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Global Trustee and Fiduciary Services News and Views | MiFID II Special Edition 2016
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Given the increased reliance on distributors
for information and data to meet the product
monitoring obligations for asset managers under
MiFID II, it could well be a challenge for asset
managers to analyse and assess the vast amounts
of information arising from sometimes complex
distribution models. They should therefore
use this opportunity to evaluate their current
distribution models as well as their marketing
strategies, from a cost, commercial and efficiency
perspective. Asset managers will need to identify
what success looks like for their distribution
strategies from a customer-outcomes perspective.
Overall, the new product manufacturing and
distribution requirements will mean significant
work for some asset managers, who will need to
enhance their product approval and monitoring
processes. Given the burden of information-
sharing between providers and distributors,
asset managers with large distribution
networks may look to consolidate the number
of distributors with whom they deal. Similarly,
distributors selling funds from a wide range of
asset managers (e.g. large platforms) may look
to reduce the number of asset managers with
whom they deal. The net effect will likely be
further consolidation and concentration around
the larger asset managers and distributors.
Investor disclosures: costs and charges
MiFID II introduces new requirements for the
disclosure of costs and charges. For example,
both manufacturing and distribution costs
will have to be disclosed to investors on an
aggregated basis together with an analysis of
the impact of such costs and charges on the net
return of the investment. In addition, firms must
provide clients with an itemised breakdown of
the aggregated costs and charges on request.
There are also disclosure requirements both
before and after the sale of the fund. The
increased transparency regarding costs and
charges should benefit investors. However,
the onerous nature of the requirements may
lead some asset managers to reconsider their
product suites and charging structures.
The MiFID II rules do provide firms with the
option of disclosing costs and charges in a less
granular fashion when dealing with professional
clients and eligible counterparties in some
circumstances. However, where the fund is also
being marketed to retail clients, asset managers
will need to ensure that distributors of the fund
have access to the relevant detailed costs and