It has been just over a year since the Markets in Financial Instruments Directive II (MiFID II) regulations came into force – January 3 2018.
The new EU rules have been greeted with mixed reaction from the financial services industry.
Under MiFID II, financial services companies must now have much stricter controls on how they monitor and supervise their communications.
This has forced European companies to completely reassess the way they monitor and capture their communications and collaboration information, according to publication FT Adviser.
Impact upon financial advisers
Philip Hanley, director and financial adviser for Philip James Financial Services says the MiFID II regulations have brought about “a lot of extra work [for financial advisers]. Also, the amount of extra work expands according to the size of compliance and marketing departments.”
It has not been easy implementing MiFID II, Parasols, director of operations, Jo Campbell says: “[MiFID II and GDPR] has created challenges and it has been poorly communicated, and a lot of pressure has been piled on us. We launched a service to assist our clients with this new regulation.”
Sarat Allan-Davey, financial adviser at Heron House agrees with Campbell, she says: “It has taken us an enormous amount of time for us to comply with MiFID II and the new GDPR rules. They have been enormous events which have been poorly communicated.”
Impact upon research
It is not all bad news though, according to the Financial Conduct Authority (FCA), CEO Andrew Bailey, MiFID II is having a ‘positive impact’ on the accountability and discipline of the buy side when getting research.
Speaking at an event hosted by the European Association of Independent Research Providers (Euro IRP), Bailey said commissions had fallen not only because of the unbundling of research costs but also because managers are increasingly using more electric, ‘low touch’ channels.
The FCA’s findings suggest research budgets have dropped by around 20% to 30% since the introduction of MiFID II.
The regulator estimates that the reduction incurred in equity portfolios managed in the UK was in the region of £180m in 2018.
Bailey added that while the market was going through a period of ‘price discovery’, the price of written research is much lower than initial forecasts ahead of MiFID II.
But he emphasised that these changes to research will ultimately lead to an appreciation and elevation of high-quality research.
With the growing likelihood that the UK will exit the EU ‘without a deal’ in the coming months, there might be more change, and more regulation awaiting the financial services industry.
New regulations could possibly include the European Market Infrastructure Regulation (EMIR) and potentially MiFID III.
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