MiFID II warning on delays and practical challenges implementing costs and charges
5 March 2018
Advice firms should not delay embedding the new MiFID II aggregated costs and charges requirements, support services firm Bankhall has warned.
MiFID II requires investment firms to combine and disclose all costs and charges relating to any financial instruments an adviser recommends to clients. It includes the cost of any investment services provided, such as adviser charges; the financial instruments themselves, and any ancillary costs such as platform fees and charges.
Bankhall’s managing director Julie Sadler said firms should not underestimate the practical challenges in doing so, especially where clients hold assets across multiple platforms or a combination of platform-based and directly held investments.
She said: “Aggregated costs and charges is undoubtedly one of the biggest challenges advisory firms face in embedding the new MiFID II requirements. The problem from the outset has been the lack of a prescribed industry method for calculating or presenting this information, with investment platforms, fund managers and other providers taking a variety of different interpretations and approaches. Advisers are faced with the difficult task of collating and distilling information from potentially many different sources, with the adviser being the one who is ultimately responsible for disclosing and presenting it to the client.
“It could be the sheer scale and scope of these EU-wide MiFID II changes, with high-level guidelines derived from ESMA, which is the reason why we have not seen this translate into the usual degree of practical working examples for our industry in the UK. But with aggregated costs and charges set to become a focus of the FCA’s supervisory work with advisory firms, it is imperative that firms press ahead and fully embed the new requirements where possible.”
In response to adviser demand for more practical support with meeting the new requirements, Bankhall has launched a tool designed to assist firms with their ex-ante (forecast) costs, calculations and disclosures.
Sadler added: “It is important that we do not underestimate the challenge facing advisers in embedding the new MiFID II aggregated costs and charges requirements. Over time we expect more industry guidance and solutions to emerge, but in the meantime, it is incumbent on advisers to take action now and embed the new changes. This will enable firms to respond to any regulatory scrutiny and MiFID II post-implementation reviews further down the line.”
Professional Paraplanner’s publisher, Research in Finance (RiF), is a leading research company in the financial services sector. On occasion our readers...
This week sees the launch of The Paraplanner Club, a new initiative devised by Siân Davies Cole and Chloe Phillips, a mentoring...
Professional Paraplanner has teamed up with Brand Financial Training to answer your questions around the exams scheduled for 2021....