More than half (52%) of financial advisers will be forced to rethink their business models due to additional regulatory and compliance demands, resulting from the introduction of MiFID II, according to a new study by Investec Wealth & Investment (IW&I).
Adviser firms are most likely to review and change their compliance functions in light of MiFID II, according to 52% of advisers that completed the IW&I study, followed by fee structures (42%) in order to provide greater transparency.
Almost four-in-ten (38%) intermediaries believe MiFID II will encourage IFAs to de-risk their business by reviewing their level of professional indemnity cover, for example.
According to the IW&I study, that featured advisers covering both the UK and international marketplaces, nearly a third (31%) of advisers, said that they would be more likely to outsource client portfolios to a discretionary investment manager, with boutique adviser firms the most likely to follow this trend.
A fifth (20%) of advisers believe MiFID II will have little effect on their firms.
‘Root and branch review’
“MiFID II is the latest in a series of regulatory changes and it’s no surprise that it has prompted many IFA owners to conduct a root and branch review of how they run their businesses,” said 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. As part of this, we are likely to see more firms outsourcing their investment management requirements to specialist discretionary managers.
“This will provide them with the bandwidth required to grow their businesses in a post MiFID II world.”
The IW&I research was conducted online among 94 intermediary firms in September. IW&I said that the responses also underlined how much advisers are occupied with the consequences of Brexit. Almost one in four advisers (24%) reported that Brexit has prompted clients to take a greater interest in their portfolios, while almost half (47%) said clients are seeking more advice about how to protect their portfolios from post EU referendum market volatility.
IW&I is part of the Investec group of companies, IW&I offers wealth management and investment services to private individuals, charities, trusts, international clients and financial advisers.