Clients who have Malta-based pensions must be advised by an individual or company that is regulated in the jurisdiction in which they reside from 1 July 2019.
But as advisers scramble to understand the implications of this Malta Financial Services Authority (MFSA) imposed rule, another issue has arisen that will likely cause further problems for some, writes James Pearcy-Caldwell, chief executive of OpesFidelio.
Interpretation
In addition to the above, the MFSA has confirmed to Maltese trustees that they need to ensure that an ‘investment adviser’ has been appointed to give advice to the trust.
Many of them have interpreted ‘investment adviser’ as meaning a Mifid adviser.
So, where does this leave firms and individuals that only have insurance distribution directive (IDD) licences?
The first option is to seek Mifid regulation in their local countries (provided they are in the EU).
Others, however, have looked to appoint a discretionary fund manager (DFM).
But feedback from regulators and some DFMs calls into question this second option.
Not the adviser
Several DFMs have separately confirmed that they have no issue with being appointed as a fund manager, although that does not mean that they accept that they then become the ‘investment adviser’ for clients of Maltese trusts, whether in the EU or outside of it.
Indeed, most of them went further and said that they are refusing to be the appointed adviser.
They expect the adviser who is appointing them to meet the requirements of the Maltese regulator as an ‘investment adviser’.
One firm, which does not wish to be named, has refused to be appointed as the DFM by any firm that only holds IDD licences, as it does not believe that it should accept instructions from a non-Mifid adviser.
Two other firms have stated that, while they currently accept introduced business, they will not accept future instructions from agents who are only IDD.
What about the clients?
This leaves a picture of uncertainty.
Pearcy-Caldwell has already seen one piece of correspondence from an IDD-only adviser regulated from Germany, who is instructing a client to sign a document to be sent to trustees, on the basis that a DFM will countersign it retrospectively.
When contacted, the DFM confirmed that it will not action the instruction as the adviser lacks the regulatory ability to advise the client.
The situation is even more complicated for advisers whose clients reside outside of the EU where Mifid does not exist.
Different takes
The argument has been made before that IDD agents are able to instruct on internal investments where they have an insurance and pension wrapper.
Even if that is the case, the MFSA has clarified that they do not accept this.
Further, the UK’s Financial Conduct Authority has let it be known that, from October 2019, it expects all pension advisers recommending transfers to also have the requisite investment qualifications and licence.
This is likely to be adopted by those jurisdictions in close alliance with the UK.
While IDD advisers may think that by appointing a DFM it will allow them to continue to advise on the investments within pensions held in Malta, it is rapidly becoming apparent that DFMs and trustees themselves do not agree with this.
This leaves option one, which is that IDD advisers have to obtain the qualifications and Mifid licence to allow them to carry on advising on pensions both in Malta and indeed in the UK.
Where those countries lead, others are likely to follow shortly.
