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MiFID II costs and charges spotlight could see platforms lose business

29 June 2019

Wealth managers and platform providers could start to lose business as the stringent MiFID II requirements turn the spotlight on costs and charges, a new research paper from analysts AKG and financial planning firm Netwealth has revealed.

One in three (34%) of advisers expect clients to switch investment solution/ provider in the future and an overwhelming 62% said the reporting and transparency on charges and services already influences their preferred choice of DFMs and platforms.

More than half (51%) of advisers would like to see more consistency across DFM and platforms’ reporting of costs and charges, with an even greater percentage (59%) believing MiFID II has failed to deliver on its goal of improving integrity, fairness and efficiency within the wealth management industry.

The paper, MiFID II Implementation – A Work in Progress, also found the biggest impact upon advisers has been an increased workload, with 66% saying the additional requirements means they have more work to do. Nearly a third said they have increased or are considering increasing their minimum client portfolio size as a result.

The findings of the paper suggested that DFMs, platform operators and asset managers could stand out from competitors by matching up to MiFID II requirements, but need to address inconsistencies to be successful.

Matt Ward, communications director, AKG, said: “There is enough evidence here for DFMs and platforms to target continuous improvements with their reporting suite and to seek further transparency on charges in order to retain intermediary business.

“It is disappointing to see that many of those advisers surveyed do not feel that, at this stage, MiFID II is delivering improved integrity, fairness and efficiency in the wealth management industry. Rather than dwell on this, it should be viewed as a call to action for all industry participants. Strong, collaborative efforts need to be made during the second half of 2019 and during 2020 to ensure that these core MiFID II initiatives begin to bear fruit.”

Sophie Austen, head of intermediary business development, Netwealth, commented: “The research identifies that the greatest propositional impact has been on intermediaries, largely due to the increased workload generated by additional MiFID II requirements. There’s little doubt that the workload has been amplified by the trickle-down effect of incomplete or inaccurate data being provided by other areas of the value chain.”

Austen said that an increasing workload appears to be resulting in an “emerging advice gap” as servicing clients becomes more expensive.

“More needs to be done across the industry to address the quality of data being produced, as well as improving delivery, in order to alleviate some of the pressure on advisers and generate better client outcomes,” she added.

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