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”.