Financial advisers have criticised the European regulation Markets in Financial Instruments Directive II (MiFID II) for having a negative effect on the advice profession, while the legislation was also dubbed “a waste of time and money”.

Research from CoreData, which surveyed 993 UK financial advisers in June 2018, found more than half of advisers (57%) felt MiFID II as an unnecessary burden, while a similar proportion (56%) saw the European regulation as a waste of time and money.

One-third (34%) meanwhile did not see MiFID II as containing sensible reforms that would improve the industry’s standards.

Two-fifths (41%) of advisers thought the regulation would lead to higher fees for their clients compared with the quarter (24%) who did not believe so. One-third (36%) said MiFID II would result in a fall in the number of advisers practising in the profession, while one-quarter (23%) disagreed.

On a more positive note, one-quarter (26%) of advisers thought the regulation had increased market transparency, a further quarter (23%) reckoned it improved investor confidence and trust, while one-sixth (17%) believed it had enhanced investor protections.

“Encouragingly, these top three benefits all align to the needs of investors — indicating advisers are putting clients first and foremost,” said CoreData Research head of international Craig Phillips.

Disclosure and suitability

The most challenging aspects of the regulation for advisers, according to the research, was the disclosure of aggregated costs, with two-thirds (67%) of advisers citing it as one of the hardest changes to get to grips with.

This was followed by writing suitability reports (32%), recording client conversations (27%) and reporting 10% drops in portfolio valuations (23%).

And while volatile markets (28%) topped the list of challenges advisers face in their business generally, MiFID II came in second at 19%. It was followed by Brexit (15%), macroeconomic and geopolitical risks (13%), GDPR (13%) and cybersecurity (9%).

Phillips added: “The fact advisers consider MiFID II more of a challenge than Brexit and macroeconomic risks speaks volumes about the scale of concern over the regulation.”

 


Published 2 October 2018
https://www.investmentweek.co.uk/investment-week/news/3063779/unnecessary-burden-advisers-cast-doubt-on-mifid-ii-effectiveness