Asset managers should prepare for key investor information documents (KIIDs) rules alongside MiFID II to significantly reduce costs, according to BNY Mellon.
The buy-side’s focus will be very much on MiFID II over the next 12 months, however BNY Mellon believes asset managers can benefit from preparing for rules surrounding packaged retail and insurance-based investment products (PRIIPs) at the same time.
“For large firms the benefits gained from integrating PRIIPs into MiFID II programmes may be considerable,” says Paul North, head of product management for EMEA, Asset Servicing, BNY Mellon.
“Asset managers face the additional burden of renegotiating distribution agreements under MiFID II. The cost of this work is considerable, and could spiral out of control if managers to do not combine PRIIPs requirements with the work they are doing for MiFID II.”
European regulators are introducing the KIDs requirement as part of wider initiatives to improve investor protection in the sale of retail investment products.
KIDs will be documents giving standardised information about products that are designed to give retail investors information on the range of PRIIPs in order to compare them.
The documentation will be longer, broader and more dynamic documents than asset managers are used to and will vary depending on the complexity of the underlying strategy.
The industry has a two-year grace period for PRIIPs, requiring all KIIDs to be updated by January 2018.
“While the deadline seems far away and, with PRIIPs regulatory technical standards still to be finalised, a lack of clarity is causing asset managers to push compliance programmes back,” adds North. “
“The amount of paperwork and communication that needs to ripple through the industry, from manufacturers to promoters to distributors and out to the end investor is extensive.
“MiFID II places significant emphasis on cost transparency, requiring details which go beyond the single ongoing charges figure currently listed on KIIDs.”
BNY Mellon sees cost savings with MiFID and KIIDs overlap
Asset managers should prepare for key investor information documents (KIIDs) rules alongside MiFID II to significantly reduce costs, according to BNY Mellon.