Platform cost disclosure plans cause problem for advisers

Platform cost disclosure plans cause problem for advisers

Advisers may need to re-think their approach to cost disclosure under Mifid II, as platforms plan to send their list of charges direct to clients.

Cost disclosure requirements under Mifid II came into effect in January 2018, but it is only now advisers must begin disclosing actual costs and charges associated with client investments, rather than just estimates.

Investors will soon begin receiving statements from providers disclosing the actual costs incurred over the past 12 months, with some industry speculation as to how this will be received following a troublesome year for the markets. 

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Financial services consultancy The Lang Cat researched various platforms' approach to their requirements under Mifid II, with 15 platforms responding to the information requests. 

The results suggested for the majority of platforms, advisers will have no involvement in the cost disclosure process with 100 per cent of the respondent platforms intending to send the statements directly to clients. 

Of the respondent platforms, five are giving advisers the ability to interrogate the data or run their own reports while most others are said to still be developing the functionality. 

Ian Lowes, managing director at Lowes Financial Management Ltd, said: "The issue we have revolves around the rules stating that firms like ours have to provide aggregated cost disclosures under Mifid II.  

"The rules for platforms are similar and they have to send these direct to clients, however if they all do not provide the same information to the intermediary, in any format, let alone an agreed, standardised format, the intermediary will be unable to provide the client with the requisite aggregated data.  

"We have been trying to find solutions for many months now but as expected, it's proving somewhat of a challenge." 

Mike Barrett, consulting director at The Lang Cat, said considering the platform's regulatory requirement is to disclose the costs to the end customer, the results are not surprising. 

Mr Barrett said he is aware of the complexities involved with the process having run several of these projects himself and therefore has sympathy with the platforms who are required to do the project within a defined scope and timescale.  

He said: "We applaud the respondent platforms for their transparency and cooperation in providing us with information which will ultimately help both advisers and other platforms in satisfying Mifid II." 

Mr Barrett also cautioned those advisers who have client's assets with a number of platforms may be faced with further challenges, with each platform implementing a slightly different disclosure process which will see statements sent to clients on different days with "potentially different calculations and products". 

Andy Thompson, chief executive of Intrinsic ,said as charges could be four or even five figures sums the information they receive direct from platforms will undoubtedly focus customers’ minds on whether they are receiving value.

Mr Thompson said: "The disclosures will have the power to disturb customer relationships and are likely to be seismic and impactful for every corner of the advice profession, given that they arrive at a time when we face market uncertainty ahead of Brexit.