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Adviser workshop: how to fulfil the Mifid II client contact requirement

With Mifid II now in full flow, we ask two financial planning experts how they are adhering to the new rules regarding client contact.

Gemma says...

Under Mifid II there is a requirement to provide a client with an annual suitability assessment of any Mifid II instruments if you charge an ongoing fee. The format of this is not prescribed in detail, so it is up to individual firms to manage this process. It is designed to ensure the arrangement is suitable for the client.

We are fortunate, as we do not charge a fee unless we provide a structured ongoing service anyway. Almost all our clients have at least annual reviews. A handful of legacy clients did not require annual reviews. Instead they opted for a full financial planning review every two years, where we look at life plans, cashflow forecasts and product requirements.

But, even for these clients, we would still contact them yearly. We ask for a cash balance update and plans for expenditure. And we provide an investment summary and a reminder we are available on an ad hoc basis between formal reviews.

As such, it was relatively easy to tailor this process to gather a little more detail and undertake a basic suitability assessment.

Most of the time, nothing needs changing at interim reviews. We can do the whole thing remotely, knowing a thorough lifetime planning review will be conducted the following year.

Top tip: 

Check in with clients every year, even if they do not require an annual review.

Top quote:

'I support the idea that those who pay for advice should receive a suitability assessment. This rule could cause serious issues for those with lower asset values.'

Gemma Siddle is director of client services at Eldon Financial

 

Gemma says...

Under Mifid II there is a requirement to provide a client with an annual suitability assessment of any Mifid II instruments if you charge an ongoing fee. The format of this is not prescribed in detail, so it is up to individual firms to manage this process. It is designed to ensure the arrangement is suitable for the client.

We are fortunate, as we do not charge a fee unless we provide a structured ongoing service anyway. Almost all our clients have at least annual reviews. A handful of legacy clients did not require annual reviews. Instead they opted for a full financial planning review every two years, where we look at life plans, cashflow forecasts and product requirements.

But, even for these clients, we would still contact them yearly. We ask for a cash balance update and plans for expenditure. And we provide an investment summary and a reminder we are available on an ad hoc basis between formal reviews.

As such, it was relatively easy to tailor this process to gather a little more detail and undertake a basic suitability assessment.

Most of the time, nothing needs changing at interim reviews. We can do the whole thing remotely, knowing a thorough lifetime planning review will be conducted the following year.

Top tip: 

Check in with clients every year, even if they do not require an annual review.

Top quote:

'I support the idea that those who pay for advice should receive a suitability assessment. This rule could cause serious issues for those with lower asset values.'

Gemma Siddle is director of client services at Eldon Financial

 

Helen says...

Some clients cannot afford an annual review service from us. But we can still see those people every three years.

The client will have to pay for that interaction, otherwise we cannot work with them anymore. Those are the clients who can only afford to see us every three years.

If something major were to happen, we would get in touch with them anyway. They pay an ongoing fee of 0.5%, which builds up to fund a full three-yearly review costing £1,700.

Some clients do not want to pay for contact with us every year. They see no value in it.

The Mifid II requirement only applies to unit trusts, not investment bonds, ISAs or pensions. People only invested in these latter three product types do not need an annual review. They are accumulating, and do not have many funds under advice.

 

We are working out how to do it with as light a touch as possible. I have a paraplanning team looking at creating a cost-efficient format. We are looking to pull together a template to give to clients when they go through a full planning review.

We can send a completed version of this out to them again on a 12-monthly basis. Then we can ask them: does this still fit your requirements?

Top tip:

Create a template for clients to fill in when they undertake a review, which can be revisited each year.

Top quote:

'Some clients do not want to pay for contact with us every year. They see no value in it.'

Helen Howcroft is managing director at Equanimity IFA

According to Twitter

NMA editor Will Robins asked the Twittersphere for its thoughts on Mifid II. Here are the responses:

Paul Stocks, financial services director, Dobson and Hodge

I am led to believe Mifid II imposes an annual advice requirement on clients and their advisers. Therefore, even if annual advice is not sought or required, it would appear it has to be given.

Anthony Villis, managing partner, First Wealth

The beautiful irony of Mifid II is firms end up redirecting resources from services that clients really appreciate and value to things that have nil perceived value. #keepupthegoodwork

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