Nucleus, the adviser-built wrap platform has collaborated with Zero Support managing partner Phil Young to publish a 20-page booklet for advisers to ensure that they are fully MiFID II-compliant ahead of the January 2018 deadline.
The two firms also include a ten-point checklist to make sure that financial advisers are ready for when the new directive comes into effect on 3 January, around ten weeks from now.
However, he says, there are elements of the regulation that will be entirely new to advisers, and these may require time and effort to comply with.
“What advisers must first assess, and is perhaps most important in their road to MiFID compliance, is what impact this will have on your clients and how you deal with them,” says Young.
There will certainly changes to the ways businesses operate because of MiFID and with the General Data Protection Regulation (GDPR) coming into effect soon after that on 25 May 2018, he points out, advisers will need to time their changes to ensure as little disruption as possible.
‘Unanswered questions from the FCA’
“There are unanswered questions from the FCA still, but advisers must get their compliance in as orderly a state as is possible, and fully understand what they need to be doing to ensure any changes in business go smoothly.”
Nucleus chief customer officer Barry Neilson described the changes brought in by MiFID II and the legislative and regulatory paperwork and processes behind it as being “extremely involved and complex”.
Like Young, Neilson felt there are still areas that require clarification, but “given there is not long to go until the implementation date”, there is a significant risk the industry will not have the opportunity to collaborate.
Less consistency and more confusion
“We may find ourselves in a situation where firms are interpreting the rules around issues such as charges and fees aggregation is different ways,” said Neilson, resulting in less consistency and more confusion.
“It is important for advisers to speak with the discretionary fund anaDFMs and platforms they use to ensure the path to compliance is as streamlined and as efficient as possible, and that is what we aim to promote with this paper,” said Neilson.
Although this could be daunting, he added, it should also be welcomed as it is an opportunity for advisers to review areas of their business that may need improving “and result in better customer outcomes”.
Ten-point checklist for independent advisers
To help with advisers with their compliance, Nucleus has provided advisers with a list of 10 concise actions:
1. Keep a register of all conflicts of interest and review at least annually
2. Review whether you need further qualifications, training or permissions to maintain independent status
3. Apply for new permissions by 2nd January 2018 if you wish to advise on structured deposits
4. Review your recruitment procedures and assess if they need tightening
5. Look at your remuneration structure and ensure no incentives negatively impact clients
6. Decide which staff the dealing on personal account rule should apply to, and create a record of direct equities they hold
7. Decide if you need to apply for a Legal Entity Identifier through the London Stock Exchange
8. Establish whether your DFM or platform will offer online reporting access to avoid the need for paper reporting
9. Understand whether your DFM or platform will issue the 10% loss notification and how
10. Check your agency agreement with your DFM – where model portfolios are being used, does the responsibility for regularly checking suitability sit with you as the adviser?
Download the booklet ‘MiFID II: A guide for financial advisers’ here