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Mifid II: Europe’s answer to RDR

Europe’s dominant tool for cleaning up financial services practice looks to be Mifid II, for now


In the UK, the first stage of RDR is one-and-a-half years old but across Europe, others have been watching and planning. The Netherlands already has its ‘RDR’, which at times is stricter than ours: it also covers insurance and mortgage products. Sweden and Switzerland are working on their own regimes.

But the major play comes in the form of the revised EU Markets in Financial Instruments Directive – Mifid II. This wide-ranging directive includes new provisions covering the payment of commissions and other benefits.

The “level one” Mifid is agreed, with “level two” rules out for consultation.  Agreed is an EU regime that bans independent advisers and portfolio managers from accepting commission: any payments received must be passed on to the client as soon as possible. As Mifid II applies to portfolio management as well as independent advice, discretionary fund management will have to be brought into the RDR regime by 2 January 2017. But the restrictions in Mifid II do not apply to “non-independent” advice, so in the rest of Europe tied/restricted advisers will still be able to accept and keep commission. 

Mifid II will not have the effect of rolling back the RDR in the UK, or the Netherlands, as member states are permitted to impose additional rules. Nor do the Mifid requirements apply to insurance products because the directive deals with investment products, which includes units in investment funds, and bank structured products, but the position of insurance products is still unclear and depends on revisions to the Insurance Mediation Directive.

Mike Gould is senior adviser, retail distribution at the IMA



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