MiFID II update

Trading in exchange-traded instruments (ETIs)

As previously communicated, we suggest your business takes a small number of key actions to ensure you can continue to trade in ETIs on our platforms with minimum disruption. The action required depends on the assets your clients are invested in:

Firms using Wrap or Elevate under advisory permissions only

• All individual clients that are invested in ETIs must confirm their nationality and provide appropriate national identifiers (NI) in order to trade in ETIs.
• All corporate clients, e.g. trust accounts invested in ETIs, must provide the legal entity identifier (LEI) of the Trust.
• This action is still required if your clients or trusts are invested in ETIs via discretionary portfolios on our platforms, unless those assets are held via the Wrap International Bond or an on-platform third party bond or pension provider on Elevate. Gathering this information is the responsibility of the discretionary manager where assets are held ‘off platform’ via Wrap SIPP.

Firms using Wrap, The Investment Hub or Elevate under discretionary permissions

In addition to requesting the information above for individual clients and trusts, we also require the LEIs for discretionary firms and the NIs for key decision makers within those firms.

Discretionary firms using Elevate, Wrap or Wrap's Investment Hub are able to input this information on the platform.

Firms using the Investment Hub under advisory permissions only

Firms using the Investment Hub under advisory permissions are not required to provide an LEI / NI for key decision makers for their firm. However, we require the information as outlined above for individual clients or Trust accounts regardless of which product the investment is held through.

Discretionary portfolio statements and the 10% drop

Discretionary managers (DFMs) and advisers with discretionary permissions are now obligated to provide quarterly client reporting. Clients must also be informed of depreciations in the value of their model by 10% (and any subsequent 10%) within each reporting period.

For both Wrap and Elevate, a document which details the valuation drop (in relation to Investment Management Hub portfolios on Wrap and DFM portfolios on Elevate) will be generated in your client’s document library within their platform account and we’ll automatically inform advisers/discretionary managers about the 10% drop and which clients are affected.

Leveraged instruments

Clients must also be informed when the unit price of their investment in a ‘leveraged instrument’ drops by 10% (and any subsequent 10%). The vast majority of assets on our platforms are not defined as leveraged.

PRIIPs information

Packaged Retail & Insurance-based Investment Products (PRIIPs)

PRIIPs regulations came into force on 1 January 2018. PRIIPs manufacturers are required to provide a pre-sale Key Information Document (KID) to help customers with product comparison and comprehension. The KID uses prescribed content and methodology to display charges and risk / reward information. It must be provided to the customer by the adviser in good time before point of sale.

How can I obtain copies of KIDs and SIDs required for the International Bond and Tailored Investment Bond?

Pre-sale Key and Supplementary Information Documents (Product KIDs, investment level SIDs and KIIDs) are available on Adviserzone. Product KIDs can be found on the relevant product literature pages. SIDs (use for insured funds) and KIIDS (used for mutual funds) are available via the Fund Filter tool on adviserzone.com

How can I obtain copies of KIDs and SIDs required for Wrap Investment Bond products?

Pre-sale Key and Supplementary information documents (Product KIDs and investment level SID’s) are available on Adviserzone. Product KIDs and SIDs (used for insured funds) can be found on the relevant product literature pages. KIIDs (used for mutual funds) are available via the Investment Selection Tool (IST) on the platform.

What about investment KIDs for underlying investments held in ISA and GIA / Wrap Personal Portfolio?

Underlying ISA / Personal Portfolio investments which are PRIIPS will, in the majority of cases, have a KIID or KID, available on the platforms. For those which do not, please source the KID directly from the provider's website.

On Elevate, access to appropriate fund documentation is available in the IST and research screens.

Client disclosure of costs and charges

MiFID II requires you to provide your clients with aggregated information both pre-sale and post sale.

Platforms hold the key to efficient reporting and you should expect reports to break down costs and charges into pounds and percentages.

How abrdn is supporting you

Pre-sale we will take all the relevant information from fund managers and present through a charges information document. We will also make this information available post-sale on an annual and ad hoc basis.

We’ll also show the discretionary manager fees through the same documents.

Transaction level detail for discretionary models will go into the contract notes.

Product governance and your target market

MiFID II compels fund managers to decide and clearly articulate the target market for their products. They will then monitor sales to ensure their products are being recommended to the right people. It naturally flows that it will become advisers’ responsibility to ensure their recommendations are aligned to this guidance.

As a result, advisers must be clear on their target clients and understand the appropriate products and distribution method for them.

How abrdn is supporting you

abrdn will bring together target market data from fund managers, as well as help provide the data required by fund managers to monitor sales.

Target market data

Client suitability

This is about formalising best practice for assessing and reporting on advice to hold a particular fund. The regulation creates a requirement to repeat this each year if your advice is ongoing. It’s worth considering whether you could improve your ‘know your client’ process. Or perhaps review how often you check a client’s attitude to risk and whether there are any specific trigger points (like at retirement).

How abrdn is supporting you

abrdn will provide easy access to the investment information advisers need to help to support suitability assessments.