Mifid II 

How AI can help advisers with Mifid II

  • To understand what Mifid II is going to bring in.
  • To learn what hidden obstacles might lurk in the legislation.
  • To learn what sort of strategies can help ensure compliance.
CPD
30min
How AI can help advisers with Mifid II

Despite implementation deadlines being delayed by a year, many compliance managers are still ill-prepared for the introduction of Mifid II.

In fact, 90 per cent of buy-side firms risk non-compliance at the deadline, according to a recent survey.

Mifid II was lauded as the accelerator of digitalisation in the financial services industry. New technology would be adopted to help banks and other financial firms comply with the regulations.

But while basic tech, like phone-call recording software to comply with Article 16(7), has been introduced, far fewer firms have seen the opportunities presented by more advanced technologies, such as artificial intelligence (AI). 

With scant few months left before the implementation deadline, financial services firms should look to AI to help them better understand what Mifid II means for them, and plot a pathway to compliance.

Challenges

The real challenge of the Mifid II legislation, however, is its complexity and length.

Mifid II is arguably the largest and most complex piece of legislation ever to hit the global financial services industry. It runs to over half a million words, and would take an average person more than five working days to read.

But the number of words alone does not do justice to the impact it will have on advisers, banks and financial institutions, not just in the eurozone but also worldwide. 

On its implementation in January 2018, no area of a financial adviser’s job will remain untouched. No element is too small, and no issue too large to be covered by Mifid II.

The Financial Conduct Authority (FCA) is doing its best to support the industry, and has published a number of guidance papers.

However, the fact that the regulator's most recent policy document, published earlier this year, is a mere 156 pages in length, demonstrates the sheer enormity of the task facing the industry, and individual officers. 

It is fair to say that Mifid II contains many specific and immediately identifiable challenges – ones which are easy to spot.

But there is no doubt that the greatest problem for compliance managers is not spotting the obvious, but rather understanding what Mifid II actually means for them in practice. What do they physically need to do to comply? Which parts are relevant and which are not?

The sheer weight and volume of Mifid IImeans it’s difficult to build a holistic picture of what is and isn't relevant; and, because the interpretation of some of the language in Mifid II is unclear, what is it actually asking us to do?

Mifid II and technology to date

Over the last few years, there has been much discussion about how technology might help tackle the challenges with specific articles in Mifid II. Understandably, this debate has slowly grown in volume with advisers’ agitation levels.

Comments

CPD
30min
  1. What has Mifid II been lauded as?

  2. What does Mr Holmes claim is the real challenge of Mifid II?

  3. Mr Holmes claims when Mifid II comes into force, no area of a financial adviser’s job will remain untouched. True or False?

  4. Why does Mr Holmes think AI can help cope with the legislation?

  5. What can AI build up to help with reading documents?

  6. Why does Mr Holmes say we need to get this right?

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