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At Your Service!


In our Vintage thought leadership series, Bernard Cunningham, Vintage Wealth Management’s Director of Operations, has chosen to discuss the new raft of legislation introduced under MiFID ll.

It’s been quite a challenging year so far. The MiFID II legislation introduced in January 2018 has meant there has been a lot more focus on client reviews throughout our business. That’s not necessarily a bad thing because we’re in a service industry so we do of course need to make sure we look after our customers.

However, the legislation brought in focused heavily on the disclosure of investment charges within fund houses and discretionary fund managers, without seemingly giving much thought as to how it would actually kick through and impact smaller businesses due to the level of reporting and the amount of disclosure that has to take place, which is really quite extraordinary.

This is great news for the consumer. Why should you not have full transparency on what you’re paying and the proportion that goes towards investment charges, service charges, or what your adviser is charging?

Being IFAs, we’re always very open and honest about our charging structure anyway, and full disclosure of our costs is always given to clients.

The confusion now is that this regulation says that we have to disclose the fund management charges and wrapper charges, and the process is not that simple. Imagine trying to get through that level of disclosure for a client that has six or seven different types of investments with different companies.

The level of disclosure required to meet this legislation have been rather onerous on companies, and this has made it difficult for the product providers themselves to give information at the right level of what these charges are.

So, we have to disclose the charges and the breakdown, and it’s difficult for us to get that information through to the end user. Hopefully, now we’re in a situation where we’ll be on top of that moving forward but it has been a bit of a challenge getting around it.

Another aspect of the legislation focuses on ensuring the adviser continually assesses the suitability of the investments held by the client. When we engage with a client, we give them a chance to work with us on a purely transactional basis – just to do a piece of business that suits their needs and move away. But most clients prefer to have ongoing contact because they appreciate the need to have a review and a sense check of what’s going on for them.

Doing client reviews is not a new thing but, in the past, the focus would quite often be on investment performance and market review; this has helped to place increased attention on the client and ensuring what they hold is appropriate for their needs.

What we want to do as a business is really make people think about the wider issues, what’s important to them, and identify things they may not have thought about.

At the end of the day, if you’re working for a client and they’re paying you an ongoing fee then, of course, you want to ensure that you are delivering a high-quality service.  For us as a business, this has meant we’ve had to gear up more support to cope with the enhanced service and disclosure requirements.

We’ve also had to place an increased focus on putting systems and processes in place to make sure that clients have their review within the appropriate timescale, as well as look at improving the documentation and information that we provide. We want to make sure that our clients are paying for a service where they can say ‘it was really worthwhile having that meeting’.

A great example of this is when we had an adviser phone one of their clients to arrange a review meeting. The client’s attitude was ‘I know what I’ve got, I’m quite happy, do we really need to meet?’.

At the start of the meeting, his body language was not engaging at all but once the conversation opened up and he saw that we were actually making him think about different issues, his entire body language changed. He became more engaged in the discussion and at the end of the meeting, he thanked the adviser and said how glad he was that he had come in.

That’s how an annual review should be for a client, where they perceive the value for the price that they’re paying.

Considering the challenges of the legislation, for clients it’s going to be a better thing as they’ll have clearer visibility of all their ongoing charges. It might confuse them a little and that’s up to us to explain and lead them through all the changes, but their overall experience should be a lot better going forward.

We have always been aware of the need to give clients good quality service. We’re constantly looking at our back-office systems and how to produce information and data in a much more friendly manner.

We undertake a program of observing our advisers conducting review meetings, so we also get a chance to speak to the customers and get their feedback on how the meetings have gone.

The danger in our industry has always been that a client review becomes just a review of performance, but at Vintage our advisers act as your conscience.

We make you stop and take some time out, and we ask you some challenging questions to make you think about your current situation and circumstances. What might happen, what if… all those good points that make you think, as a customer, “Oh I haven’t thought about that’ or ‘Now I’m aware of that’ and ‘I’m not going to do anything about it right now but thank you for bringing it to my attention.’ Those questions then allow the customer to think about what’s important to them and to build a plan which we can help them facilitate.

At this stage, the regulation only applies to investments, but it is more than likely that pensions will be brought on par. So we’re working on the assumption that we will need to get our systems in shape to cope with pension disclosure.

The legislation is always changing. Attempting to give the customer better clarity is a positive approach for us, it’s about having an awareness of the complexity and impact on our business.

Some firms we’ve spoken to are not taking on more clients because the legislation means they have to focus on getting their existing reviews in shape. But at Vintage, we’re fortunate enough that we’ve got a wide number of advisers and a great support network.

We will need to take more staff on, and it will take longer to prepare review documentation, but we can still carry on talking to new clients whilst having the confidence that we can continue to provide a high level of service to our existing clients.

Importantly, we are always looking to put our customers at the heart of what we do and how we can add value. Following the implementation of MiFID II, we have experienced more challenges from clients due to the disclosure around fees and costs.

People are questioning ‘What do I get for my fees?’ We actually welcome these questions as it gives us the opportunity to sit down and remind our clients about our business. We explain that it’s not just the adviser’s time they’re paying for, but that every client benefits from the technical team working behind the scenes to support the advisers.

Then there’s the compliance department and operational support, and we also invest heavily in technology and resources including compliance committees, investment committees and, where appropriate, look to utilise platforms to make it easier for us to deal with our clients.

People that take advice benefit from a wider level of support and ongoing governance.

As there’s so much information available on the internet, we’ve seen a lot of people self-serve for their financial needs and they are often making investment choices based on the experiences of friends or work colleagues.  How would they know which is the right fund to buy or even if it’s suitable for their needs?

We’ve also seen how quite a few investment propositions have come under fire for various reasons. If you’ve bought funds yourself, what level of due diligence have you done (or are you able to carry out)?

We have an investment committee and corporate governance in place to look and consider such things, and when you’re paying for advice, this is the extra value we bring.

So although constant changes to legislation can bring many challenges, we must embrace these and strive to deliver a valued service for our clients. Whilst there is a cost to seeking advice, it’s actually the cost of not taking advice that can be the most expensive.