There are so many factors at play in today’s consumer marketplace that govern pricing and levels of service; consumers themselves are so much more aware of their rights, and the means by which to exercise them.
With customer expectations on the rise, those companies which are providing products and services constantly need to raise their game in order to remain relevant and competitive. Customers have high expectations and are willing to take their custom elsewhere if these are not met, writes John Westwood, founder and group managing director of Blacktower Financial Management.
Unfortunately, what can tend to happen in the continual striving for a better and more competitive offering, is that complexity can start to creep in as the resulting terms and conditions needed to safeguard these products become ever more complicated to navigate.
The consumer could find themselves in a marketplace of products that are increasingly complex – and these same intricacies could hide the potential for more unscrupulous members of our profession to lead the unwary astray.
Fortunately, the vast majority of financial advisers are above reproach, and operate in a way which is both professional and respectful. But how can clients be sure that they are getting advice from this type of adviser?
To protect consumers’ finances from unlicensed advice, extremely high levels of regulation have been introduced over the last few years, which aim to protect the client and ensure that certain standards are met.
Mifid
The Markets in Financial Instruments Directive, or Mifid, was drafted in 2004 and has been in force across the European Union since 2007 - it was replaced by Mifid II in 2018.
This directive is a European regulation designed to increase transparency across the financial markets in Europe and also standardise the regulatory disclosures which companies operating in the EU are subject to.
Although the original directive was mainly concerned with covering stocks and shares, since the update to Mifid II, a much broader selection of financial products now fall under the same stringent set of regulations, which is good news for consumers.
How does it affect clients?
Essentially, the imposition of Mifid onto the financial services sector means that clients have access to a far safer, fairer and more efficient marketplace than would otherwise be the case.
It serves to strengthen investor protection by submitting members of the financial services industry to much higher degree of scrutiny and regulation.
Another important aspect of Mifid II is that, by virtue of the increased transparency that it engenders, ‘over the counter’ (OTC) trading is subject to similar scrutiny to that of any other online trade.
This means that trading which previously took place over the phone with little in the way of auditory trails or surveillance is no longer possible in the atmosphere of increased transparency.
For the client, all the extra ‘red tape’ which now exists, means that they can enjoy greater protection and renewed confidence in their financial dealings, with greater peace of mind as a result.
Importance of a licence
By ensuring that your financial adviser or advisory firm are Mifid II-licensed, you will be making sure that you are protected to the greatest possible degree in your investments and financial dealings.
The process by which the licenses are awarded is extremely exacting and requires a great deal of commitment from those involved.
Only the most dedicated individuals who are willing to adhere to the highest standards of financial regulation will devote the time and energy necessary to attain this license.
If you are determined to secure the best, most transparent, regulated advice in a market where consumer confidence can so easily be rocked by scandal and nefarious dealings, then be sure to check for the relevant Mifid II certification. That way you can be confident that your advice is coming from a truly trustworthy and regulated source.
There has never been a more imperative time to understand your rights, have knowledge of the legislations in place to protect you and your finances, and to be asking important questions of your chosen firm.
This article was written for International Adviser by John Westwood, founder and group managing director of Blacktower Financial Management.
