MiFID II: Disclosure Article 3: Aggregated Costs
This is a summary of detailed analysis that ATEB has undertaken of the disclosure requirements detailed in the MiFID II Policy Statement. Our full analysis will be discussed with ATEB clients as part of our ongoing service arrangements.
This article is one of a series. It is biased towards ‘typical’ ATEB clients. It is a very high-level summary and does not therefore cover every MiFID connotation. It does include our interpretation of the requirements, where there is a lack of clarity, and should therefore be used with discretion and read with a questioning attitude.
All firms should read the Policy Statement.
Accessing the FCA Handbook
We do not replicate FCA rules in this article, but refer to them. The made rules are contained in the annex to the Policy Statement but to access the relevant rules as they will be in their final context, you will need to forward date the FCA handbook. To do this:
- Go to the FCA Handbook provide link ;
- Click on ‘Show Timeline’;
- Select a date well into 2018;
- Access the relevant handbook.
Disclosure of aggregated costs
The requirement in this respect highlights how difficult it is to decipher what rules apply to what type of firm. A cursory read of the policy statement could suggest that there are no changes for firms that carry out non-MiFID business. However, a deeper dig into the rules makes it clear that the vast majority of advisory firms must comply with COBS 6.1ZA.2.7R and 6.1ZA2.8R, as well as COBS 2.2A.2R.
So, unless you are in the minority, the requirements are to provide appropriate information:
- In good time about all costs and services – this is referred to as aggregated costs;
- The information in question relates to the cost of investment services, ancillary services, investment advice and financial instruments*, as well as any third-party payments;
- Aggregated costs and charges are to be expressed both as cash amounts and as a percentage;
- A client must receive an itemised breakdown of the costs and charges:
- When requested by the client; and
- Where applicable, on a regular basis, at least annually, during the life of the investment.
- The FCA has indicated that, whilst the rules take effect on 3rd January, they do not expect immediate disclosure of aggregated costs. It is acceptable for this to be made to existing clients throughout the year so that by January 2019 all existing clients have received their first annual disclosure.
- You must also inform the client how they may pay.
Notes to the above
(i) The terms in italics* are glossary terms but, basically, they cover all costs and charges;
(ii) The only exception is costs and charges that are ‘caused by the occurrence of underlying market risk’ (market fluctuations);
(iii) Regarding the fourth bullet point above, we read ‘where applicable’ to mean where an ongoing service is being provided.
The ‘at least annually’ requirement highlights a dilemma for those firms that provide an ongoing service where the service is not provided at least every 12 months. This is an issue that firms will need to consider carefully. Can the existing service be provided annually? Do you terminate such service arrangements?
Regarding increments, this will need consideration. Any changes in costs arising from an increment made post 3rd January will need to be disclosed. This may be dealt with by providers and platforms, but if you are involved in an advisory capacity, then it is our opinion that updated aggregated costs should be disclosed.