The study by Greenwich Associates and Capital Institutional Services (CAPIS) is based on interviews with 43 investment managers and 37 plan sponsors.
More than half (55%) of plan sponsors say mandatory disclosure of commissions for both research and trading would benefit them and 86% say disclosure by investment managers of broker commissions should be required.
However, half of participating investment managers support disclosure requirements for total commissions, 41% think managers should be required to split out commissions paid for research overall, half support mandatory disclosure for commissions used for third party research and 45% think managers should be required to report the amount paid to executing brokers for proprietary research.
Forty percent of investment managers think that the use of proprietary research will decline as a result of increases in disclosure and almost 30% believe that greater disclosure will lead to reductions in overall commissions and lower quality of research, which will in turn have a negative impact on investment performance.
Currently, just more than half of plan sponsors say their investment managers disclose total commissions and another 38% say their managers will disclose that information only upon request. Meanwhile, 35% of investment managers say they disclose the commissions they pay to brokers.
Only 20% of plan sponsors say their investment managers give them a more specific breakdown of commissions paid for research in general or third party research in particular; between 40% and 50% say their managers do not disclose commission data at this level of detail. Nearly a quarter of investment managers say they take the next step and split out the total amount of commissions paid for research.
More than 60% believe managers should be required to split out the amount of commissions paid for research overall and for third party research as a separate line item, and more than half want to see managers report total commissions paid to executing brokers for proprietary research.