According to Mr Young: “When a model portfolio service is used and run on a platform, the DFM has no idea who the client is, but remains lumbered with the regulatory responsibility for notifying.
“Furthermore, as the notification has to be made the business day that the portfolio breaches the 10 per cent drop, the platform as custodian is the most reliable source for calculating that loss.
“I doubt many advisers would feel comfortable relying on their back office data for that level of consistent, daily accuracy.”
He adds that the platform is the agency most capable of issuing the notification – but it is not the platform’s responsibility.
Ascentric has been speaking with those advisers with discretionary permissions to make sure the platform has put Transmission Arrangements in place “well before 3 January 2018”.
However, this might not be as problematic as it might seem.
According to a spokesman for Novia, most financial advisers will not be affected “unless they have discretionary permissisons – and very few do”. As with any regulatory change, it is worth checking permissions are up to date.
In addition, although Alistair Wilson, head of retail platform strategy at Zurich UK, says this “might sound onerous”, he says realistically, this might not occur very often.
Mr Wilson explains: “If the new requirement had been in place for the past five years, a client wholly invested in the FTSE 100 would have been alerted of a 10 per cent drop within a three-month period on only one occasion.
“Going back a little further, there would have been only 25 notifications since the start of 1984, with most of these activated around the 2001-2002 and 2008 financial crises.
“Moreover, a portfolio in the context of Mifid II is the collection of all the assets being managed on a discretionary basis, not an individual fund – unless we are talking about structured funds, which will be assessed individually.”
Other considerations
There is also the need for some advisers with discretionary permissions to have a legal entity identifier (LEI) in place.
Under Mifid II, a new set of standards for investing in exchange-traded assets or exchange-traded instruments (ETAs or ETIs) are being put in place under new ‘transaction reporting’ rules.
Providers under Mifid II will need to know who is the beneficial owner of an ETI, and who is the decision-maker in respect of the transaction.
This means where advisers are dealing with legal entities, such as trusts, charities or corporates, they will need to have an LEI in place so they can continue trading in ETIs.
