Financial Advisers Brace for Rule Changes in 2019

Several important developments affecting the adviser community are currently in play, affecting fees, communication and pensions

Andy Pettit 25 February, 2019 | 2:08PM
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To-do list and checklist

In the first issue of 2019 we round-up recent regulatory activity across a spectrum of topics affecting investors. During the last quarter Morningstar has submitted comment letters to regulators on topics including ESG, Packaged Retail Investment and Insurance Products (PRIIPs) and common ownership.


European regulators were tasked to provide reports on the cost and past performance of retail investment products.

The first Annual Statistical Report has now been published by the European Securities and Markets Authority (ESMA). The report highlights a lack of available and usable cost and performance data, particularly for retail Alternative Investment Funds and Structured Retail Products.

The report highlights a significant impact of costs on the returns received by retail investors. These include: charges for UCITS funds reducing their gross returns by one quarter on average; the cost impact varying widely, depending on the choice of product, asset class, fund type and domicile; and management fees and other ongoing costs constituting over 80% of investors costs, whilst entry and exit fees have a less significant impact.

Morningstar’s latest fee research was also published recently: Retail Distribution Review: Effects on Fund Fees in the UK by Jackie Beard, Director of Manager Research Services, EMEA, summarises the findings.

Investor Communications

We are awaiting European regulators' final report on their consultation, which closed in December 2018, on Packaged Retail Investment and Insurance Products (PRIIPs). PRIIPs regulation come in last year with the aim of improving investors' ability to compare retail products such as savings accounts, in terms of cost, risks and key features.

Morningstar’s response to the consultation cautioned against making piecemeal amendments. We fear that would induce a series of changes to Key Information Documents (KID) over time that would increase investor confusion and further limit the use of the documents.


Morningstar has just submitted a comment letter to the Financial Conduct Authority's discussion paper on climate change and green finance. In our response we call for more work on standardising disclosures about the risks that companies have identified.

We also highlight the importance of developing adviser education materials to equip them for a vital role between investors and the product manufacturers of green investment products.

In evolving future regulation we encourage working with other public and private initiatives that have been developing work and building experience where practical and ahead of developing new frameworks in isolation.


The UK Government published a feasibility report and consultation on the controversial Pensions Dashboard, which aims to provide people with online access to their pension information from multiple sources at a time of their choosing.

The government expects data to start being supplied voluntarily later in 2019 and that a majority of schemes to be onboarded within three to four years of the first dashboards being available to the public.

Liquidity and Leverage

Liquidity and leverage continue active policy topics. The comment period for a UK FCA consultation paper on these areas has just closed.

Morningstar’s Manager Research team recently published its own research paper on Evaluating Capacity and Liquidity for Equity Strategies. Authored by Tom Whitelaw, Director of Equity Ratings, the paper takes a practical look at when the scale of assets under management may erode alpha generation, or outperforming the market. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Andy Pettit  Director, Policy Research (EMEA), Morningstar