This month's question: Will Mifid II change the advice industry for the better?
Yes
Nathan Mead-Wellings, director at Finura Partners
Mifid II will strengthen the call for firms to deliver impartial advice centred on the best interests of clients.
I believe that restricted practices, and even independent advisers, can be open to certain familiarity or inertia biases in the creation of their methodology documents. This needs to change. We must keep up with change and be held to account by our clients to deliver value for money across platforms, funds and our own advice. Mifid II must help the brightest firms rearticulate their value.
Remuneration policies should be clear and consistent; we disclose work to an hourly rate card for full transparency and have no cross-subsidy. Our fees are also mainly non-contingent, breaking the need for advice to require a product for remuneration. We believe this encourages plans, where appropriate, to remain in situ.
I think Mifid II will force parties to clearly articulate the total costs to us and our clients - at present this research can be unclear. This should also cause investment houses to become more competitive and deliver real value, particularly in the actively managed space, which has its place, at the right price, in portfolios.
Lastly, the impact on vertically integrated firms is interesting. Is it good for the client when advice, fund management and platforms are owned by one company? Will this highlight any conflicts of interest at firms such as St James's Place or Old Mutual Wealth? Cross-subsidy should come under pressure, which I think is a good thing.
No
Martin Bamford, managing director at Informed Choice
One of the drawbacks of operating as a smaller business within the wider financial services sector is the often-severe impact of regulation. The rules and regulations dreamt up in Canary Wharf, originating in Brussels, are primarily designed to keep large banks and insurance companies in check, but trickle down and hit small financial planners like a ton of bricks.
Where rule changes are designed primarily with advisers in mind, they can have a big impact without damaging consequences. The Retail Distribution Review was a good example of change aimed specifically at advisers. Many didn’t like having to hold a higher standard of qualification or being more transparent around their remuneration practices. At least the changes made were (mostly) designed to improve consumer protection and client experience.
Some aspects of Mifid II rules could help prevent, or at least identify, instances of market abuse. This isn’t really an issue for the advice sector, yet we have to comply with the rules regardless. Documenting certain phone calls or meetings in a prescribed format has little relevance for financial advisers either, where meetings and conversations are already meticulously recorded.
What things like Mifid II achieve is diverting precious time away from delivering services to clients, so it can instead be spent on reading rule books, changing processes and then monitoring compliance. When we spend time on regulatory initiatives like Mifid, it inevitably increases our cost base and means clients have to pay more for advice. With a growing advice gap, Mifid II has no chance of changing the advice sector for the better.
