Opinion  

Client experience should be front of mind for Mifid

Manmeet Rana

Given the plethora of recent regulatory changes, I think the delay to Mifid II has brought a sigh of relief to most.

The complexity and scale of change required is still vast and the delay only serves to turn a difficult deadline into a very demanding one.

Firms are currently focussed on the big IT builds and data challenges, rather than a number of strategic decisions which should be considered from a commercial perspective.

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The level of information exchange required between distributors and manufacturers, including the introduction of what is effectively dual responsibility between the two, could lead to streamlining in the industry.

Manufacturers could reduce the number of distributors they use or automating processes as far as they can, which should also help with their direct to client aspirations.

The more granular target market segmentation should allow firms to review their current distribution models. I believe it can also help in proactively identifying both the types of distributors they use to access their intended target market, as well as their use of platforms.

This ensures firms can obtain the information they need on whom the products have been sold to.

Where firms have made strategic decisions to only distribute non-complex products, they may well find themselves re-considering their approach as more products will be classified as complex.

The number of notifications and disclosures required to clients will present both practical and commercial challenges. Competitors could potentially have greater insight into how products are being priced, as well as greater transparency in respect of charges associated with products that are not performing so well.

There has also been much noise around how all of the information around costs and charges will be sourced.

However, I would suggest a significant strategic consideration is how firms will look to enhance the customer experience and avoid bombarding customers with more paperwork. As part of this, firms should also learn the lessons of the past and consider how they can be more proactive around compliance.

Third-party relationships are another area that deserves some focus. Depending on the activities performed (such as trade execution), firms may need to perform post-trade reporting, as well as transaction reporting. This is causing firms to consider their relationships with third parties who can help, providing a potential opportunity for service providers.

Distributors may look to platform providers and manufacturers to their custodians and prime brokers for help with some of these solutions. While depending on third parties for MiFID II solutions provides opportunities for service providers, they could create significant risks for firms who are looking to the third parties to help them achieve compliance.

Now is not the time to take the foot off the pedal. There are a number of strategic decisions firms should be considering now, which may influence both business models and the IT build firms are implementing.