MiFID II compliance 18 months on – what advisers say

Back in 2018, the second Markets in Financial Instruments Directive (MiFID II) was brought in to improve protections for investors and restore confidence in the industry.

The directive has been in force for 18 months and, during that time, there’s been plenty of debate about the impact it has had on the day-to-day lives of financial planners and advisers, and about whether MiFID II has actually worked.

We look at recent surveys to find out what advisers really think about the changes, how it has changed the way they work, and what we can do to help.

59% of advisers think the regulation has failed to deliver

Consultancy firm AKG recently carried out a survey of financial advisers and asked them both about preparing for the introduction of MiFID II and its delivery.

The research found that 59% of advisers believe the regulation has failed to deliver on its objectives of improving integrity, fairness, and efficiency within the wealth management industry.

The survey also found that 43% of advisers felt that MiFID II has not improved client understanding at all, while one in ten planners felt that it has even reduced understanding.

Matt Ward, communications director at AKG, says: “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.

“Given the huge amount of time and resource that has been sunk into preparation and implementation, it would be a great shame if these initiatives could not be translated into beneficial change for customers and the sector.”

So, what issues do advisers have with the MiFID II regulations?

Problems with getting permission for trades

One problem that some advisers and planners have reported is that getting client permission for trades can be difficult.

The positive affirmation required from a client every time a trade needs to be made can prove tricky.

While many clients are aware of the need to confirm deals, and the time-sensitive nature of these, there are sometimes clients who do not respond. This means that clients do not get rebalanced and end up in a different portfolio.

Client meetings take longer

Only recently, Jacqueline Lockie, Head of Financial Planning at the Chartered Institute for Securities & Investment (CISI), said that financial planners found MiFID II was adding ‘at least 20 minutes’ of administrative time to each client meeting.

This additional time has led Financial Express regulatory manager, Mikkel Bates, to say that there is a sense that advisers were suffering from ‘regulatory fatigue’ and that they ‘begrudge’ the new rules as they impact their business processes.

A growing advice gap

As suggested above, MiFID II compliance takes up a substantial amount of an adviser or planner’s time.

The AKG survey reported two-thirds of advisers (66%) say the additional reporting requirements have increased their workload. As a result, nearly a third have increased the threshold for their minimum client portfolio size – or are considering it.

A 2018 survey by consultants Platforum implies that MiFID II is widening the advice gap. Their report, Adviser Market: Charging Models, found more than 40% of advisers had reviewed their charging structures in the first half of 2018.

It suggested that “over half the advisers surveyed increased their charges, either for all their clients or at least for their lower value clients, who tend to be less profitable”.

Increasing the regulatory burden – and stress levels

A recent survey by CoreData quizzed 1,000 advisers in the UK about the biggest concerns they face in their profession.

The research found that compliance with MiFID II reporting standards is more of a concern for advisers than Brexit or broader economic volatility. Close to a third (31%) pointed to MiFID II as their primary business challenge.

Craig Phillips, Head of International, says: “Given recent market volatility and geopolitical tensions, in addition to the current state of Brexit negotiations, the finding that adviser consider MiFID II their biggest challenges shows just how much of a headache the regulation is causing.”

Phillips says: “Advisers are feeling the MiFID II strain more this year, suggesting elements of the regulation are creating an increased workload.”

How we can help

It’s clear from a number of surveys that many advisers are struggling with the burden of additional MiFID II compliance. That’s where we come in.

Trailblazer is a flexible, secure and easy to use client and compliance management system that is built for financial advisers, by financial advisers.

  • It has been developed for advisers and networks as the ideal solution to help you remain compliant with MiFID II
  • You can update your records on the go in real time through a highly secure smartphone and tablet app
  • Trailblazer lets you manage client communication, regular servicing, annual suitability assessments and COD quickly and easily
  • You can quickly and easily generate reports that evidence compliance, with your data stored securely and accessible 24/7.

Want to know more about how we can help you to make MiFID II compliance easier? Email enquiries@trailblazertracking.co.uk or complete our contact form.