By Nathan Fryer
This week has been largely used up going back and forth between myself and one of the large providers trying to get to the bottom of as to whether the additional costs over and above what the provider disclosed, prior to 3rd January 2018 (MIFID II), versus the reduction in yield that is now contained within the KID are correct. (Please note, this is the one ‘eyed’ KIID and not the two ’eyed’ kind) (This is within an ISA).
I emailed the provider immediately to check the charges as they appeared to have increased by just over 30%. The provider responded saying that whilst the KID did list a RIY of somewhere in the region of 1.79% the only cost that needed to be disclosed was 1.35%.
Now, I can be a bit argumentative at times and even took to twitter to ridicule the provider for not understanding MIFID II. I even went so far as to contact the FCA who initially confirmed my belief that all the charges within the KID needed to be disclosed. Imagine my glee, I felt like I’d been the star in the sequel to David and Goliath.
As you have no doubt gathered from the title of this piece, I was wrong, I held my hands up, admitted defeat and went back to the FCA to ensure that they did not approach the provider concerned.
Turns out, the fund within the ISA being proposed is an insured fund which therefore does not fall under MIFID II disclosure rules. Even at this point I didn’t believe what I was being told, frantically emailing Richard Allum of the Paraplanners and Mike Barrett at the Lang Cat to confirm what I thought was so clearly wrong… I was of the opinion that the wrapper is the deciding factor when it comes to MIFID II charge disclosure???
I was then further confused because I was being told that an insured fund within an ISA is not subject to the new disclosure regime, so does that mean that an OEIC within a SIPP would be? It turns out not…so the deciding factor is whether or not the fund or the product is an insured product or fund.
I sincerely hope that this helps some of you, it maybe that a lot of you knew this already in which case I hope my jovial way of reporting my misfortune has amused you at the very least.
Next Battle, personalised annual disclosure of charges in £’s and pence!
This follows on from January’s Howwow on MiFID II and costs, which you can watch here.