3 January 2018. Mark the date in your diaries if you haven’t already. It’s the day that the second Markets in Financial Instruments Directive takes effect in UK law.
That’s only three months away. But it’s no reason at all to panic, as our cover story this week, which takes stock of how the sector is preparing for the changes, aptly illustrates.
IFAs have won a few concessions already, most notably that they will no longer be forced to record phone calls in which they are talking about executing orders.
As regulatory experts point out, an analogous written note still has to appear, so there is still some work to be done. Fortunately, current guidance suggests this will only need to include core details of what happened and not chapter and verse on what the client had for breakfast and why.
IFAs will also find written notes easier than call recording when it comes to technology adoption. It will save data storage costs for firms. With the advent of new cloud storage techniques these would have been minimal in any case, and I will reiterate again that the requirement to record calls would not have applied to all client conversations as some industry luminaries were leading people to believe.
For the organised IFA, a quick note after very specific calls should pose little hurdle to getting along with their daily lives. Yes, they’ve had to react to a change in timetabling, but that only gave firms longer to get ready when the rules were pushed back from an original 2017 deadline to next year. And since when have IFAs failed to meet the challenge of the political winds changing around them?
While some in the compliance world may have used the impen-ding “avalanche” of Mifid II rules to sell their services to IFAs, the truth is, it will not change whether or not the advice you give is right or wrong. Many of the changes are sensible adoptions that well-run firms will be doing anyway.
The real impact is actually further up the supply chain, at asset managers and providers. They are still working out what to do about research costs, for example. Platforms have had to study the implications of giving individuals new legal entity identifiers so their adviser clients don’t get blocked from trading. Chances are, DFMs are going to be very keen to take on the burden of a new reporting rule that says clients have to be told if the value of discretionary portfolios drop by more than 10 per cent to keep their advisers happy too.
Stay on top of the paper trail, and the smooth sailing will continue for IFAs.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1