View more on these topics

Mifid prompts fears of inappropriate advice

The markets in financial instruments directive could prevent IFAs from giving the best advice to clients and outlaw any exposure of low-risk clients to high-risk investments, say lawyers.

Eversheds partner Matthew Allen says advice could be deemed inappropriate under Mifid, even if the firm has fulfilled all suitability and know your customer requirements and discussed the investment fully with their client.

Although EU rules are yet to be confirmed, Allen says there is confusion over the interaction of current suitability requirements with Mifid’s more objective appropriateness test.

He says clients could even claim compensation from IFAs, citing a failure to meet the appropriate test, which foc-uses heavily on the investment track record of the client.

Allen says the problem could be exacerbated by the implementation of Ucits III and Mifid, set to come into force in November next year, which will enable more high-risk pan-European investments.

Allen says: “We may get to the strange situation where advice is judged inappropriate, even if it has been discussed fully and deemed suitable. As the rules stand, there is confusion between suitability and appropriateness and when, if ever, does appropriateness trump suitability requirements?”

Although Mifid does not directly affect the vast majority of advisers, the FSA is rewriting the conduct of business handbook to incorporate the changes, meaning that most firms will be affected.

Fishburns Law solicitor Harriet Quiney says the focus on the experience of the investor as part of Mifid’s appropriateness test could prevent firms from advising low-risk clients investing a lump sum to take out a small high-risk investment as part of their portfolio.

She says: “Advisers may not be able to build the ideal portfolio for their clients. Advice that is perfectly OK now may not be OK in the future.”


Hutton dressed as lamb

By the time you read this column, the public administration select committee will have published its report into the Government’s refusal to offer proper compensation to125,000 people who have lost most of their pensions following the wind-up of their occupational schemes.

97% of investors vote to split Fidelity special sits

Fidelity has received resounding backing to split its special situations fund in two. A special meeting saw an unprecedented 88,000 or 36 per cent of unitholders take part in the voting process, with 97 per cent voting in favour of splitting the £6.5n fund in two. One fund will continue with the current mandate and […]

Watchdog slams DWP’s inadequate consumer information

The Department for Work and Pensions has been criticised for failing to make adequate information available to pensioners and disabled people. The National Audit Office and work and pensions select committee say they found the DWP’s pension information leaflets for these two groups very difficult to obtain. Their findings cast doubts over the Government’s ability […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm