MiFID II: Costs and charges transparency still a key risk to clients

In January 2018 MIFID II introduced new and revised requirements for the disclosure of costs and charges. Investment firms are now required to provide full disclosure of all costs and charges to enable clients to make more informed decisions about who they wish to invest or trade with.

Inaccurate disclosure of costs and charges

The Financial Conduct Authority (“FCA”) began supervision in April that will cover a two-year period and is focused on concerns around meeting MiFID II disclosure requirements. As part of its oversight, the regulator said that it had looked at ex-ante costs and charges of a small sample of firms within the retail sector. It discovered that firms are interpreting the rules in a variety of different ways and that whilst these firms had improved the disclosure of the costs of their own services, they were still struggling with the disclosure of costs and charges of any relevant third parties.

Costs and Charges Risk to Clients

How FundsLibrary can help you with cost transparency

Whilst it is clear that the majority of firms are trying hard to comply with the new MiFID II rules, it seems that those who are finding it difficult to demonstrate compliance are mainly hindered by the fact that it is proving difficult to get all the required data from third parties.

Many distributors are struggling to assemble the data required to address the requirement.  While the industry’s EMT solutions are robust; additional steps are required.  Clients must marry this data with client-specific position and transactional data from the distributor and then run the complex calculations required by Article 50.  Lastly, distributors are struggling to explain the disclosures to their clients; both the technical detail and a rational explanation of the charges and performance” notes Philip Taliaferro, Head of EMEA and Asia-Pac Strategy at Broadridge Financial Solutions. 

FundsLibrary’s MiFID II Manager has received, reviewed and analysed European MiFID Templates (“EMTs”) for almost 30,000 share classes since January 2018. The completeness of this data set allows our clients to view both the ex-ante and ex-post charges as soon as they are updated. We have performed some variance analysis between the ex-ante and ex-post figures across the industry. We have subsequently made this, and other information, available to our clients on a regular basis. 

We have extensive experience in regulatory distribution and have created an industry standard service for MiFID II. We understand the challenges that the industry faces and make it our business to provide a trusted system that offers our clients full control of their data and its distribution, alongside a full audit trail and secure archive. We also offer quarterly management information and industry analysis reports to our clients to give them an even greater understanding of their funds and those of their competitors” explains Paul Poletti-Gadd, Solutions Director at FundsLibrary.

We have recently completed MiFID II cost analysis reporting for our clients and have come across some very interesting insights into the various sectors and their respective charges. To read more about our findings please visit our recent article on the subject here.

If this is a service that you would be interested in receiving please contact a member of our Data Services team on +44 117 980 9994 or by email.

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All figures correct as at 30.06.2019.