MiFID- One ‘Adviser’, Multiple Regulators and the Law


OpesFidelio

We have previously written about Brexit and British pensions  and MiFID requirements for advice into Europe but how does this all affect the mobile international worker?

The largest misconceptions lie around the fact that some networks, providers and firms in Europe think that somehow European “rules” apply to UK registered advisers. They do not, as MiFID and IDD are directives that countries apply under their laws to advisers and clients living in their country.

It may seem obvious as I write this, but a client living in France has no recourse to the Spanish regulator for investment advice provided by an IDD adviser. There is no European law, only a common framework that, in this instance, the French regulator would be responsible for imposing.

If we understand that EU directives no longer apply to UK based advisers what can a UK adviser do to make themselves “legitimate” within the EU?

If advisers do not want to work physically (face to face) in the EU then the determining factors for UK advisers are their PII cover and what their compliance permits.

However, if they wish to give advice face to face or to market in the EU, then they need to follow the rules of the country that the client lives in linked to that regulators product approvals. This is not specific MiFID or IDD rules, as countries have their own regulatory setups with additional rules.

It is not uncommon for clients to cross regulatory borders and still wish to retain their financial advisers. For those with a MiFID licence, this is no issue if their advisers have access to other advisers within the same organisation with specific EU qualifications and expertise.

Our own empirical evidence, is that a lot of companies that offer cross-border services are relying on CII or CISI qualifications. that may not be recognised as sufficient standalone.

Further, many investors do not always want to have to give permission for each change (buy/sell) and fill in fund switch sheets- with all the time that takes up. For those firms that do not have MiFID, or those that do but do not have a DFM licence, the solution is often to nominate a separate DFM. While this may seem like a good solution for many advisers, we are not so sure it is always the best solution for every client.

Why? Well, a DFM on its own will not provide any financial planning advice and we have seen, particularly with pension planning, that separating the adviser and the DFM can lead to a gap in financial planning that could become costly for the client.

Likewise, Brexit has caused issues in both directions for advice firms that do not have a proper regulatory boot in both camps. An EU adviser is similarly disadvantaged with regard to lack of recognition in the UK, and could end up being frozen out by UK regulated providers; this leads to clients not being able to take advice from an EU based adviser. The common result is the EU adviser recommends a transfer irrespective of best outcomes for clients, this is merely about advisers taking control and get paid from a new product provider.

Advisers on both sides (the EU and the UK) with clients that move from one jurisdiction to another will often wish to continue to work with these clients, particularly in the areas of pensions and IHT for example.

So, what is the solution?

OpesFidelio can now offer a solution to these UK advisers that allow them to continue to advise in the EU whatever the country and irrespective of IDD, MiFID or pensions-based business. When the client returns to the UK, their FCA permissions take over.

For the EU adviser, advising in the UK is an absolute no – no, and there are specific FCA rules about this matter that also cover this. Is there a solution for this as well?

OpesFidelio can provide an ongoing service for the client via their UK advisers- who will keep the original adviser informed.

Given that the ex-EU client may have non-UK products and intend to return to the EU in the future, mutual cooperation between the UK and EU adviser could be important to the client. Alternatively, one adviser can act as both with OpesFidelio.

This form of dual authorisation allows UK based advisers to operate and advise in the EU without constraint and removes the risk of overstepping a law in a particular country.

Summary- benefits for the client?

They get continuity of service in a transparent manner and do not run the risk of being ‘orphaned’ or falling prey to unregulated advisers.

Article Date 12th September 2022

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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