Downing, a London-based investment manager, recently notified clients and advisers about the drop in value of its Downing Renewables EIS portfolio, which was launched in 2012 and carries a 30% income tax relief.
That’s a lot of transparency coming from a financial services firm, right?
Right -- but now it has to be the norm because of MiFID II. The regulations require firms to notify clients when the overall value of their portfolio, relative to its value at the beginning of each reporting period, drops by 10 per cent and multiples of 10 per cent thereafter.
Downing also agreed to rebate the value of all management fees chargeable to date and due for the remainder of the investment.
This is only one letter to one set of clients about one product, yes. But the goal of MiFID II on the marketing side was increased transparency, and we do seem to be headed there.
What are the biggest marketing changes overall?
Client outreach is strictly regulated: This means not just marketing materials, but also financial promotions, disclosure of charges and fees to clients and any informative content that you might release, online and offline, to engage your target audience.
“Fair, clear, and not misleading:” That’s the overall necessity for any marketing and communications, as well as all financial promotions -- and that applies to both retail and professional clients.
Risk warnings: MiFID II makes it compulsory for marketing material to not just talk about potential benefits and returns but to include risk warnings. Risk warnings also need to be “as prominent” as the rest of the text in terms of size/layout.
Affiliate programs have shifted: Affiliates can still introduce clients to brokerages, but they can’t facilitate any transactions -- and they can only provide services on behalf of one MiFID-regulated and compliant investment house.
Retention of materials: 5-7 years of retention is the new norm.
What should you be doing?
If you’re an asset manager in the age of MiFID II, you need to know how things will get easier for you. If you landed on this page, well, we have a solution. Let us outline some of the pros of said solution, and then give you a chance to kick some tires on it. Does that sound good? Good.
- Educating your people
- Finding the right tech partners
In more detail:
Preparing: All these processes towards compliance are time-consuming. One notable way to prep? Consider finding ways to automate some of the approval processes you have in place within marketing. That will save the time necessary to get the more vital parts right.
Education: All your marketing employees -- or anyone that touches financial promotions -- should be aware of the new rules, especially the changes around Article 16.
Tech partner: Advanced tech is going to become a larger market for investment firms because of the necessities of MiFID II. Make sure you avoid any snake oil in the market and find someone who’s going to help make all this easier, as opposed to somehow becoming a bigger headache.