MiFID II: Strategizing for January 2018
7 December 2017
By Amit Sanghvi
With just a few weeks left until the new MiFID II regulations take effect in January 2018, now is the time to start implementing measures into your IR strategy that address the changes. On our past blog post on MiFID II we described the broad implications of its implementation, particularly how IROs need to prepare for diminished sell-side research teams.
Investment banks have been feeling the squeeze for years, with firms like Nomura pulling back from equities coverage. MiFID II is expected to accelerate this trend. According to a new survey by Greenwich Associates, half of the European investors polled expect their use of global investment banks to fall by seven percent over the next 12 months.
Today we narrow in on some of the ways IR teams can prepare for MiFID II so as to avoid feeling sideswiped come 2018. We talked to Sarah Levy, group IR director at Kingfisher, and Martin Liedemit, deputy head of IR at BASF, who shared some practical advice on how to adapt to the regulation.
According to the IR Magazine Global Roadshow Report, European companies undertake an average of 12 roadshows a year – making them more extensive travellers than North American and Asian companies. If MiFID II affects banks’ ability to provide corporate access services, European companies could suffer disproportionately due to their extensive roadshow schedule.
Possible solution: Levy recommends building a strong in-house team. “We already organize private client roadshows, and we’ve always seen a lot of direct requests from investors, which we action ourselves,” she says. “Those companies with IR departments that don’t do this should start thinking now about how they can restructure their teams, or bring in additional members to accommodate.”
IR teams will also need in-house support for targeting. According to Rivel Research, companies spend an average of $25,000 and 16 percent of their time per year on targeting – figures that could rise post-MiFID II for European firms.
Possible solution: Liedemit, whose company already does a lot of in-house targeting, says IR teams should build in extra budget and resources for targeting. “Companies that don’t already do their own targeting need to consider how best they can identify those investors that are most relevant to them, and budget for the time and resources to do this effectively,” he says.
Sell-side research void
Post-MiFID II, companies will need to promote themselves more effectively as sell-side may be under resourced or lacking influence over buy-side. Channels such as the corporate website and use specialist intelligence tools will become even more critical.
Possible solution: Levy says she will be “simplifying and restructuring our processes, and increasing our use of digital tools so we can do more with our time.” For Liedemit, content will be king: “IR teams need to take a step back and assess the information they present,” he says. “In the future, we can expect to see an even stronger focus on content, with quality taking precedence over quantity.”
With MiFID II affecting roadshows, targeting and the sell-side, IR teams have plenty to think about, and implement ahead of the new year. Whether your team is able to staff up and increase costs, or simply have to re-strategize to save time and ultimately redirect resources, now is the time to do so. Levy, for instance, has started to identify areas where she can free up time for her team. “The best piece of advice I can give is to review where you can make time savings in preparation for the impact on resources that MiFID II will bring,” she concludes.
Amit Sangvhi is the senior director, international advisory at Q4. Based in London, UK, he’s passionate about how technology can change the face of shareholder ID in Europe. You can follow him @4mits.