Mifid II 

Adviser trade body working on charge comparability

 

The adviser trade body is working with the industry on making sure costs and charges between different firms are comparable.

The Personal Investment Management & Financial Advice Association (Pimfa) is working on this issue following the introduction of Mifid II, which will lead to increased cost disclosure.

Ian Cornwall, Pimfa's director of regulation, said Mifid II would mean that from 2019 advisers will face questions from their clients about the cost of products.

As part of Mifid II, which came into effect in January, cost forecasts need to be disclosed and there is an annual requirement for clients to receive a breakdown of actual costs, which means this requirement effectively kicks in from January 2019.

He said: "From advisers' perspectives, the greater transparency is likely to raise questions from clients about the cost of a particular product versus another product.

"That will not come in until 2019 but the whole drive towards transparency and cost disclosure will, I think, alert clients for the first time in many instances to the totality of the cost they are receiving, not just for the advice but also the cost of those products.

"What firms want is to make sure the manner in which they present their data is comparable to their competitors'. They want to make sure, to use an accounting term, everyone is comparing apples with apples.

"We are working quite hard to try and ensure that we provide information to try and ensure the industry presents data on a consistent basis but it is very difficult, it is a very complex topic and even now our working party is meeting fairly regularly to try and iron out some of the anomalies on the cost disclosure requirements which come into place at the beginning of 2019."

Mr Cornwall also discussed the senior managers regime, which will be extended to financial advisers from 2019 and will mean anyone who holds a senior management function at an advice firm will need to be approved by the FCA and every senior manager will need to fill out a statement of responsibilities explaining what they are responsible for.

He said: "It is going to be a big project whether you are a very large firm or a very small firm. You have got time to get it right. The rules come in on 9 December 2019 and there are some transitional rules, which means it is not fully implemented for a year later.

"I think what firms should be doing at the moment is not panic. We put out information at the beginning of the year which said one of the things you can do now is actually making sure you are complying with the existing rules.

"The FCA has published a useful guide on their website with the policy statement, and that's probably the first thing to read and get to grips with. We have working parties which are looking at the position in respect to core firms, which will be the bulk of firms, and enhanced firms, and what we are planning to produce for our members is additional guidance supplementing the FCA's guidance."

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