According to The Financial Times, the founder and chairman of Carmignac Gestion said a fee-based remuneration model could have a detrimental effect on third-party fund distribution.
“Smaller investors could end up paying the price for the spread of a new model where the distribution of funds open to various management companies will be compensated only through fees,” he said in a letter to Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA).
“The risk here is that people with modest savings will no longer have access to a wide selection of investment funds.”
He said independent advisers make up a large proportion of the 70% of all long-term collective investment conducted through the open architecture channel, and the negative effects of rebate bans on this majority could already be seen in countries that have already adopted them.
“The proposed changes to MiFID put the open architecture approach, along with the many choices it offers the broader investment community, in serious jeopardy,” he said, alluding to MiFID II, the second revision of MiFID.
Paul Stanfield, chief executive of the Federation of European Independent Financial Advisers, said it was still too early to predict the effects MiFID will have.
"Many companies, both independent financial advisers and asset management businesses, are still fine-tuning their operations and models, and are remaining quite flexible in order to adapt to the new environment," he said.
"In other words, it is just too soon to be entirely sure of the ramifications – for instance we havent yet seen the development of many online “advisory” platforms but I expect to see these grow considerably over the next few years."
Carmignac's letter comes as ESMA consults the market following a two month consultation period where it completed its first draft of MiFID’s legislative implementation.
MiFID II, which will not be fully implemented until 2016, aims to address the residual effects of the financial crisis by improving financial market transparency and strengthening investor protection within the insurance and investment market.
The proposals include:
- Limitations on the receipt of commissions.
- An enforcement of the clear distinction between independent and non-independent advice.
- Requirements to include risk identification in the manufacture and distribution of financial products.
- Powers for regulators to prohibit or restrict the marketing and distribution of certain financial instruments.
- Requirements to provide clients with details of all charges related to their investment.
Watch this space
Last week, director of regulation at the Wealth Management Association, Ian Cornwall, said the lack of clarity over definitions and protocols contained in ESMA’s technical guidance and advice for implementing MiFID II had made it difficult to predict the future position of the UK’s Retail Distribution Review.
“We are not quite clear where we are going to be in a post-MiFID environment,” he said. “There are differences between RDR and MiFID, such as their definitions of independent advice.”
“It has always been said that RDR will be compatible with MiFID, but, at the moment, it is a case of watching this space.”
