Fund giant Fidelity has reversed course and agreed to join much of the rest of the fund management industry by absorbing the costs of fund research.
That is a reversal of the company’s previous policy, when, as part of a wider announcement of a change to its fee structure, Fidelity said it wouldn't absorb research costs because it has clients in parts of the world covered by different regulatory regimes.
The investment giant argued covering research costs would have meant clients paying different fees for the same investment product depending on where they live.
The requirement for investment houses to disclose the research costs on each of its investment products is part of the European Union Mifid II regulations, which came into force on 3 January.
A range of investment houses with operation in the UK, including Woodford Investment Management, Artemis, Aberdeen Standard Investments and JP Morgan stated they would absorb the costs.
Brian Conroy, president of Fidelity International when the new charging structure was announced, has since moved to a different role at Fidelity.
In an announcement this morning (22 February) confirming its U-turn, a spokesman for Fidelity said they will not be charging the cost of research to any client and that the move followed "extensive discussions with clients."
Paras Anand, chief investment officer for equities, Europe, at Fidelity International, said the change was made as clients would have faced "disproportionate operational and reporting consequences" if it had persevered with its original policy.
He said the original policy had created unexpected problems, which was why it is now reversing course.
Jason Hollands, managing director at Tilney Group, said: "Today's (22 February) announcement of an about turn on its original decision made last October is welcome news and a clear admission that they had got it wrong.
"The decision to now absorb these costs brings Fidelity into line with the vast majority of asset managers. Fidelity's U-turn on this will matter heap pressure on remaining outlier firms.
"The impact of Mifid II on access to research and how the costs are covered has stoked much debate and it is widely estimated that the fund management industry in aggregate has significantly slashed spending on external research as a result of new regulations.
"Only time will tell whether or not this has an impact on performance or makes markets less efficient, as some observers suggest, or turns out to be the catalyst for a healthy clear-out of those analysts whose research is, on reflection, of little value.
"In this environment I believe that firms such as Fidelity, which has long prided itself on the scale and strength of its own in-house platform and has therefore been much less reliant on external research, are in a relatively strong position."
david.thorpe@ft.com
