MIFID Compliant Review Letter and Charges Disclosure

Hi all,

I appreciate that everyone is probably numb from all the MiFID discussion and debate, but I wondered if anyone would feel comfortable sharing what their documentation looks like in terms of a post meeting review letter, which includes charges please? (no need for me to emphasise the anonymity of all personal client info)

We've had our 'post review and charges' document in place since roughly this time last year. However, our compliance support couldn't be more airy fairy when we have asked for guidance or enlightenment as to how we should be handling MiFID to ensure we are conveying everything to clients in the way that meets the requirements.

We're a busy firm and our advisers have a lot of client reviews each week so I'm just looking for some ideas as to how to simplify or enhance our current document.

Many thanks in advance for any kind of tip or trick or example! (I'll be happy to provide my email address over private message)

Comments

  • I'm doing exactly the same thing. Currently looking at Dynamic Planner's new review service.

    I don't have anything to add at this point (our current review letters leave a lot to be desired) but I do have the Dynamic Planner demo document - which is too big to attach here @richallum can I have some file space or something (this is 2.74mb) .

    It curiously lacks MIFID 'effect of charges' which i'm sure is a requirement for Ex-Post(?)

    I'm looking forward to people sharing ideas on this topic.

  • richallumrichallum Administrator

    @arongunningham didn't know we had a file size limit, I'll look into it. I raised the lack of effect with DT at their launch event. Hope they add that it as it is a requirement.

    Can you share the file via Dropbox link? If not send to me and I'll do it.

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • @arongunningham I didn't realise they had a review service, I'll definitely check that out, thanks.

    We're the same, our review letters do what we need them to do in a very basis sense, but they're just not the same standard as all of our other reports and docs.

  • Weird one: Are you allowed to round charges to the nearest £1 per MIFID?

  • @arongunningham thanks for uploading that document. I agree with you that it isn't compliant with mifid because it doesn't include the effect of the charges.

    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • @arongunningham thanks for that i'll give it a look through

  • Does anyone have a good example of ex-post 'effect of costs' tables?

  • benjaminfabibenjaminfabi Moderator
    edited March 1

    Technically there should be a separate 'effect' figure for each plan, but it didn't fit in the width and using one figure removes the anomoly where you are taking high fees from the GIA. I don't mix clients though ie one table for each client and joint as applicable. If you've got numbers from your platform's disclosure just copy them in.

    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • edited March 1

    So the difference between ex-post and ex-ante will be there's no 'illustration' per se with compounding growth with and without the charges applied.

    Does that table double-up as your aggregated charges disclosure table too?

  • benjaminfabibenjaminfabi Moderator

    Sorry @arongunningham I don't understand your first statement. You can't produce an illustration of ex-post: it's reporting known figures.

    That table is the aggregated charges disclosure. It's synonymous with the effect of charges. The individual elements are calculated elsewhere in the process and not put into the report.

    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • There's no need to look ahead (like you would ex-ante) based on the charges from the year before?

    If that's right, you are able to make aggregated tables synonymous with the effect of charges tables, unlike ex-ante where I am projecting years ahead.

  • Surely the majority of platform providers supply the 'ex-post' MIFID stuff (see Lang Cat research)

    Is there a requirement for us to provide the ex-post MIFID details in our annual reviews in addition to the providers also supplying this?

    Our compliance team suggested that we can just rely on the provider MIFID statements

  • @AndyRichards said:
    Surely the majority of platform providers supply the 'ex-post' MIFID stuff (see Lang Cat research)

    Is there a requirement for us to provide the ex-post MIFID details in our annual reviews in addition to the providers also supplying this?

    Our compliance team suggested that we can just rely on the provider MIFID statements

    The documention, from the providers we use, is a complete mixed bag. Some providers are issuing detailed statements with all the required figures etc. and some still aren't or haven't as of yet got round to doing the bulk mailing.

    As your compliance team have said to rely on provider statments, you don't include any charges in your post review letter to your clients? If so, I'd be willing to challenge our compliance team with this as it would save so much time.

  • @ParaWhatNow said:

    @AndyRichards said:
    Surely the majority of platform providers supply the 'ex-post' MIFID stuff (see Lang Cat research)

    Is there a requirement for us to provide the ex-post MIFID details in our annual reviews in addition to the providers also supplying this?

    Our compliance team suggested that we can just rely on the provider MIFID statements

    The documention, from the providers we use, is a complete mixed bag. Some providers are issuing detailed statements with all the required figures etc. and some still aren't or haven't as of yet got round to doing the bulk mailing.

    As your compliance team have said to rely on provider statments, you don't include any charges in your post review letter to your clients? If so, I'd be willing to challenge our compliance team with this as it would save so much time.

    To be honest I'm going to query our compliance team on this one again. I'm thinking that best practise would be to summarise all the charges into an easy to read table for the client instead of making them trawl through pages and pages of nonsense that the providers send out - will suggest this to them!

  • benjaminfabibenjaminfabi Moderator
    @AndyRichards is that in house compliance? Sounds like they should have a read of the esma Q&A document in this fca press release last week

    https://www.fca.org.uk/publications/multi-firm-reviews/mifid-ii-costs-and-charges-disclosures-review-findings

    Also this is useful for determining what is in scope for mifid

    https://www.fca.org.uk/firms/priips-disclosure-key-information-documents

    Relying solely on the platform for ex-post disclosure is not enough.
    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • @benjaminfabi said:
    @AndyRichards is that in house compliance? Sounds like they should have a read of the esma Q&A document in this fca press release last week

    https://www.fca.org.uk/publications/multi-firm-reviews/mifid-ii-costs-and-charges-disclosures-review-findings

    Also this is useful for determining what is in scope for mifid

    https://www.fca.org.uk/firms/priips-disclosure-key-information-documents

    Relying solely on the platform for ex-post disclosure is not enough.

    Outsourced compliance - I've only recently joined this company so just getting my head around how they do things!

    In my previous company we manually provided the ex-post costs in the suitability which I feel is far superior - especially as the majority of platforms are MIFID 2 friendly allow you to see exactly what the client has paid over the last period.

    Thanks for the links I'll have a look.

  • Just found this article from Parmenion: https://www.parmenion.co.uk/stay-informed/mifid-ii-ex-post-disclosure.

    The below quote from them suggests that you can rely on their statements for ex-post, assuming that adviser fees are facilitated via the product. I assume then if you have clients who pay directly you'd need to do your own ex-post report

    This also means, that if your adviser charges have been administered through Parmenion, that you can rely on our disclosure to fulfil your ex-post obligations for the clients you have on Parmenion.

  • benjaminfabibenjaminfabi Moderator
    Parmenion is correct, but you should be putting the aggregated summary of their disclosure into your ex post report. It's still your disclosure, even if you have 'outsourced' the calculations to the platform.

    I'm not sure I agree that the majority of platforms are mifid ready though.
    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • richallumrichallum Administrator

    @benjaminfabi said:
    Parmenion is correct, but you should be putting the aggregated summary of their disclosure into your ex post report. It's still your disclosure, even if you have 'outsourced' the calculations to the platform.

    I'm not sure I agree that the majority of platforms are mifid ready though.

    Agree with all that, especially the last bit.

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • A little off topic but still MIFID II related; I note Transact won't be producing their ex post reports for clients until the end of April. Generally speaking, it appears that adviser firms should be producing their first round of ex post disclosure by the end of Q1. What are the thoughts on this currently? Are people waiting for Transact or trying to produce their own?

    I have to be honest, i'm a little disappointed with Transact's approach to all this so far.

  • We're doing what we can with what we can reasonably get. The disclosure document is so full of caveats and notes that we're running out of symbols to use.

  • Our thoughts are that it simply cannot be expected for an IFA firm to collate and produce a full breakdown of costs over the last 12 months, for all clients over every platform within our business. I say this simply because each platform operates differently and thus there is no straight forward, efficient method of obtaining the breakdown of fees. In addition all/most platforms are expected to fall in line with sending out annual statements with the full cost breakdown by April anyway and therefore we would be sending out duplicate information, at a very high cost to the business and manpower.

    As such we write out a simple one page letter to our clients once a year, telling them how much we have received in fees over the last 12 months, and that they will receive a full breakdown of costs from their provider(s) during the year. The letter also includes a small statement on the continued suitability of their product(s).

    This annual letter is coupled with a shortened suitability which is sent out twice a year to all of our clients in a model portfolio. Within this we disclose the cost of their current portfolio (i.e. average cost of the funds) and a comparison cost for the newly recommended portfolio both in monetary and % terms.

    Our compliance officer (external) has confirmed this is more than sufficient and, more importantly, manageable to our team of 5 paraplanners/admin.

  • @LiamConnor said:
    Our thoughts are that it simply cannot be expected for an IFA firm to collate and produce a full breakdown of costs over the last 12 months, for all clients over every platform within our business. I say this simply because each platform operates differently and thus there is no straight forward, efficient method of obtaining the breakdown of fees. In addition all/most platforms are expected to fall in line with sending out annual statements with the full cost breakdown by April anyway and therefore we would be sending out duplicate information, at a very high cost to the business and manpower.

    As such we write out a simple one page letter to our clients once a year, telling them how much we have received in fees over the last 12 months, and that they will receive a full breakdown of costs from their provider(s) during the year. The letter also includes a small statement on the continued suitability of their product(s).

    This annual letter is coupled with a shortened suitability which is sent out twice a year to all of our clients in a model portfolio. Within this we disclose the cost of their current portfolio (i.e. average cost of the funds) and a comparison cost for the newly recommended portfolio both in monetary and % terms.

    Our compliance officer (external) has confirmed this is more than sufficient and, more importantly, manageable to our team of 5 paraplanners/admin.

    Hi Liam, thanks for this. I'd say what we do mostly follows your firms approach, but I've seen others say that it isn't enough to rely on providers to disclose their charges. It's a constant battle and something that I'm going to have to yet again shake our external compliance to provide more solid guidance on, once I've recovered from the horror that is tax year end..

  • Hello All.

    Can anyone point to a summary of what we should be including in our ex post charges summary to clients? There is a big mis -match of information being flown around still. These include;

    • Value at the start of the 12 month period
    • Value at the end of the 12 month period
    • Fees over the period split between advice fees (including initial and ongoing) / investment fees / product fees
    • Money paid in/ out over the 12 months
    • Effect of the fees on the value of the portfolio over the period

    Am I over complicating this or missing anything?

    thanks, Charlotte

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