Advice firm Tilney has warned against advisers "going into hibernation" during the current market turmoil and sending 10 per cent drop letters to clients without context.
As the spreading coronavirus pandemic has taken its toll on global markets this month advisers have been required to comply with the 10 per cent depreciation rule under Mifid II, which came into force in January 2018.
The rule requires advisers to inform a client, before the end of that business day, if their portfolio has dropped by 10 per cent or more compared to its valuation at the beginning of the quarterly reporting period.
But Jason Hollands, managing director of business development and communications at Tilney Investment Management, said he is aware of advice firms sending the letters to clients without context, merely to tick a regulatory box.
Mr Hollands said: "Firms obviously have a regulatory obligation to send the letters but it is really important for advisers to be providing context with that, as many clients won't have a clue about the Mifid II rules and this will be the first time they have received any such communication.
"This is not the time for advisers to go into hibernation, regular communication must be set up with clients."
Mr Hollands said Tilney's own chief executive has sent weekly emails to clients throughout the turbulent period and the company has "provided narrative" on its 10 per cent drop letters.
He added: "It's also important you are always on the other end of the phone for those clients who are concerned by the drops and make sure communication channels are open.
"Part of our client base has been with us a long time and have seen their portfolios take a hit, and recover, before. But there are also those who have just joined and are relatively new to investing, so advisers have got to be available to pick up the phone."
Mr Hollands said he had not yet seen any evidence of panic selling or withdrawal of investments in Tilney's client base.
Earlier this week the Personal Finance Society called on the Financial Conduct Authority to suspend the 10 per cent drop rule under Mifid II until "further notice", warning it was adding to "workload pressure and anxiety for consumers at this time".
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