MiFID II
The European Union’s MiFID II requires greater transparency in the commission-based advisory model. By exposing the true costs of actively managed funds, this new set of rules could drive cost-conscious retail investors, who account for 15 percent to 20 percent of the market, into the arms of lower-cost ETFs.
Because of MiFID II, says Thomas Meyer zu Drewer, global head of ComStage ETFs, which is part of Commerzbank AG, investors will be able to compare an insurance contract with an ETF. “You can see what the costs are, such as rebates or kickbacks, as, all of a sudden, financial advisers have to inform their clients that they are getting a commission for the insurance product,” he says. The change, which kicks in on Jan. 3., will likely push European fund assets from $725 billion to $1 trillion by 2020-21, zu Drewer says.
But that’s not all. U.S.-traded ETFs may benefit more than European ETFs because the former are less opaque than the latter. In Europe’s ETF market, where 70 percent of securities are traded over the counter, MiFID II will require companies to report details of their transactions, such as price and trade volume data.
This article was provided by Bloomberg News.