Transforming “Broker Vote” to Research Budgeting

Frost Consulting has developed a proprietary methodology that allows asset managers to transform their existing “Broker-Vote”/Research Commission Allocation Process into a Research Budgeting structure.

Frost Method Research Valuation Factor Attribution Framework (TM)

Regulatory Objectives
  • Meet FCA requirements under PS 14/7
  • Comply with likely requirements under MiFID II
Research Budget Design

This proprietary process uses existing asset manager data outputs which are first normalized and then customized to reflect a variety of firm/fund specific variables to construct robust fund-level multi-asset class research budgets.

For more information: info@frostconsulting.co.uk

Research Budget Implementation

Working with senior management, compliance and execution to design payment mechanisms that:

  • Meet or exceed regulatory requirements
  • Leverage existing execution patterns/requirements - where appropri
Historic Research Commission Analysis

“Backtesting Research Commissions” Frost has developed a methodology that allows asset managers to model different research commission outcomes. The first step is a historical analysis of actual research commission paid, based on AUM, portfolio turnover, net performance and inflows/outflows.

This is compared against a “budgeted” approach starting with the actual research commissions in the first year of the survey and projecting mutiple “budgeted” approaches thereafter.

While the results will vary, based on a number of factors, in multiple cases susbstantial research commission savings (in the 10s of percents over time) have been demonstrated - while simultaneously ensuring that the investment professionals recieve the critical external research they require.

Not only were the savings directly accretive to performance, but the unified commission framework created high levels of transparency for clients and regulators.

UK FCA Position on “Broker Vote” Methodologies

Download PDF: FCA - Broker Vote Analysis

For more information contact info@frostconsulting.co.uk