The European Working Group (EWG) met last month and has issued an updated European MiFID Template (EMT), which aims to standardise the data to be provided by fund groups to platforms and advisers to help them deliver their client reports under MiFID II.
MiFID II requires all advisers and distributors (so platforms are included) to provide clients with a pre-sale costs and charges projection and an annual, personalised costs and charges report afterwards. In addition, fund groups need to identify the target market for whom the fund is appropriate and distributors will have to report back to show that only those in the target market have invested.
The latest version of the EMT still has the 6 defined target market fields:
Investor type (retail, professional, eligible counterparty)
Knowledge and experience (basic, informed, experienced)
Ability to bear loss
Risk tolerance (based on the UCITS KIID SRRI or PRIIPs KID SRI)
Client objectives & needs (capital preservation, growth, income, etc, and includes return profile and usage)
Distribution strategy (execution only, advised, portfolio management)
It also adds clarity on how each field is reported, by improving the clarity of each one and turning some single fields into multiple ones, eg a field for each available target market option.
The greatest change since the last version of the EMT is the inclusion of the ex-post costs and charges. The difference between “ex-ante” (pre-sale) and “ex-post” (post-sale) costs lies in the calculation. Although we still await confirmation from ESMA, it’s likely the incidental and transaction costs within ex-ante reports will refer to historical averages, while ex-post will need the actual costs over the past year. The EWG will work on this section to help further define what is required. One thing we hope to see is the inclusion of effective dates, so it will be clear what period each cost field covers.
Although the live date for MiFID II is not far off, this is certainly not the final version of the EMT. The target date the EWG has given itself for the EMT is the end of June, which is very tight, given how many different parties across Europe provide input. In the end, it may be a case of minds becoming even more focused by the lack of time, but the end result needs to be workable or it won’t be used properly, which defeats the object completely.