MiFID II Ex-ante disclosure for fund switches/portfolio changes

Hi All,

Hopefully you can help with a discussion we are having in our office. We work on a bespoke advisory basis and generate personallised recommendations and portfolios for all of our clients.

Our original understanding of the MiFID II rules was that an ex-ante projection was required to be produced at the point of every change to the portfolio, so a switch from Fund A to Fund B within an ISA portfolio would require a projection to be produced and included in the recommendation. This has proved extremely time consuming given the volume of recommendations we get through.

How are other people approaching this issue? As it is a switch within a product for which an Ex-ante projection was provided when the investment was made, do we even need to provide another Ex-ante projection as any changes will be picked up in the Ex-post reporting?

Thanks

Alex

Comments

  • JonaJona Member

    My understanding would be that MiFID applies at fund level, not wrapper level as it seeks to provide transparency for UTs, OEICs, ETFs etc.

    Therefore a fund switch would require fresh ex-ante reporting.

    Read this yesterday that may provide a little more background.

    https://www.ftadviser.com/investments/2020/01/22/what-advisers-should-have-learned-about-mifid-ii-so-far/?page=1

    I would happily like to be proved wrong on this, but it is one of the reasons we are moving away from bespoke portfolio services.

  • Hi Jona
    Thanks for your response. It seems like shoehorning clients into model portfolios is the only way to approach this with any efficiency as you say
    Alex

  • Our outsourced compliance team (360) said that for a fund switch we do not have to do a full costs and charges table, but can simply add a line to say that the recommended switch will result in an increase to your ongoing charges of XX% (£XX based on the current plan value). Then it gets picked up in the ongoing disclosure so they said this was sufficient.

  • Sophie that is interesting, we have had the same advice from our outsourced compliance consultants now too (BCompliant so a different firm). I hadn't been comfortable with the conclusion but good to hear that it has been backed up by a second opinion.

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