The second phase of financial transparency rules that will take effect in the European Union will push more wealth management to a fiduciary model, BlackRock Inc. Chairman and CEO Laurence Fink said.
With MiFID II standards enticing more business toward the fee-based, best-interest model and away from the commission-based brokerage model, BlackRock expects a boost to its business in exchange-traded funds, Fink said during a conference call to discuss quarterly earnings.
"These big changes are going to move more money ... to fee-based relationships that are going to drive more ETF flows," Fink said. The company reported $52.31 billion in net inflows for its popular iShares ETFs business in the third quarter.
BlackRock has seen some of its strongest performance in Europe, and demand has followed, an executive said.
The new regulations for MiFID, or Markets in Financial Instruments Directive, are set to take effect in 2018 for all EU member states. The possibility of BlackRock having more responsibility over its own investment research is a "fantastic thing," Fink said. It will give the company a better chance to differentiate its offering, and BlackRock's scale as one of the world's largest asset managers will present it with unique opportunities, the CEO said.
One potential pitfall from the coming standards is that smaller companies are finding it more difficult to get researchers to follow them, he said. Fink also wonders if there will be enough coverage for new companies outside the largest IPOs, he said.