MiFID II implementation in the real world - Unbundling Research and actually getting some value from it..

MiFID II: Just Cost, Restrictions and Admin?

MiFID II is only 14 months away, 2017 is going to be a busy year. A bunch of admin, restrictions and reporting for financial services firms – which all means cost. And in a world of paid-for content, only the best content providers will survive.

MiFID II is certainly going to be costly - IHS Markit/Expand estimate that firms will spend $2.1bn preparing for MiFID II in 2017 – approximately $1bn by the top 40 investment banks and $1bn by the top 400 asset managers.

 

Be Ambitious – make this work for you. Think Digital Transformation not Compliance

So make the change work for you. My main message to you here is – focus on how the changes you make over the coming year are going to help accelerate your business, rather than slow it down.

I spend my time at RapidKD advising large firms how to make Digital Transformation happen. Like any good buzzphrase, “Digital Transformation” has a load of definitions – here’s mine:

Digital Transformation = optimising information flows in your business in order to drive better decisions, so you make more money
— Jeremy Phillips, CEO, RapidKD

The important thing here is: it’s all about return on investment (ROI), not adding cost.

Flow diagram ii.jpg

It’s also about better decision-making, and the EC echo this point. The EC Delegated Directive says that investment firms “must regularly assess the quality of research purchased and its ability to contribute to better investment decisions.

So - think Digital Transformation, not compliance. Given that there is a fixed deadline to comply, make the most of the next year and focus on the positive ROI that you can make.

 

Making better decisions

Start by ignoring the technology, and focus on these simple questions:

  • What is going to really help to grow your business – either by helping you to make more fees, or to reduce your costs?
  • What information do you need in front of you each day, to make better decisions and do your job better?

Here are some of the decisions your teams need to make day-to-day – Digital Transformation should help you to make each of these, better:

Buy Side

  • Which research to read next?
  • What is it worth?
  • Who to buy research from?
  • How much to pay for research?
  • How to justify the price?

Sell Side

  • What are you going to write about next?
  • What is in most demand?
  • Which commentators should you follow?
  • What is your next insightful conclusion?
  • How to price your research?
 

All

  • Who to sell to next?
  • Which client to speak to next?
  • What to say to them, to lead their thinking?
 

 

Technology is not the problem

The good news is that you really can be ambitious in how you feed these decisions – technology is no longer the problem.

Key technologies (cloud, APIs) are now mature and proven – which means that new platforms are much cheaper and more powerful and it’s also a lot easier to connect disparate sources & platforms. 

Content analytics have also come on a long way in the last couple of years, making it much easier to tag and rate each piece of content, track usage, profile your users and rank your sources.

Analytics should be at the heart of your Digital Transformation plans, to enrich and focus the flow of content to each decision-maker:

Nimble technology partners can also help you to implement very rapidly. 3rd January 2018 may feel scarily close, but a year is a long time in tech.

 

Here’s what is most likely to go wrong

Technology programs normally fail for non-technical reasons:

  • Poor stakeholder engagement and support
  • Unclear ROI case
  • Poor scoping – not driven by a ROI case or how people work in the real world
  • Wrong partner(s) selected – again, not aligned to ROI
  • Poor adoption by staff – which often boils down to poor stakeholder support
  • Overload of projects 

A really common mistake is to assume that people will somehow all change their ways of working when presented with new technologies. However - we’re all creatures of habit and some things just aren’t going to change:

  • People who are time constrained (senior, expensive people) are still going to be time constrained
  • People who don’t like spending time on systems still won’t want to use new systems, however shiny they are
  • And juniors will have more time on their hands (relatively) and are going to want to help

The simple point here is - work with this dynamic, don’t try to change it.

Time-constrained users want information to magically appear in front of them – so focus on how to push content to them, don’t make them work the platforms. Power users want respect and authority – so give them controls to be as helpful as possible to as many colleagues as possible. 

 

Focus on your stakeholders

It’s vitally important that you focus on the stakeholders across the business from the outset – make sure that the ROI case is clear for each function and for each senior stakeholder personally. Ask this question:

What (information, day to day) is going to help them to make more money and more profit, individually and within their department?

.. and keep aligned to this at all times – as you plan, during build, at rollout and beyond.

But you’re going to have to get the buy-in of the troops as well as the leaders. Given that your junior “Power Users” are likely to be the main hands-on users of your new technology platforms, focus on them too. If you plan your rollout correctly, they will become your advocates and will help to engage the “Passive Masses”.

 

Your Action Plan

All FS firms will likely have assembled a MiFID II project team by now (and if you haven’t, it’s about time..).  A few final questions to ask at this stage:

Priorities: Do you have your priorities straight – are you focussing on ROI rather than just complying?

State of Play: You undoubtedly have lots of other projects on the go and at different stages – are you focussing on the right areas and can you clearly communicate how they fit together? Can you simplify and clear the decks?

Stakeholder Health Check: Do you have the right sponsors across the business and are they engaged? NB not just the sponsors who pay for the project – is each business stakeholder absolutely clear about what it means for their business unit and (vitally) for them personally?

… and if you’re saying yes to all three of these, you are well on your way to a calm and orderly 2017!


Jeremy Phillips is CEO of RapidKD. You can contact Jeremy on LinkedIn or at jeremy DOT phillips AT rapidkd.com.