Mifid II: Entering the unknown
As Spain readies its adoption of Miﬁd II, ﬁnancial advisers assess its impact in the local market.
The Spanish financial regulator CNMV has submitted for public consultation a technical guide to assess the suitability of financial advisers on investment services, which will enter into force in 2018.
The guide states that these advisers must have received formal training and at least six months’ fulltime experience in the field, in order to provide qualified and transparent advice. The consultation comes in context of the entry into force of Mifid II and, as Spain gets ready to adopt the new directive, it is thought to be a gamechanger in the Spanish financial advisory industry.
According to a survey from EFPA Spain, an organisation for financial advisers, two-thirds of financial advisers certified by the industry body believe that Mifid II will change the current advisory model in the country.
Fernando de Roda Lamsfus, partner at Madrid-based Orienta Capital notes that Mifid II will enhance advisory and wealth management services, clearly distinguishing between distribution of financial products and advisory services.
“Mifid II will oblige service providers to offer informative transparency, especially with regard to costs passed on to customers, as well as hidden benefits obtained by suppliers, as a result of the placement of third party products,” Lamsfus says.
TO BE OR NOT TO BE INDEPENDENT
In the post Mifid II world, investment advice to retail and professional investors will be classified as either dependent or independent. “If you declare yourself dependent, you will be able to secure rebates, providing that the quality of the service is improved.
If you are independent, you won’t have access to rebates,” explains Ricardo de Manuel, partner at Barcelona-based Collins Patrimonios.
“I think this will lead to more transparency, as in Spain it’s believed banks offer advisory services for free when, in fact, they are taking rebates. However, I think the complete elimination of rebates would be a mistake as it wouldn’t be worth providing advisory for small portfolios,” de Manuel notes.
According to Deloitte, the major impact of this distinction between independent or not is the ability for financial advisers to receive inducements from product providers, as advisers cannot claim to be independent if they don’t demonstrate independence.
“Perversely, this may result in more advisers deciding to be non-independent and offering a range of financial products from a limited number of product manufacturers. Many advisers (outside of the UK) are keen to explore the non-independent route, the route that leads to less change and potentially more focus on own products,” reads the Deloitte’s report on impact of Mifid II on fund distribution.
For the majority (54%) of advisers surveyed by EFTA Spain, the market will move towards a mixed advisory model, and the exclusive transition to one of the two models would be less relevant – 25% would opt for an independent model compared to 21.3% opting for a non-independent one.
Following the experience of the UK, with the implementation of the Retail Distribution Review (RDR) regulations, half of the EFPA advisers surveyed consider that financial advisers will partially stop offering their services to retail clients once the new regulation is implemented, while 10% think it will be totally discontinued due to restrictions.
For their part, four in ten respondents believe that Mifid II will not prevent advisory services from continuing in the retail segment.
In this sense, almost three-quarters of respondents believe that there are solutions such as multi-asset funds or profiled funds which may be alternatives to advisory service for retail customers.
Regarding clients of private banking, more than seven-in-ten advisers believe they will be willing to pay “explicitly” for the service, but only if they perceive value-add.
Sergio Miguez, director of Institutional Relations at EFPA Spain, notes that the survey results evidence the need for customers to recognise value adding services.
“This, together with adequate and properly certified training, will be the great challenge for advisers in the future. In fact, whether they pay explicitly or not, customers will have to receive the value-add, as competition will be increasingly strong for everyone in the market.”