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Mifid II may force platforms to change strategy

Mifid II may force platforms to change strategy

Mifid II may force wraps and platforms to change strategies to keep advisers and clients on board, industry experts have warned.

Lawrence Cook, director at Thesis Asset Management, warned advisers would "move away" from old, legacy platforms and wraps which no longer innovated or provided positive Mifid II-compliant services. 

Speaking at the FTAdviser Outsourcing Masterclass, held at the FT offices last week, he said: "There are three ways that advisers could view wraps and platforms in this post-Mifid II world: as the enemy, a necessary evil or a partner. 

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"The enemy would be those platforms which used to be innovative 10 years ago, but which seem to be highly resistant to hosting services such as discretionary fund managers on their platforms.

"Will they have to change their strategy? Maybe, in terms of Mifid II we might see financial advisers moving away from those [who don't change]."

Mr Cook said advisers should expect support services from wraps and platforms, in terms of notification over the 10 per cent portfolio drop, clearer breakdowns on DFM fees, greater cost and charges disclosure, better reporting on transaction and providing a better service more generally. 

He added the platforms and wraps who would survive and thrive would be those which offered advisers a more collaborative approach as partners. 

Mr Cook explained: "Those platforms which recognise that advisers' own propositions are evolving will be 'partners'. These wraps and platforms will develop their propositions to recognise that more advisers will want to do some sort of 'outsourcing', whether this is to a DFM or a managed portfolio service or to multi-asset or to multi-managed funds."

While many platforms had put centralised investment propositions into their offerings for advisers, which would help clients in the accumulation stage, Mr Cook said platforms would also have to start thinking about how to cater for those advised clients in the decumulation stage.

He told delegates: "It will be best practice to develop and provide centralised retirement propositions as well as the CIPs on platform. The question wraps have to ask themselves is how long will the client money stick unless they start to change their propositions.

"I think Mifid II will accelerate this trend to greater efficiency", he added. 

Emily Booth, senior investment manager for Parmenion, brought up the issue of Mifid II's 10 per cent portfolio drop rule, whereby investment firms with discretionary permissions must inform clients by the end of the business day if the value of their discretionary managed portfolio falls by more than 10 per cent from the beginning of the last reporting period.

This has already posed problems where DFMs run discretionary portfolios on platforms for advised clients, particularly around establishing whose job is it to inform the end client.