Speaking to Portfolio Adviser, Joe Parkin (pictured) said five years on from RDR “we are only just seeing the true effects play out”.
“It’s going to be a while before we see the true effects of Mifid II play out,” he said, but added he was optimistic about regulation’s impact on ETFs, stating that the passive products already deliver on transparency and are suited to a shifting approach to portfolio construction.
Parkin said: “Regulation has led to the centralisation of investment decisions, so you shift more to an asset allocation view rather than the fund view.
“All these things have been incredibly positive for the ETF industry.”
Mifid II, which came in to effect on 3 January this year, requires firms to unbundle research and dealing costs to increase transparency for investors.
It followed in the footsteps of the RDR, which was introduced in the UK in 2013 to boost transparency by banning commission payments and ensuring financial advisers were fairly choosing financial products based on client needs and not for personal gain.
Parkin said in the UK, where the RDR has already been in place for five years, people have moved from less than 5% in passive to over 30% and continue to increase upwards because of a move towards an asset allocation view. He indicated Mifid II was likely to push investors across Europe in the same direction.
A KPMG survey, which spoke to 130 financial advisers revealed 55% of respondents thought regulatory change was the driving force behind ETF growth, along with fee pressures.
Parkin said ETFs benefit from Mifid II’s transparency push due to the availability of charges information through the total expenses ratio (TER) and details about all holdings in the fund, rather than the top-10 positions Oeics and unit trusts declare.
