A majority 59% of financial advisers believe that regulatory change has altered investment advice, according to a new study from Aegon.
Advisers surveyed in Aegon’s 2021 Adviser attitudes report said that PROD and MiFID II have impacted their investment proposition.
The two pieces of legislation, introduced in 2018, have challenged the industry to be more transparent about the benefits, risks and charges associated with investment products and to demonstrate how these meet customer needs.
Aegon suggested that its research, which quizzed 251 UK financial advisers, shows that the legislation has caused many advice firms to review their business models. It also found that the key question adviser are faced with is whether they will be manufacturers of investment products and therefore resource the changes required by PROD and MIFID II, or whether they’ll outsource to third parties.
The study asked advisers who were impacted about the changes they’d made, with the biggest change revealed as an increase in the use of multi-asset funds. Aegon said that this suggests a move away from in-house models towards outsourcing. Another 22% said they’ve increased their use of multi-asset funds, and they now make up 32.6% of adviser assets under management, a figure up from 26% in 2019.
“There’s clear evidence that PROD and MIFID regulations are prompting the changes the regulator was hoping for, and some advisers are taking a fresh look at how investments are selected and clients are segmented,” commented Aegon managing director of investment solutions, Tim Orton.
“Whilst there are other factors influencing the trend towards simpler, cheaper investment strategies, our findings highlight a good degree of change since the new rules were introduced.
“Looking forward, we expect to see the FCA’s focus on the consumer investments market accelerate the trend towards straightforward investment solutions, and new ESG-focused regulations such as the Sustainable Finance Disclosure Regulation (SFDR), will help join the dots between sustainability and suitability, and bring investment propositions more into line with the government’s climate action plan.”
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