The Association of Professional Financial Advisers raised several concerns in its response to the European regulator’s consultation on the implementation of new advice rules across Europe, which it claims could increase cost for firms and further reduce access to advice.
A second iteration of the Markets in Financial Instruments Directive (Mifid II) is expected to come into force in 2017 and the European Securities and Markets Authority is currently consulting on the technical details of the directive.
Apfa’s consultation response warned that costs would “surge” under the new rules and smaller advisers would be hit the hardest.
Clare Griffiths, senior policy adviser at Apfa, said the proposed measures include recording telephone calls, asking clients to sign minutes of meetings and specifying the time periods for issuing reports to clients and having reviews.
She said: “This will add a significant burden to firms as the costs of compliance surge. Worryingly, it is smaller firms who will feel the impact of this the most.
“This ultimately risks excluding even more consumers from being able to access affordable regulated advice, because the cost of the advice will inevitably increase.
“Advisers recognise that greater clarity for consumers is critical, but simply increasing the amount of paperwork they need to read through is not the answer.”
Apfa’s response specifically took issue with the proposal that the requirement to publish the details of the process to be followed when handling complaints “in detail” could lead to an excessive administrative burden.
On the obligation to ‘digitalise’ records, Apfa argued that for proportionality reasons physical files should be treated in the same way as digitalised information and this should be made clear in the text.
With regards to the recording of telephone calls, Apfa questioned whether the purpose was to help prevent market abuse or be a record of the advice given to a client.
“The language in the rules does not sit comfortably with the way financial advice is typically conducted, where the conversation may take place over a period of time and via various mediums,” the response read.
“In our view therefore the telephone recording requirement, when advice is being given, is not proportional.
“In practice it would mean that all telephone conversations with a client must be recorded which would have a significant cost impact and administrative burden, particularly for smaller firms that do not have systems for recording telephone conversations or no way of easily indexing and retrieving any recordings made.”
Apfa also stated that the proposed requirement to record the content of relevant face-to-face conversations with a client by using written minutes or notes was disproportionate, adding that having to sign notes would add to the “excessive amounts of paperwork” consumers face.
It also argued against the proposal that minor non-monetary benefits received from third parties should be disclosed to clients prior to the provision of a service.
