Good news has probably been thin on the ground for most advisers this year. But on one issue – regulation – a silver lining seems to be emerging.
Specifically, I’m thinking of Mifid II. A potential year’s delay to the legislation isn’t foremost in my mind here. There have been enough reminders by now that timetables are tight, even with 12 months’ grace. My starting point is more specific – Mifid’s suggestion that all consumers who buy “complex” investment products be subject to “appropriateness tests”.
These tests have caused some alarm among those who fear the death of these products’ hopes of attracting retail investors. But the difficulty of gauging when and by whom they should be taken means it may be easier for platforms to apply a blanket approach – or so one direct-to-consumer player has suggested to me.
Tests for all means more forms to fill in, for each and every retail investor. It doesn’t sound like good news, but let’s explore a little further.
Firstly, the Investment Association has said it will seek to work with the FCA to lighten the burden. A simple box-ticking exercise for consumers, if that is the outcome, shouldn’t prove a barrier to engagement or investment.
Secondly, why does this issue matter to advisers? Because it affects an increasingly large part of their product universe. Not just investment trusts, which seem to be gradually gaining traction after years of being, well, ignored. But also the range of multi-asset products structured as non-Ucits vehicles.
This designation encompasses most of the popular, established multi-manager funds as well as many newer offerings. Many fund houses have considered changing these products to ensure they conform to the new rules – changes that would limit managers’ investment universe. That would hardly be helpful when advisers and other fund buyers are looking for more flexibility and, dare I say, more idiosyncrasy from their portfolios. Creating an even playing field for all products at a direct-to-consumer level would ensure that advisers continue to have access to a wide range of potential investments.
A final positive is the suspicion that, in certain areas, Mifid II is one issue on which the FCA does at least sympathise with the industry.
Mifid II is one issue on which the FCA does at least sympathise with the industry.Certainly, when it comes to complex products, the regulator seems more interested in meeting investment managers halfway than it is with gold-plating the rules. Might it take a similar approach with advisers’ main problems with the legislation? After all, the Financial Advice Market Review means their concerns are front and centre for the first time in a while. A more accommodative approach to a tough piece of European legislation may be a small mercy, but it’s one not to be sniffed at in the current environment.
Dan Jones is editor of Investment Adviser
