MiFID II, or to give it its full name - the second Markets in Financial Instruments Directive, aims to:
Many people are still unsure about the effects MiFID II will have on their business and the specifics of what they need to know and do.
With that in mind, we’ve created a factsheet to help you understand the key things you need to consider, including an action plan to make sure you’re moving in the right direction.
By improving the management of risk through cost-effective technology solutions, there can be an increase in transparency, reporting standards and scalable processes for adviser firms:
As the deadline for MiFID II approaches, read the latest news from across the industry.
Implementing regulatory change in a way that delivers good outcomes for your business and your clients.
Helping you to ensure clients with similar goals receive consistent outcomes, mitigating any unwanted disparity.
Using scale to drive down the cost of investing.
Supporting you to service more clients with the same resource.
Find out about the specific changes we’re making to our platforms to support your business in preparation for MiFID II.
DFMs and advisers with discretionary permissions must deliver quarterly client reporting. You must also tell clients of any depreciation of 10% (and subsequent 10% drops) within each reporting period.
For both Wrap and Elevate, a document which details the valuation drop (in relation to Investment Management Hub portfolios on Wrap and DFM portfolios on Elevate) will be generated in your client’s document library within their platform account and we’ll automatically let advisers/DFM’s know about the 10% drop and which clients are affected.
Your client needs to be informed when their investment in a MiFID II ‘leveraged instrument’ drops by 10% or more. Our current interpretation of the regulation is that the vast majority of assets will not be defined as leveraged; however, the information provided by the Fund Manager via the new European MiFID Template (EMT) will determine this.
MiFID II requires you to provide your clients with aggregated information about costs and charges. This includes transaction costs of trades and a breakdown of DFM fees.
Platforms hold the key to efficient reporting and you should expect reports to break down costs and charges into pounds and percentages, before and after sale.
For transaction costs, Standard Life will take all the relevant information from fund managers and present through a charges information document. We’ll do this after each transaction but also in the yearly statement.
We’ll also show the DFM fees through the same documents.
Transaction level detail for discretionary models will go into the contract notes.
MiFID II compels fund managers to decide and clearly articulate the target market for their products. They will then monitor sales to ensure their products are being recommended to the right people. It naturally flows that it will become advisers’ responsibility to ensure their recommendations are aligned to this guidance.
As a result, advisers must be clear on their target clients and understand the appropriate products and distribution method for them.
Standard Life will bring together target market data from fund managers, as well as help provide the data required by fund managers to monitor sales.
This is about formalising best practice for assessing and reporting on advice to hold a particular fund. The regulation creates a requirement to repeat this each year if your advice is ongoing. It’s worth considering whether you could improve your ‘know your client’ process. Or perhaps review how often you check a client’s attitude to risk and whether there are any specific trigger points (like at retirement).
Standard Life will provide easy access to the investment information advisers need to help to support suitability assessments.
These reportable investments include Exchange Traded Instruments, of which a variety can be traded on Standard Life platforms, including:
If the answer is yes, and your firm does trade in ETIs on behalf of clients, or you have clients invested in discretionary portfolios holding ETIs – you may be required to have Legal Entity Identifiers (LEIs) and National Identifiers (NIs) in place before a trade in an ETI can be processed on our platforms from 3 January 2018.
The requirement to provide LEIs and NIs does not apply to trading in funds.
Our platforms are being updated to enable advisers to provide and check the relevant identifiers. Where clients are UK nationals, the existing National Insurance numbers provided will be pre-populated and this should be checked. The Nationality of all clients, including UK nationals, must be confirmed in the platform. We will communicate full details of this process in the coming weeks.
In the meantime, we recommend that advisers with significant numbers of clients that hold and trade in ETIs consider their preparations for January:
The LEI application process may take a number of weeks, meaning firms should apply in advance, particularly if they anticipate trading early in 2018. Initial charges and annual maintenance costs apply.
Standard Life accepts no responsibility for the information contained in the websites referred to.
This is our current understanding of the regulations on 14 November 2017.
If you still have questions then please speak to your usual Standard Life contact, otherwise, contact us on 0345 272 6622, or email email@example.com. We’ll continue to update this page over the next few months to keep you up to date with the latest news and insight on MiFID II.