MiFID II and PRIIPs are looming. Due to come into force from January next year, these regulations will place great demands on the entire fund supply chain. Paolo Brignardello of Fundsquare asks: how can asset managers comply and provide all the necessary documentation efficiently?
More data will need to flow up and down the fund distribution chain when MiFID II and PRIIPs go live. Accuracy and timeliness will be key. So, how to satisfy regulatory requirements and document these processes at the lowest possible cost?
Many regulators have indicated their desire to see compliance with MiFID II along the entire fund supply chain. Or they will want well-documented reasons for why guidance did not need to be followed. Amending distribution agreements is the first part of this process. However, the more onerous task will be the on-going maintenance of the information flow between fund producers, vendors and advisers.
MiFID II requires asset managers to specify for which markets each product is intended, featuring information about intended investors and distribution strategies. This information must demonstrably reach client advisers. Proof must be given of the expertise of each service provider, and that responsibilities have been clearly defined. Product advisers, vendors and wealth managers will need to demonstrate that they too understand their target markets and are serving clients with appropriate products. The more complex the product, the more will need to be done to explain risks. Clients can also request that charges be itemised, and all must receive explanations on how costs could impact returns. Proof that these steps have been taken must flow back to the asset manager.
The danger is that this will result in an inefficient and error-prone spaghetti plate of point-to-point dissemination. Thousands of intermediaries will be involved in this information flow. Moreover, this data must be reviewed and updated regularly, as well as being stored and communicated in a secure fashion. Accuracy and timeliness will be needed if regulators are to be satisfied and reputations maintained.
More than ever, a central, mutualised data hub would help to cut complexity, boost precision and offer economies of scale. All actors on the distribution chain would have a single point of contact via flexible, open interfaces. Data could be collected, managed, disseminated, tracked and documented seamlessly. Standardised tools and automation would boost efficiency, and strict security measures implemented. Importantly, working with an exchange means the data continues to belong to the organisation which submits the information.
Fundsquare has been providing similar services from Luxembourg to the cross-border asset management industry for decades, and has a new range of services for MiFID II and PRIIPs. It acts as a nodal point, collecting and disseminating data and documents. This reduces complexity and the risk of error for reporting, notifications and registration.
Getting product governance standards right is central to achieving a smooth sales process. Everyone from the asset manager through to platforms and advisers will be involved. Managing the data flow efficiently and in a cost-efficient manner will be vital.
Funds Europe, September 2017