to brokers, with most reporting in-house instead, and others undecided or preferring to outsource to a third party provider. We expect there will also be demand for a third party reporting solution, particularly among smaller investment managers for which bringing reporting in-house may not be a cost-effective option due to the technology implications. 
  • MiFID II will increase costs and reduce margins, as the increased costs are unlikely to be passed on to investors due to competition between firms and the increased disclosure requirements under MiFID II making charges more transparent for investors. 
  • As regards the impact on operating models, many interviewees thought that MiFID II could make the EU less attractive as a location for investment management activities, particularly with regard to the market structure, transparency and investment research rules. We do not expect MiFID II to drive any significant increase in outsourcing, although some standalone activities could be outsourced, such as Transaction Cost Analysis or operating a Research Payment Account.

How can investment managers gain a competitive advantage?

Larger investment managers will be better able to absorb the increased costs of MiFID II and the impact of MiFID II on smaller investment managers that focus on niche areas may be relatively more contained, leaving a 'squeezed middle'. Firms should consider where MiFID II disproportionately affects them compared to peers. Possible options are market consolidation, or changing product offerings and/or investment strategy.

MiFID II will give rise to a significant amount of new data. Market-leading firms will seek to use the new, increased data requirements under MiFID II to their competitive advantage and use MiFID II as a catalyst to ensure their data infrastructure is flexible and efficient.

MiFID II will drive changes in the distribution landscape. Investment managers that have multiple distribution channels and robust links with distributors will be in a strong position. Investment managers should be continually looking to innovate, recognising that online, mobile and social media are becoming primary channels for consumers.

Implementation progress and next steps

In the meantime, firms cannot rest on their laurels. In terms of implementation, most firms we surveyed said they had completed – in whole or in part – their project initiation and governance, impact assessment, gap analysis and project mobilisation (resource analysis and project plan). Most also plan to be well into their implementation programmes by February 2016.

With the 3 January 2017 deadline rapidly approaching and implementation programmes well under way, there is no time to lose in taking the necessary strategic decisions. In order to be market-leading, investment managers cannot focus purely on implementation, but must focus also on wider market and regulatory considerations.

Following publication of the Regulatory Technical Standards (RTS) by the European Securities and Markets Authority in September, we now have a clearer picture of how the transparency regime will be calibrated, but it may be some time before the impact of the rules on fixed income liquidity becomes clearer. The European Commission is expected to adopt Delegated Acts on many of the investor protection implementing measures in November, including on the investment research rules. Both the RTS and Delegated Acts must undergo further scrutiny by the EU Parliament and Council before being finalised. And investment managers must wait even longer for the Financial Conduct Authority to finalise its rules, with the first consultation paper expected in December 2015. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.