MiFID ii - Markets in Financial Instruments Directive

Will MiFID II prompt a business model overhaul for IFAs?

It has been on the cards for over half a decade, but MiFID II is expected to come into force at the turn of 2018. That date may seem a long way off, but in reality, the new EU legislation is just fourteen months away. And, according research undertaken by Investec, the majority of firms are expecting it to have a significant impact on their business models.

The survey, which featured as many as 94 intermediaries, revealed that 52% of those interviewed believed that the impending implementation of the Markets in Financial Instruments Directive 2 – MiFID II for short – will prompt firms to review their business models.

The MiFID II legislation is intended for that very purpose, with the raft of regulatory changes set to change the way financial service providers work on a day-to-day basis. The core objectives consider increasing investor protection and competition across the markets, but also look at how firms are conducting their business, with a renewed focus on compliance, management and supervision.

Transparency will be key, as shown by the 42% of intermediaries who anticipated a review of advisers’ fee structures ahead of 2018, while a further 38% believe that IFAs will scrutinise the level of their professional indemnity cover. Almost a third of those intermediaries – 31%, to be precise – also predicted that IFAs will seek to reduce the risk to their business by outsourcing client portfolios to discretionary investment managers.

“It is no surprise that it has prompted many IFA owners to conduct a root and branch review of how they run their businesses,” says Mark Stevens, Head of Intermediary Services at Investec Wealth & Investment. “For some adviser firms, MiFID II will act as a catalyst and lead them to create a more efficient business model.”

Is your business preparing for MiFID II?

Some adviser firms have been holding out hope that another MiFID II delay could be on the cards, but the FCA recently reaffirmed its intention to go ahead with the legislative roadmap. Should it remain on course, the legislation will come into play on the 3rd of January 2018 – and those who look to adopt and implement more robust practices could gain an advantage over the rest of the field.

For more information and a discussion on what MiFID II entails and how it could affect your firm, get in touch with Jacana today.