by Eirik Frisvold, on 22 June 2022 10:10
If you feel apprehensive about the coming regulatory changes, you are not alone there. We have been asked many times to clarify what the coming changes actually mean.
So here are some practical steps to be considered.
When?
The new regulations are implemented from August 2, 2022 in EU in regards to investment advisory. From this date on, an amendment to the MiFID II directive comes into force as part of the EU action plan for financing sustainable growth. So far it applies only if you are offering investment advice within EU. The changes to the regulations are not enforced in the EØS yet, but the timeline is not clear and the changes might come any time after August, 2.
How will it affect the advisory process?
It will be mandatory for advisors to ask investors about their sustainability preferences. The advisor will be obliged to document the preferences and how these preferences are met. However the sustainability assessment should not replace or affect the original risk score.
In practice this means:
- Talking about new topics that might be complicated for some investors. This might also involve competence development for advisors
- Increased documentation requirements on the sustainability preferences
- Need for documenting how the sustainability preferences are met
- Annual follow-up as for the current suitability assessment
Deep Alpha Advisory Platform integrates sustainability assessment into investment advisory process. This covers the following functionality that will ensure that you are ready to handle the new regulations:
- Interactive questionnaire that allows for assessing the sustainability preferences of the investors
- Models for calculating the overall sustainability preference score of the investor
- Educational modules to assist advisors when talking about sustainability and explaining the subject to the investors
- Functionality for assessing each fund in the universe and matching it to the investor´s sustainability preference
- Analytic tools that provide insight to the investor and advisor on how the portfolio is aligned to the sustainability preferences
- Ready to go documentation of how the sustainability preferences are met, that can be included in the final investment proposal.
If you are interested to learn more, here is a checklist we have prepared:
