FCA Rules Out Cost Disclosure Template

Pressure is on the asset management industry to become compliant with the Markets in Financial Instruments Directive II (MiFID II), which is due to come into force at the start of next year.

Financial advisers have been petitioning the Financial Conduct Authority (FCA) for some time for help with the technical aspects of the new compulsory legislation which EU countries will have to introduce.


The main changes are designed to protect investors and ensure that they understand what costs they will incur.

Firms have indicated that although they understand the need to provide such information, the lack of detail from the regulator means they are not clear about how they need to do it so as not to fall foul of the new legislation.

The European Securities and Markets Authority have provided advice on these issues.

These include both point of sale, known as ex-ante, and post-sale disclosure. Both will have to indicate to clients the cumulative cost of their investments as well as ancillary services provided by the firm.

Firms would anticipate using financial adviser software such as that supplied by www.intelliflo.com to provide relevant information, but concerns have been raised.


Firms will be required to provide both ex-ante and ex-post total costs, which includes both product and service charges.

As a result, trade organisations have asked the FCA to produce a template to help firms prepare cost analysis on a consistent basis. The latter have refused to prepare a one-size-fits-all template but have agreed to work with firms on their own versions.

The FCA’s Megan Butler said that firms’ disclosure under MiFID II was probably not perfect. She has recently placed an emphasis on clarity for the firms, saying that despite difficulties it is reasonable for investors to be given clarity on the costs of their overall investment.

Some advisers have bemoaned the attitude of the FCA, claiming that the complexity of assessing costs is putting enormous pressure on them. They suggest that this may result in their opting for safer investment options or single portfolio options, or indeed investing in managed portfolios.

Ms Butler has already raised the issue of communication between providers and advisers. This resonated with critics of the legislation. They have pointed out that firms will have to ensure there is a smooth transference of information up the chain in terms of costs.

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