UK advisers set to overhaul business models under Mifid II

By Sam Shaw

Added 25th October 2016

Over a half of UK advisers believe additional regulatory and compliance demands when Mifid II comes into effect will force them to review their business models, according to Investec Wealth & Investment (IW&I).

UK advisers set to overhaul business models under Mifid II

A survey by IW&I revealed that 31% of independent financial advisers expect the next phase of the Markets in Financial Instruments Directive (Mifid) to fuel the outsourcing of client portfolio management to DFMs, with boutique IFA firms most likely to follow this route.

Discretionary fund management (DFM) looks set to benefit from Mifid II as almost a third of advisers expect the directive to result in the rise of outsourcing arrangements to financial advisers

More than half the advisers in the latest survey, or 52%, expect the additional regulatory and compliance demands expected under Mifid II to force advisers to streamline their business models to improve efficiencies.

Many expect to review their compliance functions and fee structures, seeking greater transparency, according to 52% and 42% of respondents, respectively.

A further 38% of IFAs will look to review their levels of professional indemnity insurance in a bid to derisk their business.

The piece of European Union (EU) regulation was first brought in in November 2007 to provide a framework for investment intermediaries involved with shares, bonds, collective investment schemes and derivatives, as well as the trading of these, which are together deemed ‘financial instruments’.

Mifid II was introduced since the financial crisis to help improve investor protection, and could affect all parts of a business, from trading and reporting, to IT and HR systems.  It is set to take effect from 3 January 2018.

Of the 94 intermediaries surveyed, 20% believe Mifid II will have “little effect” on their business.

Mark Stevens, head of intermediary services at Investec Wealth & Investment, said: “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. 

“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.”

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