Investment leaders have given Mifid II a mixed welcome as the new EU regulations come into force today.
The regulations are designed to improve consumer protection and accountability when investing.
Speaking on the BBC’s Today programme this morning, trading platform Liquidnet’s market structure head Rebecca Healey said the rules would improve transparency of investment costs by splitting out what managers pay for research from other fund costs.
She said: “[Letting you know] what research you are receiving, at what price…allows you to choose what you want, versus what you don’t, so Mifid II will deliver better competition.”
However Polar Capital UK Value Opportunities manager George Godber, also speaking on the programme, called some of the rules “bizarre”.
He said: “It’s an absolute beast, 1.4 million paragraphs, and because of that, there are chunks of it that are really vague…Some of the terms have been well thought-out in terms of trying to increase transparency, and some are just playing into the hands of the bigger firms, because the cost to serve the consumer has gone up.
“A lot of that is positive, driving value, but some of the legislation is bizarre at best.”
For advisers, the main changes surround the need to make notes of conversations that result in a transaction, enhanced disclosure of some conflicts of interests, making a requirement that suitability must be re-confirmed at least annually explicit, and clearer requirements to link products to their appropriate target market in due diligence.
Clients will also need to be informed when the value of their portfolio suffers a double-digit fall, with debate continuing over whether IFAs, discretionary fund managers, or platforms should have to lead the way on reporting the drops.
Pension schemes will also be impacted by the breadth of the rules, according to Pensions and Lifetime Savings Association investment and defined benefit policy lead Caroline Escott.
She says: “Although this poses challenges to pension schemes and trustees, which need to get to grips with what the new rules mean for them, it also offers an opportunity for in-depth consideration of the value of schemes’ fund management services. For instance, schemes could take advantage of the improved research cost transparency to assess where investment research adds value, or use the cost disclosures to improve their due diligence on managers and think about how to achieve better value for money.”