Mifid II 

FCA rules out adviser cost template

FCA rules out adviser cost template

The Financial Conduct Authority has ruled out creating a cost disclosure template but has agreed to work with trade bodies on their own versions.

Megan Butler, executive director of supervision for the investment wholesale and specialists division at the Financial Conduct Authority (FCA), said the disclosure regime under the new Mifid II requirements was “probably not perfect.”

Mifid II requires investment firms to explain all costs ex-ante, before the client invests, and ex-post, which means periodic reporting after the client has invested into a fund about annual management fees and advisory charges.

Speaking at the Personal Investment Management & Financial Advice Association (Pimfa) annual summit earlier this week, Ms Butler said she had heard numerous calls from the industry to clarify Mifid II cost disclosure rules by producing templates.

But Ms Butler said it was not feasible for the FCA to mandate a “one size fits all approach” for point of sale and post investment disclosure as the sector has so many different business models

Ms Butler said: “As complicated as it is to present the advisory cost to the client it is difficult to argue that people should not have the opportunity to understand the overall cost of investing.

“That said, we do know this is a real challenge for you, particularly given the tendency of people to discount tomorrow over today.

“We still have no plans to propose a standardised format for firm’s point of sale disclosure.

“However we will do everything to positively engage with you on industry level proposals for templates.”

Liz Field, chief executive of the Personal Investment Management & Financial Advice Association, said she had pressed the FCA on a number of occasions over the past two years to produce a template to ensure the presentations of ex-ante cost and post cost disclosure were prepared on a consistent basis by all firms.

Ms Field said: “The text detailing the costs and charges obligations is opaque and require firms to make judgments and assumptions in respect of the detailed computations. 

“The FCA still declined to do a template so various working parties including one set up by Pimfa have sought to address the issue.”

At this week’s Pimfa event, the FCA’s Ms Butler also talked about the need for greater communication between providers and intermediaries about who was investing in certain types of funds once the Mifid II rules come into force on 3 January 2018.

Ms Butler said: “Generally speaking firms are required to assess their own target markets, to ensure board level accountability and to keep a check that products are ending up where they intended.

“Post Mifid II advisers will need to gather information for manufacturers on the products they intend to advise on and feed that information back to manufacturers so that they can review their products.

“To support this to and fro of information we think it will be useful for both parties to put pen to paper on contractual provisions for the exchange of data.”

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