According to Massimo Greco (pictured), the rise of execution-only platforms
should be seriously discussed by politicians and regulators. “There is plenty of evidence saying people are not particularly good in allocating their money. In general individuals need advice, but the question is how to arrange this in a transparent and economic way, free of conflicts of interest.”
MiFID kicking in
One of the main objectives of the MiFID II Directive, which was adopted by the European Parliament in April, is to increase cost transparency of financial products such as mutual funds. Therefore all retail investors across the EU will have to pay for investment advice separately as of 2017.
As a consequence, the popularity of execution-only platforms is expected to surge, something that has already happened in The Netherlands and the UK which introduced legislation banning the payment of distribution fees and decoupling investment products and advisory fees.
“When regulating the industry, we have to take into account that advice is needed and it doesn’t come for free,” Greco emphasised. “Lots of people [in the UK and The Netherlands] do not take advice any longer because they find it too expensive. I think this is an unintended consequence of MiFID.”
Middle course
Allan Møller, head of fund selection at Danish asset manager Danske Capital, might have found an accommodating compromise. “For us execution-only is no cause for concern. Our non-advice clients trade via the web-bank and can buy a selective range of mainly in-house funds which have been specifically selected for execution-only purposes. We still offer a wide range of funds here, but our primary focus is on funds selected for wider use in managed accounts and advised portfolios which we monitor closely.”
