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By Simon Bottle, May 23 2014 11:37AM

Famous last words. “What does this button do?” “It's probably just a rash.” “These are the good kind of mushrooms.” Before you know it we will be able to add a new corker - “I’m not worried about MiFID II and IMD II – I’ll wait until a few months before it comes into force and prepare for it then...”

The combination of MiFID II and IMD II could be 'RDR like' for international advisers in the EU categorised by the new regulations as ‘independent’. RDR has revolutionised the world of UK financial advice and many firms that did not kick off the process of future proofing their business as early as possible now have their backs against the wall.

ESMA and the EU Commission will have a say on how MiFID II and IMD II are implemented down to the nuts and bolts level and a consultation process was kicked off last week. But the framework has been established by the pen pushers. The UK firms that have flourished since RDR came into force were the ones who began their planning and future proofing early so the transition once it came was painless. It's time to start thinking about how the 1st Jan 2017 represents an opportunity to succeed where other may fail and in doing so increase market share.

So what's the big deal? Below is our latest understanding of the details.

MiFID II – Investments: implementation by Jan 1st 2017

Independent’ financial advisory firms will NOT be able to take commissions. ‘Independent’ will be determined by a company’s ability to give advice across “a wide range of financial instruments in the market” (it does not have to be “whole of market”).

‘Restricted’ financial advisory firms WILL continue to be able to take commissions. A ‘restricted’ firm will be one that does not come under the ‘independent’ definition above in terms of breadth of offering. The devil will be in the detail to come on exactly how this will be determined.

Increased pressure on advisory firms to ensure and evidence ‘Professional Standards’ including ongoing CPD (Continuing Professional Development).

IMD II - Insurance Investment Products: Implementation timeline targeted to match MiFID II – i.e. by Jan 1st 2017

Proposals lock regulation of ‘Insurance Investment Products’ (i.e. offshore/portfolio bonds) onto MiFID II investment rules. This is to ensure there is no divergence between regulation on advice given on investments direct (MiFID II) or via an offshore bond (IMD II). Therefore all MiFID points above, including the commission rules, will apply also in proposed IMD II rules to Insurance Investment Products.

The fact that ‘restricted’ advisory firms can continue to take commissions versus the ‘independents’ who cannot, could encourage a major shift in the market towards restricted firms at the expense of the development of the independent sector. It would make sense that advisory firms with an outsourced investment management partner in the form of DFM/model portfolio provider would fall into the ‘restricted’ category by definition which would be one of the routes for an advisory firm to retain the commission revenue generating model whilst providing investment portfolios for clients that are massively diversified across underlying managers.

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