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Apfa: Compliance costs to ‘surge’ under Mifid II

Apfa says advisers will see compliance costs “surge” under the Markets in Financial Instruments Directive II, with smaller firms hit the hardest.

Mifid II is expected to come into force in 2017 and the European Securities and Markets Authority is currently consulting on the technical details of the directive.

In its response to the consultation, Apfa says advisers will be required to record phone calls, ask clients to sign minutes of meetings, and specify the time periods for issuing reports to clients and for having reviews.

Apfa senior policy adviser Clare Griffiths says: “This will add a significant burden to firms as the costs of compliance surge. Worryingly it is smaller firms who will feel the impact most.

“This ultimately risks excluding even more consumers from being able to access affordable regulated advice, because the cost of the advice will inevitably increase.”

The response says to meet the requirement to record all telephone calls will leave firms without the right technology in place having to decide between high entry costs and not providing advice in that way. It adds that the rules in this area are written in a way that does not reflect the way advice firms operate.

It says: ”The “client order” concept, where clients are actively determining what is to be traded (as is the case with stockbroking firms) […] does not sit comfortably with the way financial advice is typically conducted, where the conversation may take place over a period of time and via various mediums.”

Apfa also criticises the proposed requirement to hold records in a digital format. “In our view there should be no requirement to digitalise. For proportionality reasons we believe that physical files should be treated in the same way.”

Making clients sign minutes of meetings with advisers would also disproportionate, Apfa argues, as the advice and reasons for it are set out in a suitability report which clients must sign before any transactions. The response says clients already receive lots of paper work, much of which they do not read. It says: “From a consumer perspective, it is not helpful to add more steps to the process or increase the amount of paper work.”

It also argues that because many clients can access real time information on their portfolios, proposals to introduce rules around the frequency of reports are ”unnecessary, costly and out-dated”.


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. With RDR and Europe only a very few clients will be able to afford independent or for that matter any advice. As more and more clients look at doing their own thing problems will come to light in future years with no one to blame as the FCA et al will have all gone

  2. RDR . . . FCA . . Regulation . .FSCS . . . . European Directives – all working in competition to each other in the most distressing dysfunctional manner . . . known as the DALEK Strategy . . .EXTERMINATE . . . . EXTERMINATE . . . . . . EXTERMINATE . . .small businesses EXTERMINATE remove competition remove Comepetition . . .REMOVE Popeles Controls over thei own savings . . . .FCA Mr Wheatley insist on People BUYING DIRECT 2 Customer – to encourage CHURNING FOR INSURANCE COMPANIES AND BANKS – despite the real PROBLEM is they are NOT FIT FOR PURPOSE. Of course banks who have been licensed . . .pay for the pleasure . . from Shareholders Profits . . . . . .a FURTHER TAX ON INSURNACE COMPANIES AND BANKS which are passed on to the END CONSUMER. TAX TAX TAX . . . .Loss of Contol over finances – the very point which Alex Salmon – and the Scottish Nationalist Party . . . . wishes to exert over the Con Lib Government . . .and the losers in Labour. After all Edinburghs banks remain insolvent .. . . and customers money IS AT RISK . . . .

  3. I think advisers should stop moaning and get prepared for the new rules, which I anticipated decades ago. I already wear a head camera when visiting clients and record absolutely everything in sight, just in case it turns out to be deemed relevant, by FOS, in the year 2525.

    I have a nice film, in my files, of Mr and Mrs Higgins, her in her curlers and her vastly overweight husband wearing nothing but a pair of adidas shorts, showing me where the gout affects his big toe. The film proves I thoroughly explained derivatives and Venture Captial Trust risks etc. and that the clients were insistent that they wanted a COCo, even though their attitude to risk profile was 1 out of 10. I ended up making them a cup of cocoa and charged them £500 for the review and £2.50 for the cocoa.

  4. @ Patrick
    Likewise !!!

    My office now resembles a North Korean interrogation cell, one desk and 3 chairs, with 3 permanent lawyers in the corners, the other corner is taken up by the coat stand if you were wondering, the office is painted battleship grey, one wall has 2 way glass so all can be viewed, videoed, and recorded, the walls are bare so not to influence the clients decision in any way shape or form,

    Its the only way forward.

  5. @DH
    The coat stand seems a bit OTT in my opinion…

    Sounds like your film will need to be assessed and given a certificate by the BBFC… there’s no escaping regulation…

  6. @Grey Area

    It’s on HBO next Spring.

  7. It’s pretty self-evident that these proposals, if enacted, will add a significant burden to firms as the costs of compliance surge. There’s nothing at all insightful about pointing that out. It’s just stating the obvious, and I don’t see what any of us can do about it other than to campaign (more robustly than merely writing letters and articles and responding to consultations) for complete withdrawal from the EU so we can run our own ship our own way.

    Isn’t that what an increasing proportion of the UK’s electorate wants on a whole range of issues and why the Conservatives are being forced at least to talk about it in response to the rising tide of support for UKIP?

  8. How interesting MORE COSTS . . .More REGULATION – which has proved IT DOES NOT WORK as it Strangles Business . . .and has strangled insurance companies – who CANNOT COPE . . .which means ” the outcomes ” being ” strived for ” by Mr Wheatley CANNOT BE ACHIEVED in any reasonable or efficient manner – We in the Industry call it a Cost Benefit Analysis – Too MUCH COST . . .too little benefit . . . . . . . Consumer Outcome loss of competition . . .. . loss of independent advice . . .restricted advice Tied Agents . . . operate through Comparison sites . . which for example if you do not identify your employment position correctly – you may nt receive any PAYOUT form the insurance company . . .WHICH MEANS Loss of TRUST on Insurance company . . .and LOSS OF TRUST on comparison websites . . . . Loos of understanding of RISK . . ….loss of business . . .loss of industry . . . loss to UK Plc . . . . .new business purchase by Chinese . . . . who have purchased our Whisky . . .wish to rename London Undergrounds . . .with one hung Lo and anither Wan hung Hi ? whatever next from the Buffoon Boris . . . . who would build more runways – in spite of the immigration problems and bungled hospital diseases being introduced into the UK .

  9. They do say; “many a true word is spoken in jest”

    Which IMHO captures the comments on this story very well.

    The thing is we all know what we have to content with is way beyond reasonable, to top this I have just had my e-mail detailing my fees and again bloody levies it just make me pig sick.

    And to top all this Martin Wheatly keeps banging on about simplified and non-advice markets and his stupid task force, honestly how the hell will it work, all I see is; we will just have to keep paying for other peoples mistakes when we have to abide by a massive rule book and FOS, and to top it all he blames us the industry for not being innovative !!! bloody cheek

  10. All we need is for one client to die during the waterboarding while trying to get from their ATR to their capacity for loss and the government will be forced to rethink.

  11. @DH – Do you mind me asking how much your MAS levy was as I am still waiting my levy bill and am contemplating ways to make a protest over paying ANY MAS fees in future.
    Anyone any ideas and/or interested in joining in (I’d rather not go it completely alone), then email me FOS, FCA and FSCS fees are one thing, but MAS is a different kettle of fish. Ironically I didn’t use to have a problem with MAS predecessor levt when it was just part of the FSA as the levy I paid was less than trhe cost of producing and posting the Guides, which i sued to use heavily for clients and all consumers. Now it is being used for political shinanigans when it should be coming from general taxation, I think we do need to start making a stand.

  12. Hi Phillip

    Funny you ask that ! it was the only part of the invoice that didn’t make me spit out my tea !!

    Let me put it this way, just in case they have made a rickett it represents 0.47% of the total bill.

    Re-: with holding MAS levy; I agree, however why stop there, I think we should stop paying anything until they start to learn the value of my clients money and spend it wisely and stop robbing the good to pay for the bad !!

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