Regulation  

MiFID II’s low-hanging fruit

James Foley

If one were to play a game of word association with MiFID II, topics such as “high-frequency trading”, “dark pools” and “equity research” might come to mind.

The colossal scale of the MiFID II challenge is self-evident, not only for banks and fund managers but for financial advisers as well. In the lead up to the January 2018 implementation date and following the publishing of the regulatory technical standards, there will inevitably be a mad flurry of activity with firms working all hours to make their systems and processes compliant. However, before then, what should not be forgotten is the low-hanging fruit that compliance officers can pick now.

One of those low hanging fruits is the new requirements around the recording and archiving of calls – both fixed line and mobile. Call recording in financial services is not new and the Financial Conduct Authority (FCA) has already mandated that anyone directly involved in equity trading needs to have their calls recorded.

This requires over 30,000 workers in the City of London alone – at a cost of up to £120 per head, per month – to have their mobile calls recorded. While this is a challenge for some firms, it is certainly not insurmountable.

However, what some financial advisers and wealth managers may not realise is that in less than 22 months’ time, when this European directive comes into force, they too will be required to record all of their calls. MiFID II’s wording is very clear – anyone involved in giving advice that may lead to a trade must not only record their calls, but has to securely archive these conversations for up to five years.

While global trading houses may be comfortable paying up to £120 per month to have the mobile phone calls of their top traders recorded, this is a price-point that is simply out of reach for many advisers, particularly the smaller financial advice outfits.

Cost aside, there are also practical implications. Today’s working styles are not straightforward, with the lines between business and personal becoming increasingly blurred. Those who work from home, or on the road, need the ability to distinguish between what is personal and business related. Ask yourself, have you ever made a business call on your personal handset? Financial advisers and wealth managers could be unwittingly breaching regulation if this difference is not made clear.

Furthermore, as many wealth managers work in teams across a pool of clients, it is often the case that a call to a wealth manager may need to be handled by the support staff, who themselves may be working in a variety of locations using any number of different devices. Ensuring that all calls are recorded across these locations and devices is a challenge that very few services can address.

But the benefits of call recording go beyond basic compliance – it can impact your bottom-line. In the retail banking sector, for example, the payment protection insurance compensation pay-outs demonstrate that the regulators take a dim view on information blackspots when it comes to client engagement.