The value of investments and any income from them can fall and you may get back less than you invested.

Information overload - reporting to clients under MiFID II

I was contemplating this note whilst taking a short family break in Bordeaux and seeking inspiration for an article on client reporting post MiFID II.

We haven’t been to Bordeaux for over 20 years and the City has changed quite a bit over that period, but navigating the various sights, parks, restaurants and museums has highlighted the confusion that information overload can bring, without the services of a professional guide.

Like the goals we set for our break, the focus of the MiFID II Directive is to hit four key objectives;

  1. Provide better and clearer investor protection 
  2. Deliver more transparency into market dealings
  3. Mitigate conflicts of interest and make them easier to spot
  4. Clean up the market and allow the customer to make informed choices.

We all know that there is a huge amount of detail to wade through in the directive itself, and in the FCA’s summary published in PS17/14, which runs to a mere 1,068 pages.

As a result, with less than 40 working days to implementation, I know that I’m suffering from information overload and I’m equally sure that you are feeling that as the various (and differing) business models adopted by discretionary managers and platforms are now outlining their MiFID II requirements.

As we mentioned in our last update, in the main the consumer is blissfully unaware of the impending changes and the complexity of this directive, so it is fair to say that, like the tour guides who were guiding me around Bordeaux, it is our job, together, to make the journey as clear and uneventful as possible.

Therefore, here is a summary of the differences they will see in reporting, as far as Brewin Dolphin is concerned, after we reach 3rd January 2018.

Costs and charges

We are required to ensure that all our clients can see precisely what they are paying for where they hold a Brewin Dolphin portfolio, so each of them will receive a detailed summary of what they hold with us, what it costs, and the charges that are taken from their portfolios for maintaining them.

It is our responsibility to issue this to them post 3rd January 2018, and at least on an annual basis thereafter. The first report will, therefore, be in January 2019.

Quarterly client reporting

The directive requires us to issue a report to each of our clients on a quarterly basis which highlights the performance and the asset base that we hold and manage on their behalf. Many clients already receive a report that details this on an annual basis - and they may be surprised to begin seeing this on a quarterly basis - which will commence early in 2018.

This, of course, is a mandatory requirement laid down in the directive and is not a cause for concern for them, nor should it lead to an increase in costs and charges for them.

These reports will be issued to your clients based on the current reporting schedule that you have agreed with Brewin Dolphin. If these are currently issued directly to your client (with a copy to you), for example, this is how the quarterly reports will be issued.

Depreciation reporting

This is a new and controversial requirement under the directive and one which has been the focus of a good deal of debate within the Industry.

However, it is clear from the directive, ESMA’s statements and the FCA’s Policy Statement (PS 17/14) that under Article 62(1) of the MiFID II Delegated Regulation, firms are required to meet additional reporting obligations.

This means that we must make clients aware when the overall value of their portfolio, as evaluated at the end of each reporting period, depreciates by 10% and thereafter by multiples of 10%, within 24 hours of each event.

Brewin Dolphin will be responsible for notifying the individual or entity held on our systems as the addressee for current reporting (as will be the case for quarterly reporting), so it is well worth checking the position for your clients with your local Business Development Managers. 

Please click here for the contact details of our team – they will be your professional guide for MiFID related matters in the journey through to 3rd January 2018.

Finally, the heading of this article alludes to information overload - for us, for you, and your clients. Some of your clients will be surprised to receive reports they have perhaps asked to receive annually, so it may be worthwhile alerting them to the changes they will be seeing to valuation reporting and may be seeing for depreciation reporting. Again, if we can assist in any way, please let your Business Development Manager know.
Kevin Silvester Provider Relationship Manager

 

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