The Investment Management Association has made recommendations that could see a ban on the use of dealing commission to buy investment research.
The trade body published a report this week which outlines a potential new model where fund managers would pay directly for services such as research instead of receiving dealing commissions to buy investment research.
The IMA says: “Under such a regime, services could be paid for in an open, transparent market where economic value would be more easily identifiable. Payment would be made to reflect the value received by the payer.”
IMA chief executive Daniel Godfrey says these planned improvements would have to be offset against the existing benefits of the current dealing commission model.
The trade body argues a pure cash market for research could also throw up obstacles for start-up investment managers by raising barriers to entry, and could have an unintended impact on SME research.
The IMA says any changes surrounding dealing commission would have to be carried out at a global level in order to avoid “damage” to the competitiveness of UK firms.
The report concludes that a move away from dealing commission “does not, in and of itself, improve valuation in the market.”
Bestinvest managing director Jason Hollands says: “In an environment where commission has become a dirty word, the IMA rightly understands there could also be adverse consequences for both asset managers and ultimately their clients in migrating away from the current model.”