Over the last six months post-implementation of the second Markets in Financial Instruments Directive (MiFID II), most asset managers “thought that they had done ok” but asked themselves how they could improve in the future, according to a speaker at this year’s FundForum conference in Berlin.
The panel session opened with the moderator asking the panel, how do you value, measure, monetise, and research data?
One speaker suggested: “It became very apparent that the industry was too challenged by MiFiD II. The data management side of things is a significant challenge for those in the industry. MiFiD II was delivered to deliver transparency costs amongst other things.”
However, costs are escalating day by day and that isn’t good for competition in the long run, one speaker noted.
Discussing costs, a panellist said: “The industry is highly dysfunctional and when you start to acknowledge what you have to pay it then becomes quickly obvious to think about how to change this industry into one that has a sense of efficiency about it.”
“If it is efficient then you can lower costs. Approach to this is going to have to be one of innovation. We are going to have to change the landscape.”
Another panellist added: “There has been a change in the dialogue, prior it was tactical in terms of people thinking in ways to meet the deadlines. However, some of the tactical solutions have gaps and holes, and so the dialogue has changed from being tactical. We need to be doing something more strategic that saves us money.”
Commenting on this, one speaker expanded: “This had a fast ripple effect, at the end of the day this is about economics and competition and not about regulation. We have all seen what happens in a competitive landscape. Competitive forces are global and they quickly roll out across the world.”
Agreeing with this panellist, another member of the board said: “I was surprised at how fast this globalised.”
The panel were then asked where they were seeing changes, to which one speaker said there has been a rush to try and make those changes as fast as possible. Nobody has been totally keen to see change take place, and nobody really wants to be transparent about anything at all. Thankfully that has now changed – it forces people to look for solutions, the panellist said.
Another panellist warned: “Mistakes will be made. Most people are making best efforts. Compliance is a big challenge. Undoubtedly, MiFiD II is coming, we don’t know when or what it will look like.”
Meanwhile, in another panel, panellists discussed German market distribution six months on post-implementation of MiFiD II and Packaged Retail and Insurance-based Investment Products (PRIIPs).
An issue surrounding this was that many foreign asset management funds were stuck with not being able to sell their funds outside of Germany, one speaker noted.
One member of the panel said: “Banks develop a distribution strategy and there are smaller international fund providers who still struggle with providing the right data. In the end we have a good set up. The regulator ultimately wants to have more transparency.”
Another speaker added: “Regulation pushes us heavily into an automation because all of the reporting that we are obliged to do that needs to be automated, and that is one of the big achievements of regulation.”
However, advice doesn’t come without cost, one panellist warned.
Elaborating, the panellist explained: “The most important factor is to have correct and clear data. MiFiD II pushed the trend regarding service free models and so this is why we have seen a cloud trend. My advice and hope is that there will be a focus on products that are really relevant to the market so that we do not as a whole industry end up with a large mass of data processes.”
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