Retail Asset Management and MiFID II

Prometeia Insights


The recent introduction of MiFID II legislation changes the competitive scenario for the asset management and wealth management industry. This is happening against a background of major challenges imposed by markets, from changing technological models to changing consumer behaviour. Prometeia faces the theme looking at three dimensions: products, costs, product catalogues of distributors.

This is the result of management strategies that structurally assume a limited active risk, but above all it is influenced by the cost structure: in a not negligible amount of cases the AuMs belong to funds with a cost structure that is too high and, therefore, not sustainable.

The disclosure on costs induced by MiFID II will make these issues emerge more and more, leading to re-pricing, rationalization of production processes and redistribution in the producer-distributor value chain. In fact, a re-pricing phenomenon is already observable in the market, a sign that operators are moving ahead of the effects of the regulation.

But MiFID II will not only lead to a high attention to costs: the evolution of consultancy and the continuous recourse to inducements in the value chain creates the conditions for a more careful evaluation of the "quality" of products, with effects therefore on the architecture and size of the distributors' catalogues of offer.

It is necessary to revise the product catalogues of distributors, by rationalization and/or specialization, taking into account the cost and quality evaluations on the one hand, and dealing with the increased costs induced by Mifid II in terms of product governance on the other: in fact, the cost of the relationship between manufacturer and distributor has increased.

Read the article from The Financial Times "Few funds sold to retail investors beat benchmark after fees" with the interview with Prometeia.

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