The markets in financial instruments directive will be brought into the UK (as it will in other European countries) and adopted in a manner that brings changes to the both the FSA’s regulatory remit and the way that much of financial services business is transacted.
The regulator has published a number of policy statements and consultative papers in order to bring in the changes necessary to implement Mifid. How many Money Marketing readers have read these documents? Not many, I guess.
Many advisers rely on product providers to give them the guidance and training to implement new compliance rules and other legislative changes. Just look back at the amount of technical information available for the introduction of pension simplification.
I ask you how much information have you received in order to understand the implications of Mifid on your business? Not much, I guess.
The Mifid guidance issued from the FSA to date includes the paper Implementing Mifid, published early this year. A handful of consultation papers have been issued so far.
One consultation paper not to be underestimated covers financial promotions and other communications. Think about the scope of these papers – it is extremely wide-reaching and includes some of the most important aspects of getting financial services and products to consumers.
It covers all aspects of how advisers sell financial products and advertise to consumers. My admiration is reserved for those who have found the time to respond to this consultation process as Mifid is a huge directive. It takes days to read and interpret. Due to its size, I believe we have to rely upon the resource heavy, technically sound and financially well loaded consultancies and firms to respond to this complex FSA consultation.
It is those on the coalface – the advisers that advise clients on a daily basis – that need to suggest the changes required to the conduct of business rules.
If you have never had a stranger sitting in front of you looking for advice to sort out their finances, often motivated by fear, greed or both, then it is difficult to guess what motivates the general public to take financial action.
If you have never created a financial ad or had to write copy for, say, a pension, how do you know how restricted you are by the compliance rules that can kill creativity? Financial promotions need to be able to compete fairly for a voice with all the advertising noise that faces consumers at every turn they take. There is an imminent policy statement due containing the new financial promotions and conduct of business rules to provide more bedtime or travelling reading.
We are beginning to hear details about the changes to the conduct of business rules where, for certain product types, different levels of Cob rules will apply. So get ready to incorporate these multi-layered rules into your advisory firms, particularly at the front end of business, where advice is provided.
Do find out if Mifid applies to your company, as it does not apply to all. In broad terms, Mifid will mainly apply to firms currently subject to the investment services directive. Speak to firms such as Grainger Consulting which can help guide you through.
The treating customers fairly initiative is one of the first big principle-led regulatory pieces and many of us have tried to meet the unspecified standards. In the absence of detailed rules, we will not know if we are treating customers fairly until the courts pass judgement on individual cases establishing what is “fair”.
We are in the era of principles-based regulation so be prepared for future regulation to be light.