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'If it moves we have a process': 10 advisers' MiFID II preparations

With just over three weeks to go until MiFID II comes into force, the time for umming and ahhing is well and truly over. We asked 10 advisers how their firms have approached the incoming blizzard of EU regulation.

Gemma Siddle, director, Eldon Financial

'We’ve been conscious of MiFid II for several months now (who hasn’t?) but the lack of guidance and clarity on the proposals means that, until recent weeks, we’ve had our hands tied. Who wants to do the work just to have clarification come out and find it needs revisiting? We are Article 3 exempt so it’s not been as heavy for us as it has been for some.

'We tend to run at the forefront of compliance; always aiming for best practice and making changes before they become compulsory, so several of the changes haven’t created a significant workload for us. Our Investment Committee Terms of Reference - fits the bill, vulnerable client policy – check, remuneration policy - yup, conflicts of interest policy – um hum...

'You name it, if it moves in here we have a process attached to it. Useful if one of us goes under the number 72 bus or, like our operations manager at the weekend, has a 19 stone safe almost crush him to death.

'The last three weeks or so have been very busy checking our documents and making small tweaks. Work has been done on a team basis by those most suitable; CF10, compliance administrator and client services team have all worked together to ensure the changes are understood clearly and applied in the best way for our clients. Of the 22 areas we identified as needing to review we’ve signed off 15 of these to date and have action plans in place for the other 7.

'We used our recent newsletter to let clients know about the key changes that will affect them. Given the purpose of the task is to benefit them it seemed unfair to leave them out!

'We’ll be having a MiFiD II get together (which I’m sure the team will love; cue floppy Christmas hats and sad whistles) to ensure our team are fully up-to-date with the changes and that all key points are communicated clearly and understood.

'And when we close for Christmas, I’ll be sitting next to my Christmas tree with a smile on my face and a beer in my hand knowing it’s all done! Such optimism in one so young…'

Gemma Siddle, director, Eldon Financial

'We’ve been conscious of MiFid II for several months now (who hasn’t?) but the lack of guidance and clarity on the proposals means that, until recent weeks, we’ve had our hands tied. Who wants to do the work just to have clarification come out and find it needs revisiting? We are Article 3 exempt so it’s not been as heavy for us as it has been for some.

'We tend to run at the forefront of compliance; always aiming for best practice and making changes before they become compulsory, so several of the changes haven’t created a significant workload for us. Our Investment Committee Terms of Reference - fits the bill, vulnerable client policy – check, remuneration policy - yup, conflicts of interest policy – um hum...

'You name it, if it moves in here we have a process attached to it. Useful if one of us goes under the number 72 bus or, like our operations manager at the weekend, has a 19 stone safe almost crush him to death.

'The last three weeks or so have been very busy checking our documents and making small tweaks. Work has been done on a team basis by those most suitable; CF10, compliance administrator and client services team have all worked together to ensure the changes are understood clearly and applied in the best way for our clients. Of the 22 areas we identified as needing to review we’ve signed off 15 of these to date and have action plans in place for the other 7.

'We used our recent newsletter to let clients know about the key changes that will affect them. Given the purpose of the task is to benefit them it seemed unfair to leave them out!

'We’ll be having a MiFiD II get together (which I’m sure the team will love; cue floppy Christmas hats and sad whistles) to ensure our team are fully up-to-date with the changes and that all key points are communicated clearly and understood.

'And when we close for Christmas, I’ll be sitting next to my Christmas tree with a smile on my face and a beer in my hand knowing it’s all done! Such optimism in one so young…'

Helen Howcroft, managing director, Equanimity IFA

'MiFID II is the most confusing mess I have ever come across in this profession. Everyone has a different view on what the rules are and what we need to do to comply. We have been to around five different compliance presentations now and are only just getting closer to figuring it out.

'I went to a seminar this week and received clarification on one point I was unsure about, but that only raised more questions. That was around the 10% drop reporting requirements, and is now one of the few bits I fully understand and have sorted out, along with the phone taping rules and legal entity identifiers (LEIs). I have compliance coming in today to go through everything and see just how not ready we are.

'It seems the FCA will be lenient initially and we may have three more months to get fully ready after it comes into force. I’m unsure about the charges tables as we still need clarification from providers as to how much information they are going to provide and how we are meant to provide that information to clients, particularly on old products like with-profit bonds. I don’t quite understand why these rules affects those and things like unit trusts but not pensions.

'I am slightly concerned that this level of detail is going to put clients off wanting to invest their money. We need a clear set of rules but with everybody interpreting them in a different way, I think the FCA could have done better in leading us as an industry and establishing clarity.' 

Darren Lloyd Thomas, managing director, Thomas and Thomas Finance

‘Getting ready for MiFID II is a bit like crossing the Golden Gate Bridge – just when you think you have reached the end, another stretch appears. We have been preparing since the beginning of the year, and I think we are now in a good position.

‘We had an additional external compliance audit this year. Usually, we have one annually, but we wanted to make sure that we are as watertight as we can be on the many new regulatory developments. It cost £600, but that is very much worth it for peace of mind. I am quite neurotic about this type of thing, as my biggest fear is missing the boat on something.

‘The main thing we were concerned about initially was being caught up in the 10% loss notification rule, but it turns out that hasn’t affected us. The same thing happened with the telephone recording requirements, so there have been a lot of headline issues that haven’t ended up affecting us.

‘However, we do have a legal entity identifier (LEI) in place now, and have adjusted accordingly to the MiFID II money laundering requirements.

‘For a lot of smaller firms, not all of the issues raised by MiFID II are going to have a significant impact, but you do have to be careful, and things like the money laundering force directive are going to be important, so that you can identify the risk levels that a client can take on.’

Nick Grogan, chartered financial planner, PWS Financial Consulting

'One of the main changes affecting us is the requirement to confirm the ongoing suitability of each client’s products and funds. To be able to do so we need to ensure we have updated information for each client. We have processes in place to regularly ask clients for this information. We have just had to tighten them to ensure no one slips through the net.

'For most of our clients a lot of the things we do to confirm ongoing suitability happen behind the scenes. Now, we will make it clear to clients why the things they have in place to support their plan are still the right ones. This will entail increasing the information we include on our regular portfolio updates and providing a brief report after a review.

'Another change is having to show costs on an aggregated basis. Most of our clients have their monies on wraps who can provide this information for us. Where clients have money with a range of providers we can produce our own document. '

Gretchen Betts, managing director, Magenta Financial Planning

'We have been looking at this for some time, and luckily our external compliance consultants are really on the ball, and gave us a project plan earlier in the year. We have ticked off things that are really vital, like registering with the FCA for structured deposits, which means you can remain independent.

'We are in the middle of reviewing our client agreement, and are trying to tie that in with general data protection regulation (GDPR) as well. We have had a lot of conversations around ongoing outsourcing, and how we make sure our systems and controls are up to scratch, and how we do our due diligence on the systems we outsource.'

Colin Low, managing director, Kingsfleet Wealth

'We are currently waiting for our finalised overview from our compliance consultant. We are aware of various things that have to change, but the key things that were flagged up when we began working on this in the Spring were issues like the terms of business and client agreements.

'We also had an independent compliance review in the Autumn just in case there was anything we had missed, and are waiting for that final report. They wanted to wait until fairly late in the day to make sure there would not be any last minute changes which could catch us out.

'There is also the whole disclosure issue which we are all going to have to get to grips with. It reminds me of 1994, when commission disclosure came in, and we were unsure whether clients could be able to understand it all, but I think we should be in a good position if all goes well.'

Dale Regan, senior paraplanner, FB Wealth

'Earlier in the year, with MiFID II approaching in early 2018, we started a project to see what our requirements are and we looked into all the aspects the regulations.

'With the depreciation reporting, we have found that all of the discretionary fund managers (DFM) we use will be providing clients with the report, should their investments suffer a 10% drop.

'With regard to the LEIs, we have been able to obtain one for ourselves as well as for clients where needed, and despite rumours of excessive timescales to obtain them, we have found the process relatively straightforward. It only takes a matter of days.

'In terms of the on-going charges disclosure at a client’s review, this seems to be the biggest issue so far for us. Many of the providers we have been speaking to aren’t yet in position to be able to provide us with the necessary information.

'For the providers who are not providing this information, we will have to gather it manually, and therefore this is an additional cost to us. Having conducted our research, most platforms are generally providing details of the ongoing charges, so in appropriate cases we may discuss with the clients the benefits of moving to a platform.

'We will continue to look at MiFID II over the next 12 months and refine our processes where necessary to ensure we are both compliant and efficient. '

Rohan Sivajoti, director, Postcard Planning

'We don't have a huge client bank or any legacy clients so it has been a bit easier for us in some respects, but our main preparation has been around the annual reviews, having to re-evaluate products and provide a personal recommendation, and doing another suitability report.

'A lot of time has been spent figuring out how we can store data better internally, so that we can produce suitability reports quicker, easier and more efficiently. MiFID II means you have to get a better grasp of your data, systems and processes. At the touch of a button, we need to be able to go back and see how much a particular client has paid in the last year, for example.'

Alan Smith, chief executive, Capital Asset Management

'We started to look in detail at the requirements of MiFID II around September time. Having examined it all in detail, the most relevant parts for us to address were the fee disclosure and ensuring that any investment partners and platforms we deal with were up to speed as far as the declaration on a 10% market fall. 

'We were already doing a lot of the work that MiFID II requires, so for us it was more of a fine tuning process than starting from scratch.

'There was a lot of understanding required early on around how to develop our terms and conditions, client agreements, and meeting the required level of information that we will be expected to be able to provide to clients on an ongoing basis.' 

Anna Sofat, managing director, Addidi Wealth

'We sat down with out compliance people initially in August, to identify which areas were going to be most relevant for us. 

'We are currently updating our terms and conditions and client agreements, and this month have produced another updated list of what needs doing, and by when. It has been a big part of our compliance calendar. 

'Data retention is another area we are looking at, along with the anti-money laundering requirements. We do a mix of physical and electronic cheques and we will continue with that, and everybody will end up having a full review once a year. We have also looked at our IT and recording generally, which was something we needed to do anyway.

'One other area to look at is to ensure that all our platforms are up to scratch, and we recently went through our reporting on investment trusts and so on, in line with the LEI requirements. 

'A lot of it has boiled down to enhancing disclosure documents and ongoing reviews, but I am glad we started early - I don't like leaving things like this to the last minute.' 

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