Industry Voice: MIFID ll - compliance, business strategy or both?

clock • 4 min read

When you think about MiFID, what is your first response? Whilst we know we should treat such legislation changes as opportunities for positive change, the everyday pressures of running a business make it difficult to put into practice.

Why platforms must step up and support the MiFID change

The role of a platform is to help you to run an efficient, well controlled business. However, platform providers are not always compelled to go above and beyond the minimum requirements. Focusing solely on minimum compliance standards can fail to address underlying client needs, which in turn increases the risk that regulators will demand further change in the future.

Advisers should hold their platforms accountable during times of regulatory challenge and expect full support to meet compliance and client needs.

How is Standard Life supporting its adviser partners?

Our platforms can help our partners turn MIFID II to their advantage:

  • Discretionary portfolio statements and the 10% drop

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.

Standard Life will automatically create the quarterly (monthly if there are leveraged instruments in the portfolio) statements; let advisers know about any 10% drop and which clients are affected; and create a client document with further details of the drop.

  • Client disclosure of costs and charges

MIFID II requires you to provide your clients with aggregated information about costs and charges, including transaction costs of trades and a breakdown of DFM fees.

Standard Life will provide a charges information document containing the relevant information from fund managers.

  • Product governance and your target market

MIFID compels fund managers to define 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.

Standard Life will bring together target market data from fund managers and provide the data required by fund managers to monitor sales.

  • Client Suitability

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.

Standard Life's platforms will provide easy access to the investment information to support suitability assessments.

  • Legal Entity Identifier and National Identifier

If your advice firm carries out advised transactions within Exchange Traded Instruments (ETIs) on behalf of a legal entity, that legal entity will need to provide a Legal Entity Identifier (LEI) in order to trade. You'll also have to capture the National Identifier (NI) of any client trading in ETIs, usually their National Insurance number.

Firms with discretionary permissions must also provide their own LEI as well as the NI of the individual in the firm making the investment decision.

Standard Life will support the data capture and transaction reporting with fields for both the LEI and the NI.

What next?

As MiFID II comes into effect on 3 January 2018, the first task is to determine the immediate impact it will have on your business. The best platforms will be able to describe how they can support you with any changes to your current processes.

Beyond the immediate regulatory requirements, you should consider how you can improve your business and value proposition going forward. This may mean simplifying your business model to avoid the complexity of dealing with multiple investment and platform providers at once; or it may create an opportunity to differentiate your CIP. For example, in a robo-enabled future, giving advised clients access to increased investment sophistication can demonstrate added-value that can't be accessed without you.

To find out more about how Standard Life can help you turn MiFID to your advantage, please visit https://www.standardlifeadviser.co.uk

David Tiller

David is Head of Adviser and Wealth Manager Propositions at Standard Life which includes responsibility for Standard Life's platform propositions, individual pension propositions and retirement drawdown. David is a well-known commentator on the UK platform market with Standard Life taking a prominent role in debates around modernisation of the UK long term savings market and legislative/regulatory initiatives including Pensions Freedom, RDR, transparency and ‘super clean' fund pricing.

This information is based on our implementation plans as at today's date (18 October 2017) and is subject to change. Standard Life accepts no responsibility for advice that may be formulated on the basis of this information.

Standard Life Assurance Limited is registered in Scotland (SC286833) is registered in Scotland at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

www.standardlife.co.uk © 2017 Standard Life Aberdeen

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