For firms providing investment advice to retail clients in the UK, this will generally mean being in a position to advise on all types of financial instruments, structured deposits and other retail investment products.
Suitability
One of the changes to the suitability rules is a clarification that a recommendation to hold a Mifid financial instrument is subject to the suitability rules and will require a suitability report.
Another change is that where firms are offering a periodic assessment of the suitability of their advice, this assessment must be carried out at least annually.
Firms must also ensure they assess whether equivalent investments or services, including those that are less complex and those with lower costs, can meet their client needs.
Recording conversations
Under Mifid firms must record all telephone, and keep a copy of electronic, conversations with a client that relate to the reception, transmission or execution of an order, including those that are intended to result in transactions.
Article 3 retail financial advisers have the option of either recording the telephone conversation or making a contemporaneous note.
Inducements
Mifid II also introduced new inducement bans for firms providing independent investment advice and portfolio management services.
This means, for example, that for firms providing advice to retail clients in the UK, the new ban applies to the provision of independent and non-independent (restricted) advice and in such a way as to prevent rebating.
GDPR
On 25 May 2018, GDPR came into force following a two-year grandfathering period.
The new rules are designed to provide a more robust system for the rights of individuals around how their data is handled and processed.
This means that for financial advisers, it has changed how they can process and handle client data, and prospect data; from how the data is stored, what data sets are stored and how communication can be made.
Rob Walton, chief operating officer at Intelliflo, explains: “The aim of the data protection regulation is to give power back to the data subject. The other aspect is that it is not possible that anybody who had written the previous data laws could have foreseen what the world would look like today, with the proliferation of the internet and the impact on our lives.”
The core principles of the regulation are that data must be:
- Processed lawfully, fairly and in a transparent manner in relation to individuals.
- Collected for specified, explicit and legitimate purposes and not further processed.
- Adequate, relevant and limited to what is necessary.
- Accurate and, where necessary, kept up to date.
- Kept in a form which permits identification of data subjects for only as long as is necessary.
- Processed in a manner that ensures appropriate security of the personal data.
Mr Walton adds: “This means people must know that you have their data and why you have their data. You cannot take data from somebody to give financial advice then pass it on to someone else.
“In the context of financial advisers, people need to think they are doing everything reasonable to make sure data is kept up to date.”
