Companies could do well reviewing whether their clients are EU27-only. Given the heritage of the industry, it is unusual for clients to not have some sort of affiliation with the home country in which their provider is based, that is, the UK.
So, while clients may have an address in an EU27 country, further due diligence may reveal clients do maintain a residence in the UK and a basis to continue to service them.
Engaging clients early to have an honest discussion about their options and challenging the personal data a company has on file for clients at face value will help foster a deeper mutual relationship.
Indeed, a proven UK address may circumvent the location headache and bring greater continuity of service.
In turn, this not only proves to the regulator that clients’ best interests are accounted for, but it also brings a relationship manager much closer to their client – one of the positive unintended consequences of Brexit contingency planning.
Do not forget about business as usual
Wealth managers must not forget their day-to-day and ongoing reporting responsibilities.
They should consider what it would look like from an operational perspective if they got authorisation in the EU.
As companies are reporting to different regulators, there is also potential discrepancy over whether the regulator accepts their reporting, a good example being transactional reporting, in the same way.
That is already evidenced with the FCA confirming that companies should see very little change in the reporting mechanics under Mifid II, but it will replace the European Securities and Markets Authority’s Financial Instruments Reference Data System with a UK version.
While the UK is Mifid II compliant, a hard or no-deal Brexit would challenge the transparency objectives in Mifid II, which in turn may require a much-rumoured rewrite of some of the rules and would also mean that the UK no longer has an official seat at the table for when they are formulating the regulation.
There could well be disparities in the areas that the rumoured Mifid III will focus on, which UK companies will have to consider.
Making foes your friend
If they have not already, then companies need to start examining where they have existing relationships with third-party service providers or even competitors in EU27 jurisdictions that would help hedge against the Brexit compliance burden.
The wave of structural change is already evident across the industry, and an increase in joint ventures and complementary mergers is likely – particularly if it satisfies authorisation, business continuity and reporting requirements.
While this explains the inertia over implementing contingency planning, companies should do their best to manage Brexit compliance as an effect of longer-term operational resiliency, and not just a driver of a company trying to paper over the potential cracks in the short term.
