Time for transparency on fees
Recent research details how certain firms in the wealth management sector appear to be violating MiFID II cost and fee rules.
Recent research from online wealth manager SCM Direct, which was founded by Gina and Alan Miller,details how certain firms in the wealth management sector appear to be violating MiFID II cost and fee rules.
If this is true, then that is very worrying.
As the UK’s financial regulator, the FCA’s response to the findings must be swift and decisive. While MiFID II is designed to increase transparency, SCM Direct argues that firms may not just be breaking the law, as prescribed by MiFID II, but may also be guilty of ‘false representation’ regarding their disclosure of costs and fees of investing.
SCM Direct’s research focused on ten large fund management groups with AuM of £387m ($544m), ten robo-advisers, ten direct-to-consumer platforms with AuM of approximately £600m, and 45 traditional wealth managers with £281bn of AuM.
The scandalous thing is the investigation found only 40% of firms disclosed their MiFID II cost closures on their websites. Meanwhile, only 22% of traditional wealth managers showed their costs and charges before an account was opened.
Pressed on the matter by Private Banker International, the FCA said: “MiFID II does not stipulate that firms are required to display costs and charges in a standardised format. This gives firms the flexibility to develop disclosures to meet the needs of their target customers and their individual business propositions.
“If firms fail to disclose their costs and charges, the FCA will follow up and take appropriate action.”