Providers are reviewing their marketing packages to advisers at conferences and on websites amid concerns they will fall foul of new inducement rules under Mifid II.
Mifid II, which came into force on 3 January, brought in more stringent rules around “non-monetary benefits” from providers to advisers. The rules have been translated into the FCA conduct of business handbook under rule 2.3A.
However, Money Marketing understands some firms in the industry are not clear on how the rules should be applied and that different providers are interpreting the rules in different ways.
It is understood there is confusion specifically around how the rules should be interpreted in relation to providers financially contributing to advice firm-run conferences or paying to have content published on adviser websites.
Asked for clarification on the rules, a FCA spokeswoman points to a Mifid II policy statement published in July last year.
That policy statement said the regulator was aware that hospitality within the Mifid “acceptable non-monetary benefits” definition is still prevalent in the industry, particularly in the wholesale market.
The policy statement says: “However, Mifid II tightens the acceptable hospitality perimeter. It states that hospitality is acceptable if it is ‘of a reasonable de minimis value, such as food and drink during a business meeting or a conference, seminar or other training events … [such as] … participation in conferences, seminars and other training events on the benefits and features of a specific financial instrument or an investment service’.”
Zero support managing director Phil Young says the rules have tightened under Mifid II but the key changes are evident for sponsored content, such as advertisements and advertorials on advice firm websites, or newsletters, rather than events.
Young says: “Previously some firms charged providers for this and made a profit, often referring to the advertisers’ song rates for [trade magazines] to show that it was a fair commercial rate. The rules have changed to make it clear that anything like this has to be done at pure cost, making it pointless to do it – why include an advert if it isn’t for profit?”
Young predicts some providers and large advice firms or networks might still be falling foul of the rule change because it has not been as well covered as other major changes to be brought in under Mifid II.
Aegon UK pensions director Steven Cameron says: “We support anything that allows advisers and providers to work closely together to help customers get better outcomes. Indeed, under strengthened product governance rules, we believe the FCA expects providers to take a strong interest in how their products are distributed, making collaboration even more important.”
He adds: “It’s important that the market is 100 per cent clear on what is and isn’t allowable so all firms can operate on a consistent basis for the benefit of customers.”
Speaking on the day of Mifid II’s launch, investment managers had mixed reactions to the regulation coming in.
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.