Unbundling charges for broker services such as equity research will cost fund managers up to £100m a year, the Investment Management Association (IMA) said yesterday.
The figure has been calculated as part of the fund management community's defence against proposed changes to bundled charges and "soft commission" arrangements.
This is where information and data services are bought from a third party, such as Reuters or Bloomberg, in exchange for a fixed volume of dealing with a particular broker.
The Financial Services Authority has been consulting on how to change the charging structures, and has made clear that it is keen to outlaw the opaque practices. But the IMA commissioned Charles River Associates to look at the consequences of unbundling charges and yesterday submitted its response to the FSA.
"There is little prospect of fund managers raising their fees to compensate for the higher costs," Richard Saunders, the chief executive of the IMA, said yesterday. Its research says that the costs under question currently amount to only 3 per cent of total fund management costs.
The report found that forcing fund managers to pay separately for research will seriously affect the amount of research available. "There will be very much less spending on sell-side research and the num-ber of analysts will fall even further than it has in the past three years," Mr Saunders said.
The lack of freely available research, the IMA's report found, will increase dealing spreads by 15 per cent, which would bump up execution costs. The research also shows that a "significant" amount of assets would be moved for management overseas if the proposals were introduced, to avoid the costs of operating in the UK.Reuse content