She adds: “The objective of this is to ensure they act in the client’s best interest all the way through the product’s lifecycle.”
Although this guide does not cover complaints handling under Mifid II, it is worth stating here that any complaints handling guidelines relating to the provision of investment services will apply to both potential clients as well as actual clients.
This means if a fund does not do what it is supposed to do, and there has not been proper governance, a company must ensure it has established a complaints management function to deal with any complaints that may ensue as a result.
Complexity
According to Jennine Watts, regulatory solutions manager at SEI Wealth Platform, the approach to product governance has benefited from the standardised European Mifid Template produced by the European Working Group, in that there is now a single, unified format for product manufacturers to share the relevant information with the industry.
However, she mentions several challenges remain which could complicate matters in the run-up to January 3.
Ms Watts explains: “Challenges still remain on population and dissemination of the data, as the industry struggles with the relationship and data complexities.
“Large segments of the industry do not have a direct relationship with the manufacturer with whom they invest, and in reality, there are often several parties in the investment chain, referred to as intermediary and end distributors.”
She gives as an example a small IFA, which places orders through a larger network, which in turn uses another firm with technology capabilities and market connectivity to route the fund orders, and so on.
“There could be several firms known as intermediary distributors in between the manufacturer and end distributor, and these will all have to work together to ensure information, such as target market, works its way down the chain.”
Add to this various other legislative measures, such as the Packaged Retail Investment and Insurance-based Products and Ucits legislation, and it is clear there needs to be more joined-up thinking as to how various standards and methodologies need to be brought into line with Mifid II.
As Ms Watts says: “This is not an easy feat, although ultimately the objective is the same.”
Solutions
Hugues Gillibert, chief executive of Fitz Partners, says there are some solutions the industry should be putting in place now to be compliant with Mifid II’s product governance requirements.
He outlines:
- Follow the latest FCA guidelines.
- Appoint independent directors (and provide them with meaningful information).
- In some way, follow the US model (15c reporting).
- Annually sign off in-depth reviews of operating fees.
- In parallel, assess all their fees to the lowest levels possible, and assess product performance.
Some services have already started to integrate target market data into their information systems. Zurich-based FundInfo AG has already made its data service Mifid II compliant to help fund distributors get ahead of the game.
