MiFID II - not until 2018?!

According to Markus Ferber (CSU), member of the European Parliament, the Financial Markets Directive MiFID II and the MiFIR Regulation will "certainly not enter into force on 3 January 2017". Ferber explained this on Thursday at the 9th MiFID Congress of the Stuttgart Stock Exchange. Christian Waigel, lawyer and partner at the law firm GSK Stockmann + Kollegen, assumes that the responsible Directorate-General of the European Commission will not publish the implementation details of MiFID II until the end of the year. The European Parliament would then have three months to examine the rules. Financial service providers, for example, would only be able to find out what they would have to adapt to in spring 2016. Waigel therefore expects a "factual" shift.

It assumes that the Directive will enter into force as planned in January 2017. However, the authorities will not be able to check compliance with the rules so strictly in the first year and will not require full compliance with MiFID II rules until 2018. The same approach was followed for MiFID I, says the legal expert. But no matter how and when it is implemented, MiFID will have a serious impact on existing advisory processes.

If the creators of MiFID now need a year longer to implement MiFID due to its complexity, then this shows only one thing for those who have to apply it: they need support! The statement by ECB Director Lautenschläger that "we should now concentrate on implementing the requirements instead of always laying down new rules" also shows this quite clearly. The bank advisor cannot take this hurdle alone. After all, the true complexity only arises when the directive is implemented in the consultation process.

Let's take three elementary points out of the consulting process:

A. Review of risk tolerance and loss-bearing capacity
The obligation to examine what risk the customer can and will tolerate and what losses he can cope with creates new scope for interpretation. The concept of tolerance here seems to reflect a different expectation than before. In this context, we believe that it is increasingly necessary to clarify the client's psychological position on the risk. In this context, it is precisely the effects of possible or occurring risk on behaviour that need to be determined in order to use this suitably for an assessment of risk behaviour appropriate to the customer. Behavioral Finance provides us with the necessary theoretical approaches and a supporting tool, the practical tool to implement this in the same way, transparently and sustainably for all customers.

B. Verification of the suitability of product bundles and individual products
What does it mean, if all products and the proposed product bundle have to correspond to the goals and concerns of the customer? Can the investment forms necessary to achieve a return in excess of inflation, in particular shares and funds, also be offered to customers who want to avoid risks in total? We are certain that this can only be achieved comprehensively by analysing the client's goals as closely as possible and mapping these goals through target-oriented asset allocation with a quality portfolio approach. In this way, the individual investment products are placed in direct context with the objectives, while at the same time ensuring a balance and a review within the overall allocation. However, the resulting mix of products can hardly be determined efficiently by the consultant on the "white sheet of paper". Here, systems are needed which, based on an adapted strategy, current research and comprehensive administration, provide sustainable support for the consultant, give him security in his advice and create trust with the client.

C. follow-up option
The follow-up consultation option gives the institutes a unique opportunity. They will be able to regularly inspect the client's fixed assets in their own interest. This is the sales-oriented view of the topic that we perceive. Differently motivated contributions to the discussion go in the direction of "must I advise", "is it also enough to inform" or "that is still only one option". There are certainly good reasons to exercise caution in the regulatory context. Everyone should check this on their own responsibility, but the chance of valuable contacts is never greater than with changes in the depot. The consultant will discuss these at some point in any case. Practitioners tell us the sooner the better. In order to achieve this, you need a powerful IT system that monitors individual customer positions in real time and informs customers, consultants and sales managers about changes, determines returns and enables traceable performance analyses.

As you can see, the MiFID changes are full of challenges, but there are solutions for all of these to deal with them successfully in a customer-oriented and sales-oriented way. All financial service providers with an advisory focus, whether in retail or private banking, insurance or all-finance, are centrally affected by the expanded requirements. Our experience in implementing MiFID I in various software projects in Europe has shown that it takes about two years to comprehensively implement the change process. The aim of a project should be to integrate the new requirements into the consulting and sales process in such a way that no slumps in sales and earnings occur and MiFID creates an even better sales starting position.

Christian Neuenhaus

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