RESHAPING RETAIL FUND DISTRIBUTION

DISRUPTING FACTORS

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REGULATORS PUT CLIENTS’ INTERESTS FIRST

product placement remuneration (advice fees) and the com- plexity of financial products (i.e. complex vs non-complex financial instruments), with some member states (e.g. UK, NL) already spearheading the change in product placement rules by imposing very strict national laws banning inducements (i.e. indirect revenues of the distributor stemming from the product manufacturers). Nevertheless, the MiFID rules are set- ting the stage for disrupting factors which will affect distribu- tion and business models within the EU. Two new regulatory approaches have already been imple- mented in the UK and the Netherlands. However, MiFID II will create EU-based minimum standards for fund distribution (execution and advice) without going as far as the national regimes already in existence. Nevertheless, MiFID II and multi- ple implementation standards by ESMA are still awaiting final publication. AUSTRALIA (2013) · Future of Financial Advice (FOFA) regulation is in effect from July 2013 · Key focus areas of FOFA · Ban on commission on risk insurance products · Addressing cost of advice · Clients mistrust of financial planners · Complexity in the planning process · Appropriateness of complex/simple advice solutions SWEDEN (2015) · Ban of inducements for independent or non-independent advisors to“non-professional clients”that are not in the best interest of clients · Prohibition for independent advisors to advise on related party products SWITZERLAND (2012) · Retrocession ruling · A position paper has been published covering similar requirements as MiFID and Swiss Government is preparing a proposal for a new financial services act .

The bulk of the regulatory actions taken in order to avoid con- flict of interest and increase transparency in the system, and consequently improve consumer protection within the retail fund landscape, is embedded in two main regulations: RDR, adopted by the UK in January 2013 and emulated by other countries such as Australia, Singapore, South Africa, and the Netherlands, and MiFID II, which will come into force in the EU in 2017 (see figure 6).

REBATE BANS MOVE ACROSS EUROPE, BUT NOT HOMOGENEOUSLY

MiFID II was drafted post financial crisis and the EU market has consequently undergone major shifts, in particular regarding

FIGURE 6 REBATE BANS MOVE AT THE GLOBAL LEVEL Source: PwC Analysis

MIFID II (2017) · MiFID II and MifiR – potential ban on commissions for discretionary portfolios and independent advice · Restricts which products can be sold through execution only, restrictions on bundling products and services · Links to KIID and PRIPs

NETHERLANDS (2013) The Dutch Government has banned commissions on retail investment products from 2013 to force advisors to be more transparent with clients about costs

UK (2012) · RDR : post 2012 · Commission ends: Advisor charges introduced · Client Clarity : Independent / restricted / no advice choice · Higher advisor qualifications (Level 4) required

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