Amundi
Amundi welcomes ESMA’s consultation and the possibility of sharing an opinion on the topics which it addresses. It does share the approach of ESMA and the main conclusion and driving provided in this consultation, in particular for what is of special provisions with regards to robo-advice and digital distribution. In fact, these tools may provide substantial benefits to clients but only under the condition of taking their limits on board and coping with such limits.
These guidelines provide a series of provisions which make sense for the retail market but which have little connection with other markets and, in particular with institutional investors which represent a very significant part of activities in the field of asset management. Therefore we consider that ESMA should specify that these guidelines only apply to the retail market.
Nevertheless, Amundi has some concerns on the following points which could be quite detrimental at a time when savings need to be invested in financial markets:
- The requirement of possessing information about investments of clients with other firms in point 41 which could cause real commercial problems.
- The check of knowledge and experience of the client in case of portfolio management (point 81) which contradict the very essence of discretionary portfolio management.
- All points in reference to guideline 10 and the valuation of switching which are not appropriate nor workable. In this respect Amundi would appreciate ESMA to set a clear distinction between financial advice and portfolio management.
Last but not least, as we say in French, “trop d’information tue l’information” and ESMA should take care not to add new information requirements to those –already quite heavy – which have been included in MiFID II.
Full Amundi reply
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EBF
As a general remark, the EBF finds that the supporting guidelines are very detailed and in some cases includes unnecessary repetition of what is already stated under Level 2. There are also examples where the guidelines appear to introduce new requirements on firms. In addition, we note that there are cases where the guidelines go beyond the issue of suitability, involving other parts of MiFID II (e.g. knowledge & competence and record-keeping) and how firms should perform the investment service per se (e.g. portfolio management). Based on the above, the EBF would welcome if ESMA in its forthcoming work did a general overview of the draft guidelines in order to make them more stringent and focused on the issue at hand – the suitability requirements under MiFID II.
EBF disagrees on the suggested approach for firms’ assessment of equivalent products for client profiles.
When talking about new technological developments of the advisory market, the level playing field becomes more important than ever. Possibilities for gold plating by national competent authorities should be extremely limited as they could create un-level playing field for new technological developments that are by definition not limited to Members States’ boundaries.
Full EBF reply
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AIMA
While the Guidelines are primarily targeted to firms providing investment advice or discretionary portfolio management to retail clients, ESMA has also encouraged firms to consider the Guidelines to the extent they are relevant in relation to services provided to professional clients.
Overall, AIMA would strongly urge ESMA to clearly identify in the final guidelines those rules relevant solely in relation to retail clients, and those relevant to all clients. Clarity of expectations of the proportionate application of the rules will ensure that resources are focused appropriately to those who will benefit from the investor protection measures and enable firms to streamline processes at the more sophisticated end of the market. Institutional investors, in particular, are likely to have an understanding of the products and their own requirements and objectives.
AIMA does not propose to respond in detail to the questions raised in the CP, however, it wants to take the opportunity to raise a specific concern regarding the impacts of General guideline 10 on the business costs and trading costs (delay and opportunity costs) on behalf of institutional client portfolios where there are clear and bespoke investment mandates in place. The reality of portfolio management activity within the institutional space is that clients will have very clear ideas about their risk tolerances, what type of portfolio they want and for which reasons (this could be for hedging purposes, liability matching purposes, pure investment purposes or a variety of other reasons all of which reflect the requirements on a case by case basis). The manager will choose underlying investments in its discretion according to the investment mandate given by the client.
General guideline 10 appears to be aimed at, and much more relevant to, the switching of a retail client between packaged investment products, where there is a need to address conflicts of interest to avoid ‘churning’ and ensure ‘switches’ are made in the best interests of the client. Viewing the re-balancing or adjustment of a client portfolio (potentially on a daily basis) pursuant to an agreed mandate as ‘switching’ is in our view inaccurate in light of the reality of the arrangements in place, and AIMA cannot see the benefit of a thorough cost/benefit analysis in these circumstances. It believes this level of rigidity would fundamentally undermine the nature of the service being provided to institutional clients. The fact that the investment and risk parameters are clearly documented and agreed in the mandate given by the client obviates the need for the additional measures suggested under General guideline 10.
AIMA strongly urges ESMA to revise the General guideline 10 to appropriately restrict its application to retail clients. And it encourages ESMA, in the final guidance, to clarify how the rules apply when firms are dealing with professional clients.
Full AIMA reply
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Blackrock
The draft Guidelines are mainly focused on the needs of retail clients and there is a lack of clarity as to the applicability of certain requirements to the provision of services to professional clients. Blackrock believes it should be possible to apply the Guidelines in a proportional manner, recognising differences between the nature of services provided to different types of client. It would be beneficial for the final Guidelines to be clearer as to what applies only to retail clients and what applies to all clients.
Blackrock encourages ESMA to follow a more purposive approach in the case of institutional portfolio management where there are fewer conflicts of interest arising from commissions on switching and instead focus on additional ex-post controls in the form of portfolio turnover and performance monitoring as well as enhanced reporting of transaction costs to clients.
One approach might be to distinguish between recommending an advisory portfolio management client to trade and deciding to trade on behalf of a discretionary portfolio management client. Given that Article 54(11) specifically refers to ‘recommended new investments’ it could be argued that this sub-article refers to advisory portfolio management looking at individual stocks and not to discretionary portfolio management focussing on the portfolio as a whole.
The disapplication of the requirement to perform a cost-benefit analysis for passive strategies replicating an index as envisaged in para. 84 of the Consultation Paper should be reflected in the final Guidelines (Guideline 10). The draft general Guideline 6 introduces a disclosure requirement for investment firms
not envisaged in Article 54(6) of the MiFID II Delegated Regulation.
Full Blackrock reply
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Italian Banking Association
Generally speaking, ABI appreciates the way the Guidelines have been reorganised by ESMA; moreover, this rearrangement is consistent with the Guidelines drawn up by ABI and approved by Consob in 2014 in order to provide Italian banks with operational guidance in implementing the previous version of the ESMA Guidelines, taking into account the various logical phases in the relationship between the intermediary and the customer as it evolves in the course of the suitability assessment.
Our comments (already submitted to ESMA in our letter dated April 2016) are, therefore, mainly focused on those new requirements on suitability provided for by MiFID II that need further clarification through Level 3 measures.
Full reply
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