Preparing for MIFID II and SMCR and monitoring the radar for future regulatory impacts

Wealth Management and Private Banking

Wealth Management and Private Banking


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Experts: Naheed Tapaya & Haney Saadah, EY and Andy Peterkin, Farrer & Co

Key message

With a year-long extension to the implementation of MiFID II having been recently announced, advisers were keen to talk through the impact, the challenges and the opportunities presented by the extended deadline.

EY punctuated the discussion with succinct presentations on some of the biggest changes anticipated on the regulatory landscape, and by responding to several concerns and questions from the delegates


  • The extension of the MiFID II deadline to 2018 offers an opportunity to make more ambitious changes to the client experience.
  • Attendees are worried about MiFID II reporting requirements and how to align these across multiple geographies.
  • Advisers must dismantle silos within their organisations and communicate with clients with one voice on regulatory change, only once they are sure of the message they wish to broadcast.
  • BREXIT should have no impact on your MiFID II implementation strategy.

Key themes

Implementing the Markets in Financial Instruments Directive (MiFID II)

The challenges of implementing MiFID II were discussed in some depth by delegates. The largest asset managers, have already completed their impact assessments and are moving into the planning phase to determine how to take this forward.

Some smaller players reported that they are still trying to make sense of the noise and understand the overall implications of MiFID II to their businesses, given the wide scope.

With a recent extension to the implementation deadline to 2018, many advisers feel they should now be making wholesale improvements to their processes to make the overall client experience more positive. Experts agreed with the delegates that that while MiFID may initially have been treated as a tactical play by asset managers, the extension offered a chance for full-scale business model review. At least one delegate confirmed that they are using the extra time to replace core technology in European offices.

“The regulator has granted businesses an extra year. For some this will be an opportunity to put their heads in the sand for a bit longer. Momentum dropped before the extension and it seemed like when we had the 2017 deadline, many were planning to merely put a sticky plaster on the IT architecture. Now that there is an extension to the timeline, our clients are rightly planning more strategic changes.”

Attendees were encouraged to think about how to deal with compliance costs in an era of declining reserves; whether the directive could bring about revenue-enhancing opportunities; and if there is a clear road-map of direction afterwards.

Reporting challenges

A few delegates were concerned about new reporting requirements and how this would be handled in non-European markets. One discussed the problems that have arisen in trying to align reporting standards in third countries, for example, Switzerland and some of the Asia-Pacific markets. Another attendee mentioned that his firm is struggling to align MiFID reporting across the Channel Islands, Italy and the UK.

Expert contributors reassured attendees that there is a lot more maturity and instances of ‘gold-standard’ reporting in the UK than in other markets. Advisers were encouraged to consider the lessons of implementing changes to the reporting standard for PRIPS when adapting their approach to MiFID II.

“There are some pockets of clarity. Transaction reporting has stormed ahead, so now we’re seeing a lot of discussions around products. Clients have questions around profitability.”

Communicating with clients and partners

The conversation progressed to how regulatory change should be conveyed to clients in the context of their other wealth management relationships. A few delegates discussed their experiences during the Retail Distribution Review (RDR), where communicating with clients at the appropriate time had proved important to helping them understand the changes.

“We need to think about what the client impact is and how the changes could benefit the client. Most clients are multi-banked so we’re seeing many wealth managers apply for LEIs on behalf of their clients.”

In reality, picking the right time to communicate changes with clients will also depend upon the readiness of internal systems, such as mid-office platforms and having up-to-date data-sets. It also means reviewing distribution channels and thinking about the schedule for terms of business updates.

Another delegate commented:

“We had a similar discussion around the time of RDR. We don’t want to communicate with clients too early to avoid annoying them. But there needs to be a strong education process, including providing industry fact-sheets for clients. You only want to hit clients once with all the relevant information in a coordinated way.”

There was some discussion of what conversations had taken place to date with third party providers – most delegates confirmed they had not yet been approached to discuss the opportunities. More needs to be done to initiate these conversations. There is lack of clarity around what is happening in third countries, where there are offices selling into the EU.

Implementing the Senior Managers Certification Regime (SMCR)

Finally, the SMCR has been the subject of discussion among financial institutions for some years. The certification regime will need to be ready at the beginning of 2017. Some asset managers have already gone through the process of identifying who the certified senior managers within their organisation will be.

Given the implications of certification, the number of senior managers is likely to be limited to two to three per organisation, with specific and defined responsibilities. One attendee discussed the experiences of the process, which threw up some complications, including defining the different divisions (e.g. asset management, investment banking) that make up these organisations.


The round-table served as a reminder that implementing major regulatory change entails both opportunities and challenges. If used wisely, the extended deadline to MiFID II could be used for a strategic overhaul of many aspects of the client experience rather than tactical plays, to the benefit of the end investor. Advisers were encouraged to take the time to break down siloes within their business so that they can communicate in the most effective way when the time comes to convey those changes to clients.