Gerard Garcia-Gassull's Blog

How is the investor affected by the European MiFID II Directive?



MiFID II stands for "Markets in Financial Instruments Directive". The aim of this European Directive is to increase transparency and optimize security in financial markets and, consequently, providing greater protection to the investor.

The aforementioned regulation includes the obligation to charge customers for financial advice. The fact is that financial institutions, far from being transparent, charge the cost of advice to the investor client through commissions called retrocessions. The retrocessions are intended for those agents who market and distribute the product, usually an investment fund.

| One of the specific purposes of MiFID II is to prohibit retrocessions, thus favouring independent advice |

From the date this Directive enters into force, which has been postponed to 2018, entities will have to break the cost of those commission for financial advice down by each of the parts involved in the contract, specifying each and every commission that is charged. It implies a significant change that acts against the opacity that has characterized these operations.

In addition, it is determined that those intermediaries receiving a commission for advice must prove the actual value of such advice in the specific operation. Once again, it is about accountability, being committed to clearness and transparency.

All this indicates that the costs by intermediary advisor will be reduced, favouring the Spanish investor, who has been paying one of the highest commissions to the financial institutions selling the investment products.

However, despite the implementation of transparency measures and the increase in the control, I wonder if they will be enough for private banking to offer the investor that investment fund that best suits him/her.

Now it’s a matter of waiting for results.  

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