Nothing stands still, and the coming months are going to introduce major regulatory changes.

MiFID II comes in on 3 rd January, GDPR on 25 th May, and the UK Open Banking Standard is aligned to the European Regulation PSD2 on 13th January. My apologies for all of these acronyms but my intention is not to discuss the regulations but simply to highlight some of the implications.                                                

I was invited to join the platform development group (PDG) at Nucleus Financial and I flew to Edinburgh on 19th of September for an inspiring meeting on the 20th. Twelve IFA firms form the PDG and I was delighted to be involved. One of the requirements of MiFID is quarterly reporting with an additional requirement for DFMs to report to clients within 24 hours if their portfolio falls by 10%. The only practical solution for meeting this requirement is through the use of technology and Nucleus are doing their part, however it is for the IFA to notify the client. It was universally agreed that the only realistic method is via email and or secure client platform because getting a report out on the same day by post is not only expensive it is almost doomed to fail because of the practicalities. Many of the IFA firms said that they had taken the view that if a client did not have email and internet access then they would not take them on or remove them from their books (indeed some had already done so).

It was a long meeting, and this was one point where I sat up to take notice. Over the 25 years of advising I have seen many clients disenfranchised from advice because of regulatory changes and here was another historical moment – ‘no email – no advice’- wow! But more was to come:

Another requirement of MiFID is that the adviser must make an annual assessment of the suitability of the advice to ensure that it remains appropriate. This is a very sound idea and one which I can support however the implications for both client and adviser are considerable, have a cost implication, and a potential increase in fees. It means that the client is compelled to supply full details of their income, expenditure, assets, and liabilities, on a frequency not exceeding 12 months and preferably on an ongoing basis. The time and cost of gathering this information manually would be significant. No wonder that some of my colleagues at the meeting said that they only advised clients with investable assets of £1,000,000 or more because they were the only ones who could pay their required fees of £10,000 per annum.

At this point I was feeling a little smug: my change to using Intelliflo’s Intelligent Office in April 2015 and the promotion of The Personal Finance Portal to all of my clients was coming to the rescue. My use of the Portal started as a secure and efficient means of exchanging documents and messages (thus meeting a GDPR requirement) however because most clients now link their bank accounts and credit cards I have instant access to their cash assets and liabilities in addition to their investments and pensions. I am part of the Intelliflo PFP development group and I have attended Intelliflo meetings at Kingston and elsewhere a few times this year so that I know that the development is not only exciting it is inspirational. They are currently working on a property valuation link so that all clients’ properties will be automatically valued and going into next year all client’s income and expenditure will be imported from their bank accounts so that the MiFID requirements can be met at little or no cost. The PFP Premier service upgrade which provides the bank account link is automatically provided to all of our clients at no additional cost to them because I foresaw this requirement when MiFID came into force on 2nd July 2014.  Sometimes things come together at the right time and the Open Banking Standard will make integration much simpler to put in place.

All clients who are currently using the Portal are in a good place, especially if they have linked their bank accounts. For any clients that are not using The Portal please register as soon as you can and link your bank accounts, credit cards, and any other assets that are not currently displayed. I will be reluctant to follow the colleagues that I met in our Edinburgh meeting but for those clients without email or internet access 2018 is going to present some difficult choices. Unfortunately, there is no escape because the regulations effect every source of advice and within a very short time advice without internet and email will disappear in the same way that the ‘man from the Pru’, complete with his bicycle clips, is now a distant memory.

Incidentally I took the opportunity to choose my flight times so that we could look around Edinburgh and what a beautiful city it is with so much history: The Castle, Walter Scott Memorial, museums, art galleries, and some good pubs and restaurants. I’m looking forward to my next visit in 2018.