Compliance

121 | MiFID II: Ensuring Investor Protection

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Tutors:

  • Claire Bennison, Head of Services and Product Development, Brooks Macdonald
  • Russell Catley, Chief Executive Officer, Catley Lakeman Securities

Learning outcomes:

  1. The main changes MiFID II will bring in
  2. How best to implement these changes
  3. The relevance of MiFID II for structured products

Channel

Compliance
PRESENTER: MiFID II presents one of the biggest regulatory challenges the UK wealth management industry has faced in recent years. Investor protection is one of the key drivers behind the regulation, meaning even if some elements do not directly impact advisers, they likely will clients. In this Akademia module, we’ll be looking at this issue more closely, with Claire Bennison, Head of the Services and Product Development for Brooks Macdonald, and Russell Catley, CEO at Catley Lakeman Securities. We’ll discuss the main changes MiFID II will bring in, how best to implement these changes and the relevance of MiFID II for structured products. But first I started by asking Claire what are the main professional advisers should be considering? CLAIRE BENNISON: The main points for MiFID II really builds on the achievements professional advisers have gained from RDR, and MiFID II also embeds a vast array of current FCA rules and guidance. So, when we look at the scope of MiFID II, it is quite vast, and it changes the ways of working not just on the industry through areas such as product governance, so professional advisers might be interested to understand those differences going forward, but it also touches on organisational structures, looking at areas such as corporate governance and conflicts of interest. So again for the professional adviser, it’s analysing those as part of their own organisational structure, but certainly if they outsource their investments and looking at that as part of the due diligence that they undertake. And then finally MiFID II sees a very visual and significant change to the information that will be provided to the client. And ahead of MiFID II professional advisers might want to become familiar of how different parts of the industry will be reporting that. PRESENTER: Well, before we move on to those changes, you mentioned the FCA, and you also mentioned RDR, is there any things that people have had to come to terms with there can act as almost like a building block, any takeaways and they can put towards? CLAIRE BENNISON: I think for the UK MiFID II probably isn’t as significant as change for the professional advisers it might be for the European counterparts, and that’s because RDR has already taken a huge leap forward on how you assess suitability. So I think from a UK perspective for professional advisers, a large part of that work has already occurred. But certainly MiFID II does look to enhance suitability, and there will be areas for professional advisers to consider in that respect. RUSSELL CATLEY: I think it’s fair to say that most people’s understanding is that the FCA drafted quite a lot of MiFID II on behalf of ESMA, and that the request to do that was on the back of things like RDR being very successful in the UK, and historic legislation. So ESMA’s view was that they asked the FCA to be heavily involved in MiFID II essentially. PRESENTER: Well let’s look at then some of the changes that are afoot, and costs and charges is a regular thing that comes up that people want clarification about, so what, Claire, should they really be aware of? CLAIRE BENNISON: Well costs and charges is actually one of the areas where there is still a grey area, and I think it’s fair to say that after MiFID II becomes implemented on the 3rd of January there will still be further guidance coming out on costs and charges. But if we look at the spirit behind what the changes are meant to drive, and that very much comes through in the MiFID II directive, and certainly if we look at Recital 78 I think that provides a good basis of that. And that emphasises that for clients there should be a greater awareness when you look through transparency. They should have more information so they can evaluate costs and charges of different products and services, and that information should be provided in a clear and comprehensible manner for the client. So that’s quite a key foundation to work from, and then for MiFID II costs and charges impacts both ex-ante, which are presale reports, and also ex-post reports. So looking at the ex-ante reports, you know, there are, as I said there’s this grey area still. There’s no defined template on how to do this. But certainly the guidance is clear and that you should be providing an aggregate level. You can provide an aggregate level of costs and charges from both an investment and ancillary services. You provide aggregate level costs and charges on transactions and third party payments. And you can bring those together. And that should be combined with an illustration for the client on what those costs and charges, what those costs are relative to the performance they are likely to get from an investment service or product. So in effect it’s been broken down into five different areas. So that would be your one-off costs. So an example of that would be an initial charge if that’s applied, or your switching cost. There will be the ongoing costs, which will be like the annual management charge or the custodian charge. There will be the transaction costs, which will be accumulation of third party fund costs for example. There will be your ancillary costs which are areas like if you pay for research and you put that research payment onto clients, and there’s a cost to the client there. And then there will be the incidental costs, which could include relevant performance fees. So quite a lot of new information, clearly broken down, and even at the aggregate level a client can request an itemised breakdown of how you’ve got to those costs. So you have to be very clear of how you’ve got to that. And what does that mean for the professional adviser? Well these costs move from presale to post-sale transparency of the charges. So for a professional adviser when they undertake their ongoing suitability, it should be much clearer for them to consider what was presented as a presale cost to the client, and then what has actually been the cost to the client post-sale going forward. PRESENTER: And this brings us on to cost-based analysis, how would you say is the best way then to approach this? CLAIRE BENNISON: Well cost-based analysis is already part of the industry, but certainly under MiFID II this is enhanced in many respects. So if we look at it from a professional adviser’s point of view, switching costs is a cost-based analysis, so whether you switch from one investment firm to another. If we look at it from a discretionary fund manager’s point of view, you’re always going through the thought process of whether you would be buying and selling an instrument for the client. And then what is that value of that client versus, to the client’s portfolio versus the cost. So that is already occurring, but there’s certainly a requirement to be much more clear on the documentation behind that. But I also think for cost-based analysis, you know, in reality we run an industry that isn’t just a buy or sell, there is a hold, and a hold is an active decision, and it’s providing clarity on why you think an instrument is a hold in the portfolio as well. PRESENTER: Well you said earlier that there was this grey area surrounding costs, are there certain stumbling blocks, any issues that could be raised around this that I think advisers really should be aware of, any common mistakes perhaps? CLAIRE BENNISON: I do think the breakdown into the five stages will be clearer largely as an industry for professional advisers, and as I said there will be further guidance coming out next year. I mean if we look at it through the lens of the client, which is looking at improving client outcomes, then you would, from a client’s perspective I would potentially argue, and I don’t know whether you agree, Russell, you know, that if they can see a like for like format, it’s much clearer for them to compare. And that’s probably true for the client and for the professional advisers. As we lead into MiFID II, I don’t think there is going to be a standard format that will be used throughout the industry, and that might provide some difficulty. RUSSELL CATLEY: I think it’s fair to say that in terms of cost disclosure in discretionary wealth management in the UK, I think it’s been fairly well contained for a number of years. I think investment decisions are made not based on cost, but cost is taken account of when you’re making investment decisions, as Claire said. I think most of MiFID II in terms of cost disclosure is really aimed at the lower end of the retail market where depositors have been encouraged historically throughout Europe, including the UK, to invest in investment products which have costs and fees. And I think the ability for a client to be able to distinguish whether that investment is being recommended because there are fees or costs involved, or whether it’s the right investment I think is very important. I think the difference to a discretionary asset manager personally I think will be minimal, because I think they’ve been doing this anyway. It’s just that as with most legislation it will be more clearly documented, but I don’t think much will change in truth. PRESENTER: So let’s move on to transaction reporting then. And what’s the importance of a legal entity identifier, and how would you say that relates to MiFID II? CLAIRE BENNISON: There is confusion between what an LEI is and why is it now such a focus for MiFID II. And I would say the LEI is a requirement under G20 and has been for a number of years already, so any legal entity should have an identification. So for example for a person it’s like your national insurance number, it provides and identification for transaction reporting. And certainly for central banks and regulators around the world it allows them to assess systematic risk in the marketplace, and also to identify market abuse. So it’s an important identification for the industry. Why LEIs have become such a focus leading into MiFID II is MiFID II under its transaction reporting is very clear that unless a legal entity has their 20 digit code identification in place, then the transactions on exchange traded instruments cannot occur post MiFID II, and that is the 3rd of January. So LEIs is a G20 requirement, the transaction part of it is a MiFID II requirement. It is not something you can gain an LEI overnight; you have to gain an LEI through the local operating units. So in the UK that is the London Stock Exchange. And there’s a vast array of information on the London Stock Exchange on how you can apply for an LEI, and certainly we have also put quite a lot of documentation on the Brooks Macdonald website to help clients with that respect. As I said you can’t apply for it overnight, it does take a couple of days to get through. So if you leave it too late, and given the number of LEIs that are still likely to be needed to be applied for, then there is a chance that you will not get your LEI before the 3rd of January deadline. And the regulators have been very clear and consistent so far on their message, and the message is no LEI no trade. PRESENTER: And depreciation reporting, I mean what will the requirements there be? CLAIRE BENNISON: Depreciation reporting is a, well, depreciation reporting is very much a capacity for loss part, which is what you currently have to do under MiFID. What MiFID II does is define that percentage of capacity for loss, and that percentage is 10%. So another requirement under MiFID II is that all reporting periods move to quarterly rather than certainly in the UK there has been the ability to report valuations on a six month basis. So for the 10% depreciation from the start of your quarterly reporting period, if your portfolio has fallen 10% or multiples of 10% thereof, you have to report that to the client on the same business day. So for Brooks Macdonald, for clients within our own nominee, we will be reporting that 10% fall if it happens to the client and informing the professional adviser. Where the 10% depreciation becomes a bit more grey is what do you do if you do not know who the client is, and that can be the case if you have models on platforms, so how could a discretionary fund manager know what client is impacted if they have no knowledge of that client? And I think this is where we still need to work it out as an industry: who takes on that responsibility for the 10% reporting? Will it be the adviser or would it be the platform? Would the platform then inform the adviser and then the adviser informs the client? Remembering that the timeframe on this is the same business day. So it’s quite a significant change in the requirement, and it’s quite an issue to overcome at the moment. RUSSELL CATLEY: I think it’s actually one of the parts of MiFID II which is slightly concerning. Most of MiFID II I think is very good, very clear. The reason I say that is if you look back at say the FTSE 100 index since its launch in 1984, the majority of those years, I can’t remember off hand the number but over that number of 30-odd years it’s something like two thirds of those years that that index has fallen peak to trough. Had you panicked and sold each time that happens, and not invested at the right time, then you wouldn’t have made too much money; whereas if you’d stayed invested for the 33 years or so it’s been around you’ve made a lot of money. And I think wealth management is about long-term asset management, it’s not about trading and execution. And I think the slight problem with, I think Claire hopefully would agree that if you spook clients a little bit saying your portfolio has fallen, in this sort of macro post global financial crisis world where we know there are slight asset bubbles, there’s a little bit of debt here and there, interest rates are way too low. It’s not a normal business cycle or economic cycle. I think the ability to scare clients if you’re having to point these things out I think is not ideal. And I think hopefully firms like Brooks Macdonald would be able to explain to their clients it’s not a time to panic, and this happens in asset markets, in risk asset markets, it happens regularly. So we’ll see how that goes. I think as with much of MiFID II this will be evolutionary, and I think we don’t have all the answers for the 3rd of January. It will evolve over time. PRESENTER: But for the adviser watching, what would you say to them, how should they be talking to clients, you know, to not spook them, what would your advice there be? RUSSELL CATLEY: They just need to keep the communication lines open. Advisers should talk to wealth managers, advisers should talk to their clients. Clients should talk to wealth managers, and people should, you know, it shouldn’t detract, shouldn’t be allowed to detract from the long-term goal of investing, whether it’s a pension pot of money or an asset pot of money, over what may be often 20 or 30 years to something like retirement. So it shouldn’t derail that process, which over the last so many years has been successful with asset prices rising. CLAIRE BENNISON: And I think it’s also fair to say that advisers, as part of their suitability, will be assessing a client’s capacity for loss. So it might not be 10%, it might be 20 or 30%. And certainly the adviser is the closest person to the client. So I totally agree with Russell that communication, that open communication will be very important to guide clients through this. RUSSELL CATLEY: It’s also slightly arbitrary putting a figure of 10%, because for example if you invest a portfolio, it’s the first time you’ve ever invested in risk assets and it falls 10% in the first three months is materially different to having a 10 year old portfolio that’s now worth three times what you invested, and it suddenly falls 10%. So it’s quite difficult to put a specific figure on each client. As Claire said every client has a different capacity to loss, so we’ll see how it evolves but it’s one of the things to watch, I think. PRESENTER: Now another part of the legislation talks about telephone recording, what should we be thinking of when it comes to this? CLAIRE BENNISON: Well telephone recording became again quite a hot topic in the summer. But to start with why do you need to record your telephones? You record your telephones because if you’re taking either receipt, transmission or execution of an order from a client. Now before MiFID II discretionary fund managers were out of scope for telephone recording. MiFID II clearly puts us back into scope. There was a grey area over whether article three firms, and quite a lot of professional advisers would also become in scope in line with discretionary fund managers. And that’s the thing that changed in the summer, in that article three firms are still exempt from telephone recording, though they still have to apply their telephone notes going forward. I think it’s fair to say telephone recording has not only the benefit of being able to be clear on what was said between an investment manager or an adviser and a client, but certainly if there was ever an occasion for a complaint the regulator, the client and the organisation involved can go back to telephone recording and use that as an assistance. So I think it does have merits but certainly at the moment article three firms are still exempt from telephone recording, but discretionary fund managers are captured with it. PRESENTER: But for DFMs is there anything then that they need to make their clients aware of when it comes to telephone recording, or is it just a given that this will happen? CLAIRE BENNISON: Our terms and conditions changed to make it very clear that all our telephones will be, our mobile phones will be recorded post MiFID II. PRESENTER: So despite what some people might think MiFID II hasn’t really been introduced as an onerous hindrance, so what will it help with? CLAIRE BENNISON: I think it’s unfair to say it’s a hindrance. I mean certainly there’s a vast amount of investment going into MiFID II and it’s a big change for the industry. But you have to go back to what are the drivers, what is the spirit behind MiFID II? And certainly the key drivers are the enhancement of investor protection, the greater transparency of information to the clients, and potentially it could improve competition, and ideally improved competition is good for the client as well. So it’s all focused about improving those client outcomes. So in many respects we would see a long-term benefit to the clients coming through for a number of years as a result of MiFID II. PRESENTER: Do you think then that perhaps a misunderstanding of it, or confusion or a bias against it is causing problems for people in the industry? CLAIRE BENNISON: To be fair, I don’t think the clients are particularly aware of it as yet, about the changes coming through. I think the industry is positive on it because it will improve client outcomes. And that is our job is to help improve client outcomes. So I think I don’t sense myself that there’s a huge negativity around MiFID II. It certainly is a vast amount of work to undertake. PRESENTER: Absolutely. RUSSELL CATLEY: Just as an observation from friends of mine that work outside of our industry. I think because of the timing of MiFID II it was very fashionable to suggest it was part of the EU referendum Brexit idea. That friends say things to me like I bet you’re glad you’ll be away from all this European legislation, and the reality is that the FCA drafted most of it because our legislation works and the European legislation hasn’t, so it’s definitely a good thing. We’re actually, I think it’s something that will help Europe maybe more so than our market, because I think our market was actually working much better than some of the European markets in terms of regulation haven’t worked particularly, especially the retail markets in my experience over the last so many years. So it’s difficult if you’re a bank or you’re a fund management business and you work across border into Europe at the moment. It’s very difficult satisfying every single market with one solution, and that’s I think become complex. As Claire said it’s a huge amount of work to undertake. I think for our UK, so especially the wealth management market, it’s almost a case of documenting the processes we’ve already been carrying out for some time, and the self-regulation bit in our part of the market has always worked very well. PRESENTER: Well following on from what you’ve said there, there is a little bit of confusion here in the UK surrounding MiFID II when it comes to Brexit negotiations. Because obviously we’re in this period of uncertainty, so there are questions whether, will Brexit negotiations or what happens impact this sort of regulation? RUSSELL CATLEY: Absolutely not, I mean we’re still part of Europe, obviously. We will be for the foreseeable future unless they can sort some process out, which seems to be difficult at the moment. But it’s also worth bearing in mind as we’ve said that the UK’s regulator, the FCA, drafted quite a lot of this on behalf of ESMA. It’s unlikely therefore to back track on any of that if we end up, once we end up becoming independent from Europe. I would also just point out that the Swiss government obviously, or Swiss regulatory body not being part of Europe per se has adopted very similar rules to MiFID II recently. So it’s not specifically a European issue, it’s something I think that, and many of the rules are not uncommon to those you’ll find in the US for example, especially on the retail investors side. PRESENTER: So moving on to conflicts of interest. Now we touched on this slightly at the beginning of this session, but any changes here and anything people should be aware of? CLAIRE BENNISON: There is a change coming through in conflicts of interest. So if we look at, any regulated firm today should have a conflicts of interest policy. And there’s three clear safe harbours that are used. So you can either manage a conflict, you can avoid a conflict or you can disclose a conflict. And I think it’s fair to say that over a number of years the industry has moved by default near enough automatically to disclose a conflict. Under MiFID II that becomes much more onerous. So if you cannot manage a conflict, or you can’t avoid a conflict, you have to disclose what that conflict is, be specific to the client on why you cannot manage or avoid that conflict going forward. So, there’ll be a much more onerous and intense requirement under MiFID II to be clear why you have a disclosure. So disclosures rather than being the first resort are likely to be the last resort for managing conflicts of interest going forward. PRESENTER: So the best ways to negotiate conflicts of interests, is there a? CLAIRE BENNISON: Well the best way is to either manage them or avoid them in that case. And this will apply to all regulated firms. PRESENTER: Does it affect best execution? CLAIRE BENNISON: Not specifically. There is a change with MiFID II with best execution. So under MiFID the regulation is very clear that you have to take all reasonable steps with best execution to get the right outcome for the client. Under MiFID II that terminology changes to all sufficient steps. So that is one change. The second change really for best execution is that you have to disclose your top five trading venues annually in a public way, so either on your company website. So that again focuses, if we look back at some of the key aims of MiFID II that helps transparency coming through. What doesn’t change is really the characteristics you use for best execution, so that would be the price, the speed of execution, whether the settlement period going forward, these don’t change. But it’s really the changing of the wording from reasonable to sufficient, and reporting your top five trading venues. PRESENTER: So then do you think then that advisers should perhaps be considering revisiting their client agreements? CLAIRE BENNISON: Terms and conditions in client agreements are likely to change under MiFID II just because there’s so many different changes in the scope of MiFID. So yes is the simple answer to that. I think it’s very important for DFMs and professional advisers and for platforms to be clear for example who has the reporting requirements, or who will facilitate that reporting for the 10% depreciation as an example. And also when you look at your terms and conditions, the changes in best execution and conflict of interest is one of the areas that you would maybe change in your terms and conditions. And that timeline of changes is quite close, because you should be providing clients with 30 days’ notice on changes to terms and conditions. So given that MiFID II comes into effect on the 3rd of January, we’re already in November. RUSSELL CATLEY: Close. PRESENTER: Now product governance is a key area of change, so what should DFMs and advisers be aware of when it comes to this? CLAIRE BENNISON: Product governance really impacts the whole value chain. So it’s from the manufacturer, so from the fund provider, for example, all the way through the distribution chains, whether that’s a DFM or professional adviser, to the end client, and what it requires is a lot more information flow coming forward. So from the manufacturer being very clear on what products and services and what target market that should be applied to, and for the distributor making sure that they are applying that to that target market. And why are they doing this? Well it’s really again looking at investor protection. So it’s hopefully reducing the chances of misselling products and services to clients going forward. When we talked earlier about costs and charges, you know, I mentioned that there is no defined template for costs and charges, but that’s not true for product governance. So is there a European MiFID template which will probably be used by the majority of the industry, which looks not only at investor type, whether you’re retail, professional or eligible counterparty, which is in place now, but also puts much more focus on knowledge and experience of the client. So whether they have basic knowledge, informed knowledge or advanced knowledge. It also identifies the relevant distribution channels, your investment objectives, and capacity for loss coming forward. And this is also, you know, this all ties in very clearly to what is right for the client, what product and service is right for the client. So going forward there are changes in products that some products might now be considered complex, while before they were not, there were considered non-complex. PRESENTER: So Russell, in a similar vein under MiFID II structured products will be deemed complex, what does that mean and why this categorisation? RUSSELL CATLEY: Well I think that most investment products nowadays for most retail investors are complex. The problem we’ve had over the last 10 years, certainly since the global financial crisis, is that what would have been historically classed as very simple investment vehicles, so cash deposits being probably the most simple, the most understandable, government gilts, high grade corporate bonds from large companies I think which are fairly easy to understand, you know, have just at a point with the economy being structured such as it is with quantitative easing to essentially come out of the financial crisis, albeit 10 years ago now. Those returns just aren’t there for retail investors. They’re not going to give them sufficient returns compared to even the low levels of inflation we’ve had over time. So it’s important for investors to get a proper return, and those returns tend to come from more complicated products. And I don’t think, singling out certain products I think is, it’s an interesting process. I mean the reason that I think most retail investors should take advice, whether it’s from a financial adviser or ultimately depending on the size of their assets from a discretionary asset manager, is because they’re specialists. You know, as people have said in the past, you don’t fix your own plumbing, you don’t tend to fix your own car nowadays – although I suppose people in the past used to again when they were simpler. Cars are more complex now; it’s very difficult to fix them. So why would you fix your own finances? And I think even buying stocks and shares now, whereas you could, you understand the concept of say Apple as a company or BMW or a company that you could have historically bought shares in, Vodafone, BT, you have a view on whether they’re successful, and whether a return on their profits will be something that you would be prepared to take a risk for. But unfortunately now even equities, direct equities are more of a macroeconomic risk, because it’s fair to say that not everybody’s view is this, but equities in the UK and the US for example are at their highest ever valuations on pretty much any valuation you choose to use. So that’s there for a reason, because we’ve had this price bubble really where yields from things like property and fixed income have been so low that people have tended to use preferred equities I think over time. So even buying a simple equity nowadays you could be caught in a global financial process. So I don’t think anything is really not complex anymore. In terms of structured products essentially, which is my specialist area, are complex because they embed derivatives, many things embed derivatives now, not just structured products, but it’s not an issue. We’ve always seen them as complex. They’re something that we need to explain, that Claire’s colleagues need to explain to underlying advisers, to underlying clients. And we do an awful lot of training, conference speaking, you know, CPD training obviously with both advisers and direct clients each and every year really, and that won’t change under MiFID, I don’t think. PRESENTER: But do you think this will change any perhaps the strategies used for structured products? RUSSELL CATLEY: Not at all, no, and the structured products we tend to sell are fairly simple anyway. They’re institutional products which are purchased by the likes of Brooks Macdonald. And really the structured products we actually sell are really about probability. We’ve sort of distilled processes that are used in institutional pensions management for the retail market essentially, by saying look if you have to take risk in equities you understand nowadays that that’s more complex as we’ve just said, than it was historically. And maybe picking the right stocks isn’t quite as easy. If you’re going to take equity risk, if you’re running a pension portfolio or you have a pension, and your intention is that you need a return of 6 or 7 or 8% a year, why would you risk all of your budget essentially on something that might give you plus or minus that, or plus or minus 20%? You don’t really need 20% a year, you don’t want minus 20% a year, why wouldn’t you focus the risk around an equity product that should have a high probability of paying you 6 or 7 or 8 or 9%, and that’s sort of what we do. So I don’t think that strategy will change. As we’ve said before there’s a little bit more around documentation, processes that businesses like Brooks Macdonald have had for 15 years actually now as it goes since this market was at its inception, won’t change actually, they’ll just be slightly documented in a different way. PRESENTER: So give me examples then of why wealth managers would use structured products? RUSSELL CATLEY: Well it’s interesting Jenny, in terms of, when you look at MiFID II it’s all really about clarity and comparison between whether the right clients are being sold the right products, and the alternatives to those products. What those structured products give you is definition. So they can either give you a defined level of income, which sometimes Claire might want in a specific portfolio, with a fairly high reliability of that income. They can give you a fairly defensive mechanism which can help you with the likes of the drawdown proposals that we talked about earlier. So you know where your risk parameters are on the downside, whereas your upside might be slightly restricted but it’s sufficient. And also we can use what we call accelerators, where if the likes of Brooks Macdonald have a very strong view on let’s say, as they would have five or six years ago on the US equity market. We can actually gear that very slightly, which gives them a much accelerated return compared to just buying the index or buying a fund. And those did very well as I say over the last five or six years. And really why we work with discretionary asset managers is that they’re in a position to have those views, and to be able to use the products properly. So the target market for us is in this case Brooks Macdonald. Brooks know exactly what they’re trying to achieve, and they know how the products work. So actually from that point of view MiFID works very well in that they know how to employ the products I can create to actually satisfy the requirements for each portfolio or type of portfolio. PRESENTER: So any other impacts then for structured products that perhaps we haven’t discussed already? RUSSELL CATLEY: No, well we’ve discussed costs. Claire’s discussed costs in detail. Costs are difficult, always a difficult conversation. But in terms of structured products they shouldn’t be. The institutional products that wealth managers would buy on behalf of their clients from the likes of my business are very simple and actually very cheap. The problem you have is that structured products just as a term, as with funds or any other term, encompasses a wide range of investments and markets and distribution channels and issuers and so forth. So going back to the product governance idea, it’s up to the issuers of products, in this case banks, via businesses like mine to understand the market they’re aiming for, and ensure that the costs are suitable for that market. Now the costs have always been suitable, and the business wouldn’t have grown as it has if they wouldn’t have been. So it’s very easy to see from the performance you get. The problem is that again documenting that. And if you’re a bank and you’re issuing structured products across 30 different distribution channels across 15 different European countries, every one of those distribution channels wants something different disclosed for different reasons. And I’m not here to judge those reasons, but in the purely simple large institutional market that we work in it’s very straightforward. And they’ll be documented. We’ve always told the likes of Brooks Macdonald what the costs are, we just have to write it down. PRESENTER: Well we don’t have a great deal more time, so then Claire what would you say are the major takeaways from this session? CLAIRE BENNISON: From this session on MiFID II I think again to re-emphasise what are the drivers. You know, it is to improve client outcomes; that is a key driver of MiFID II; and so always looking at the lens of the client, or through the lens of the client, when you interpret this regulation. I also think it’s probably fair to say that 3rd of January doesn’t mean it ends and life moves on. MiFID II will continue to evolve, and certainly we would be expecting further changes and enhancements to come through in 2018, as the industry as a whole and professional advisers and clients become more familiar with the impact of MiFID II. And so as such it’s keeping aware for professional advisers of the changes, the likely developments, and making sure that they become familiar with what’s currently going on. So, as I’ve mentioned we have, and will continue to provide as much information as we can to advisers through our website, and there will also be other information sources like the London Stock Exchange when you look at LEIs. PRESENTER: Super, Claire, Russell, thank you. In order to consider the viewing of this video as your structured learning, you must complete the reflective statement to demonstrate what you’ve learned and its relevance to you. By the end of this session you’ll be able to understand and describe the main changes MiFID II will bring in; how best to implement these changes; and the relevance of MiFID II for structured products. Please complete the reflective statement to validate your CPD.