One particularly relevant area for advisers is that of revisiting and reviewing ongoing service propositions in relation to charging and service levels.
Although client reviews are already part of the service offered by the majority of advisers, Mifid II specifies that these reviews need to be undertaken on at least an annual basis for clients who hold Mifid financial instruments.
The introduction of a more prescriptive way of offering client reviews has led some advisers to review their client base and assess whether this way of working is economically viable for all.
Richard Nuttall, head of compliance policy at Simply Biz says: “Advisers then have to consider the best option for those clients who were previously on biennial review agreements, the most common routes being to either disengage with the client, or to uplift them to an agreement which will see them receive at least one visit a year, and pay accordingly.”
Another element of Mifid II which has affected advisers has been the changed definition of service, which saw a move from ‘advice’ solely covering buying and selling, to also include holding, Mr Nuttall says.
In other words, advice not to do anything (to hold) becomes in itself a personal recommendation. More of the scope of adviser activity (or non-activity) has become regulated and therefore there is more accountability and, potentially, new areas of adviser responsibility and liability.
He says: “There are some key challenges in this area which overlap with the requirements of advisers under Mifid II. One, in particular, is the disclosure to clients in monetary terms, the actual cost of holding the investment over the previous period.
“Of course, advisers already know their own costs, but the new regulation requires them to state the charges from the provider. The process of platform providers needing to gather information from investment managers to show the aggregated cost will prove challenging.”
With Mifid II now business as usual, the FCA has announced its first review in this area; the application of the new research payments rules.
Solvency II
As big as the impact of Mifid II and GDPR are, another important regulatory change which has impacted the financial services sector is Solvency II.
It is the most significant development of the regulatory framework for European Union insurers for many decades, according to Guy Vanner, managing director at consultancy firm AKG.
Solvency II concerns the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.
Mr Vanner says there have been a number of effects, often connected, stemming from the introduction of Solvency II. These include:
