Mifid II's effect on platforms means advisers must evolve

Mifid II's effect on platforms means advisers must evolve

Advisers will need to innovate alongside platforms to succeed post-Mifid II, regulatory consultants have warned.

Ben Hammond, principal consultant at Altus Consulting, said while the Markets in Financial Instruments Directive (Mifid II) has meant all investment platforms have had to make changes to remain in business, this did not mean advisers had no need to change.

He said: "The issue for advisers is they have not always taken the opportunity to innovate on top of essential compliance."

Article continues after advert

For Mr Hammond, advisers need to consider seriously the scope and structure of the platforms they use, and make the necessary switches for clients towards platforms which look to be more successful post-Mifid II.

He said: "How each platform is put together, or architected, is the most important factor when it comes to changing and improving the offering, with the more modern and ‘forward thinking’ platform firms more able to make a success of what could be seen as a regulatory thorn in the side.  

"Not being wed to using a single, unruly, core system is key to this success – keeping up with modern technology being something some of the legacy platforms can struggle with."

His colleague Ross Denton, consultant at Altus Consulting, said: "On the one hand, advisers are looking for their platforms to help with the new 'baseline' Mifid II requirements, such as ex-ante and ex-post reporting, and the 10 per cent portfolio depreciation.

"On the other, the Financial Conduct Authority (FCA) is tightening up on what it considers 'non essential' platform services, pushing some things back towards the IFA to save the providers from falling foul of the so-called 'non-monetary benefits' guidelines."

He explained this meant advisers might see an increase in costs to them from some providers. Mr Denton added: "If a platform offers services like ex-post reporting or a 10 per cent portfolio drop notification, will these be deemed under the proposed platform reforms as providing a benefit to the adviser (in that they don’t have to produce the output themselves) but not necessarily benefitting the clients directly?

"If so, will the platform have to charge the IFA for services rendered?"

Moreover, he said there is now such a ream of documentation, with similar but not identical information being offered by platforms to advisers and their clients, that this will lead to more work for advisers.

He said: "This causes work for adviser firms which use multiple platforms. For example, I am aware of a few large IFA firms that have had to adopt their own method of producing an ex-ante report, as the output provided by each platform on their panel is sufficiently different that any time saved by using the platform-produced figures is then outweighed by the time it takes to adapt the output to the firm’s own standardised report.