The MIFID II – The dilemma for Advisers and DIM’s

New MIFID II regulations will soon allow discretionary investment managers (DIM’s) to rely firmly on advisers assessment of suitability when recommending a portfolio manager. While seemingly benign, this is a major step forward in clarity in terms of who ‘carries the can’ for advice and investment management and is likely to support the ongoing growth in discretionary investment services.

Of even greater significance under MIFID II is the new obligation to inform a retail investor by the end of the business day if their portfolio value drops by greater than 10%.

At we think this presents two practical issues to resolve:

a) If advisers are increasing their use of discretionary investment managers and using multiple platforms, how do they implement an efficient administration model at scale?


b) how will discretionary managers know when an investors portfolio drops below 10% in any one day?

Traditionally it is the platforms which have been best positioned to monitor portfolios and manage the admin aspects for DIM’s and indeed many platforms are already working closely with DIM’s to manage third party access to portfolios and provide them tools to manage re-balancing.

That’s fine, until you have five or more platforms you use to support your discretionary client base. Very quickly the admin aspects seriously limit the scale DIM’s can reach and costs balloon for everyone in the value chain.

We think technology has a key role to play here for advisers and DIM’s. In particular a way to allow advisers and DIM’s to manage the collaborative workflows to support advice, portfolio re-balancing and approvals, agnostic of underlying custody arrangements with traditional platforms.

There are examples of these models emerging in Australia and the UK. A number of these are focussed on discretionary only services while there are others who are applying the same concepts and disciplines to advisory clients also. We are looking at this area with interest as we see serious opportunities for advisers to make step changes to their way they operate to improve scalability, reduce risks and do so independent of wrap platforms.

In our conversation with advisers we are not surprised that they are starting to look for ways to de-couple from their reliance on platform and CRM providers. In many cases they are taking advantage of new SAAS propositions which sit alongside the traditional services on their technology stack and which provide them a way to automate their investment and advice processes quickly and seamlessly.