{"id":3574,"date":"2020-02-04T17:58:29","date_gmt":"2020-02-04T17:58:29","guid":{"rendered":"http:\/\/localhost\/britech-old\/?p=3574"},"modified":"2024-04-12T14:07:39","modified_gmt":"2024-04-12T17:07:39","slug":"mifid-ii-and-priips-a-breakdown-of-the-latest-european-regulations-for-asset-managers","status":"publish","type":"post","link":"https:\/\/britech.global\/en\/blog-en\/mifid-ii-and-priips-a-breakdown-of-the-latest-european-regulations-for-asset-managers\/","title":{"rendered":"MiFID II and PRIIPs: A Breakdown Of The Latest European Regulations For Asset Managers"},"content":{"rendered":"

At the start of 2018, the EU introduced new legislations to make investment funds completely transparent. This is what those in the financial market may now know as Market in Financial Instruments Directive (MiFID II) and the Packaged Retail and Insurance-based Investment Products (PRIIPs).<\/p>\n

With the use of these two regulations, all costs and charges involved in an investment process are to be fully disclosed. The objective behind the newly changed legislation is to help consumers assess the value of investment service before committing to an investment. For wealth managers, this means that they can assist their clients in making more informed investment decisions based on the charges and total returns of a given investment product or fund.<\/p>\n

In this article, we will take a deep dive into what asset managers can expect from MiFID II and PRIIPs, and how these can be used to better serve their clients.<\/p>\n

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Understanding MiFID II and PRIIPs<\/h2>\n

At the core of the EU legislation is investor protection. For asset managers, this means that investors are to have access to specific information that assists in gaining a better understanding of the comparable products and the risks they pose. Although MiFID II and PRIIPs are similar in this regard, it\u2019s vital that their differences are highlighted.<\/p>\n

Let\u2019s first take a look at PRIIPS. PRIIPs is built around packaged retail and insurance-based investment products – think unit-linked funds or retail investment products. The goal here is to enhance the protection standard for retail clients.<\/p>\n

On the other hand, MiFID II has a broader approach to investment that applies to firms who provide and manufacture or distribute financial instruments. Here, equities, commodities, debt instruments, and exchange-traded funds (among others), fall under its jurisdiction. The aim of this legislative framework is to standardise EU practices following the financial crisis in 2008.<\/p>\n

One of the largest points of difference between these two frameworks lies in the specifics. While PRIIPs discloses the risks, costs, and the possible ROI of products, MiFID II covers everything from transparency to product governance. In other words, MiFID II requires more work and ongoing attention from advisors to ensure compliance.<\/p>\n

Key Aspects of MiFID II and PRIIPs:<\/h2>\n

Despite the differences, there are areas of overlap that all firms or individual asset managers need to take into consideration. By developing a strategy for these key aspects, they will be able to take on these new regulations and produce a service that\u2019s beneficial on compliance, service, and final outcome levels.<\/p>\n

Transaction Costs<\/h3>\n

Both PRIIPs and MiFID II require product cost disclosures. While PRIIPS takes on a clearer direction of which costs should be disclosed, MiFID II is less formulated. In fact, the latter doesn\u2019t set out a specific formula to which firms must comply. This means that different approaches to calculating transaction costs can be taken.<\/p>\n

However, despite these differences, these two frameworks need to disclose the following:<\/p>\n