"Aggregated costs and charges is undoubtedly one of the biggest challenges advisory firms face in embedding the new MiFID II requirements. "
MiFID II requires investment firms to aggregate and disclose all costs and charges relating to any financial instruments that an adviser recommends or markets to clients, including the cost of:
• Any investment services provided, such as adviser charges or investment management fees;
• The financial instruments themselves, such as collective investments or shares; and
• Any ancillary services, such as platform fees and charges.
This aggregated cost information must be disclosed on an ex-ante (forecast) basis, and also on an ex-post (actual costs incurred) basis in instances where firms provide an ongoing service. Advisers must also provide their clients with an illustration showing the effects of these charges on their overall investment return.
Bankhall’s Managing Director, Julie Sadler, said that practical challenges still remain for firms when providing aggregated cost information, particularly where clients have assets across multiple platforms or a combination of platform-based and directly held investments.
Julie Sadler said: “Aggregated costs and charges is undoubtedly one of the biggest challenges advisory firms face in embedding the new MiFID II requirements. The problem from the outset has been the lack of a prescribed industry method for calculating or presenting this information, with investment platforms, fund managers and other providers taking a variety of different interpretations and approaches. Advisers are faced with the difficult task of collating and distilling information from potentially many different sources, with the adviser being the one who is ultimately responsible for disclosing and presenting it to the client.
“It could be the sheer scale and scope of these EU-wide MiFID II changes, with high-level guidelines derived from ESMA, which is the reason why we have not seen this translate into the usual degree of practical working examples for our industry in the UK. But with aggregated costs and charges set to become a focus of the FCA’s supervisory work with advisory firms, it is imperative that firms press ahead and fully embed the new requirements where possible.
“In response to advisers’ need for practical support, Bankhall has developed a solution to help advisers adopt a consistent, robust and repeatable process. It is part of the comprehensive support we are offering firms and which we will continue to develop further over the weeks ahead. It is important that we do not underestimate the challenge facing advisers in embedding the new MiFID II aggregated costs and charges requirements. Over time we expect more industry guidance and solutions to emerge, but in the meantime it is incumbent on advisers to take action now and embed the new changes. This will enable firms to respond to any regulatory scrutiny and MiFID II post-implementation reviews further down the line.”
