Standard Life Aberdeen has confirmed it has set aside a budget of around £35m to pay for investment research as required by Mifid II.
In September, the £655bn fund giant, which resulted from the August merger of Standard Life Investments and Aberdeen Asset Management, said it was going to absorb all research costs relating to the new Mifid II regulation starting from 3 January, the same day the European rules were implemented.
Under the Mifid II legislation, asset managers need to disclose how much they pay brokers for investment research separately from trading costs. Firms have to declare whether they pass these costs to their clients or pay for it out of their own pocket.
SLA had previously announced an annual research cost of £10m from Aberdeen, while Standard Life Investments was going to spend around £25m from 2018 onwards.
Speaking to Money Marketing, Standard Life Aberdeen head of distribution Campbell Fleming says the global scale derived from the mega-merger will allow the company to pay for research themselves and eventually pass on the economy of scale to clients through lower fees.
Fleming says: “We have a significant research capability. We have people on the ground, we are leveraging that base together. One of the big benefit of the merger is that we are generating over £1bn in revenues now. We’ll take the cost of research on to our expenses, over £34m.
“Also, because we are such a big firm now we are able to enjoy efficiency so that the total cost of some of the funds we manage as we merge them and put them onto a single platform, they will drop and pass benefit to fund holders and clients”.
In its full year results, published in February, SLA reported net outflows of £31bn for 2017, adding to the £36.8bn loss for the businesses in 2016.
Outflows from Standard Life’s flagship Gars fund continued, coming in at £10.7bn, up from £4.3bn in 2016 as a result of a slowdown in gross inflows and more redemptions from investors.
An in-depth interview with Campbell Fleming will appear in Money Marketing later this week.