The introduction of Markets in Financial Instruments Directive II (MiFID II)

Zurich Intermediary Platform MiFID II Q&As

You may have a number of questions about the introduction of MiFID II and how it affects the Zurich Intermediary Platform. We have tried to answer some of the most common queries here. If your question isn’t covered, please contact your Business Account Manager or usual Zurich contact.

The following represents Zurich’s interpretation of the MiFID II regulations and how they affect the Zurich Intermediary Platform. You should continue to talk to your own compliance functions on how this applies to your individual business.

1. Background to MiFID II

1.1 What is MiFID II and what is changing?

MiFID stands for the Markets in Financial Instruments Directive. MiFID II, which will be introduced on 3 January 2018, seeks to address the failings of MiFID I and incorporate any lessons learned during the 2008 financial crisis.


Its goal is to create a safer environment for investors by making the market easier to understand. One of the major changes is to oblige financial providers to tell investors more about what products they sell and how much they cost.

2. Transaction Reporting, LEIs and National Identifiers

2.1 Will Zurich do all the relevant transaction reporting to the regulator?
Yes, the Zurich Intermediary Platform will continue to provide daily transaction reporting to the regulator for any trades in exchange-traded assets.

2.2 Which assets are subject to transaction reporting requirements?
Only exchange-traded assets that are bought and sold via our nominated stockbroker are subject to the transaction reporting rules.

2.3 What additional information do I need to provide for my clients following MiFID II?
If you intend for your clients to trade in exchange-traded assets (via our nominated stockbroker) they will fall under transaction reporting rules and we will ask you to provide extra information on your clients’ nationalities. If your client is a company, trust or charity, they will require a Legal Entity Identifier (LEI).
If you do not use exchange-traded assets, we will not require any additional information.

2.4 What type of information will be required for clients?
If your client is a person, we will need to know all of their nationalities. Our platform will then ask for a prescribed national identifier based on rules set by the regulator. This will most likely be the client’s national identity number or passport number. For UK nationals, we need clients’ National Insurance numbers, which we already hold. For some countries (such as Germany and France), the identifier is a combination of their nationality, surname and date of birth.

2.5 How do you determine which country’s identifier is required?
This is based on the alphabetical order of the two digit country code,with EU countries taking priority over non-EU countries.

2.6 Do any of my clients need an LEI?
Where your client is a company, trust or charity, and they are investing in exchange-traded assets, they will require a Legal Entity Identifier (LEI) before the trade can take place.

2.7 Does my adviser firm need an LEI?
Where you are advising clients to invest in exchange-traded assets, and you will be recorded as the decision maker, your adviser firm will need an LEI. If you are recorded as the decision maker and do not have an LEI, trading in exchange-traded assets will be blocked.
Our view is that only firms that have portfolio management permissions (i.e. discretionary management) should select themselves as the decision maker.

2.8 How will adviser firm LEIs be recorded and used by the platform?
If your firm has an LEI, this can be provided to our agency team who will add it to your agency record on the Zurich Intermediary Platform. This data will only be used where your clients are trading in exchange-traded assets and you are selecting your firm as the decision maker.
Our view is that only firms that have portfolio management permissions (i.e. discretionary management) should select themselves as the decision maker.

2.9 How do I obtain an LEI?
These are available from the London Stock Exchange. The cost is an initial £115 plus an annual licence fee of £70 (both exclusive of VAT).

2.10 What is the LEI for Sterling ISA Managers Limited (SIML)?
The LEI for SIML is 213800RXIYPJASC77A98.

2.11 What happens if my clients do not provide the new information for transaction reporting?
Where clients have not confirmed their nationality, or provided the national identifier or LEI, they will be blocked from trading in exchange-traded assets until the information is provided.

2.12 Do clients have to provide the National Identifier or LEI information when opening a Zurich Portfolio?
No, we will only require individual clients to confirm if they have more than one nationality. The National identifier or LEI can be provided at a later date. Until this information is provided, those clients will be blocked from trading in exchange-traded assets.

2.13 How are you going to capture / acquire LEI information for applicable existing investments?
For any clients already invested in exchange-traded assets, we will be contacting their advisers before the end of 2017 to obtain the relevant information (LEIs and National Identifiers) so that these clients can continue to trade. If this information is not provided, the clients will be blocked from trading in exchange-traded assets.

2.14 Do DFMs need to provide an LEI?
No. Exchange-traded assets are not available for selection by DFMs on the Zurich Intermediary Platform.


3. Customer / Periodic Reporting

3.1 What are the implications of the changes to customer reporting / periodic reporting?

From April 2018, we will be providing quarterly statements to customers. We will be using the same style of statement as we are currently producing and will issue these in April, July, October and January each year.

The April 2018 statement will still look back over the last six months to October 2017.

Where trading confirmations are currently provided every 6 months, we will now include only the trading confirmations over the last 3 months alongside the quarterly statements. The regular statement produced on 6 April 2018 will still include all transactional data back to October 2017.

3.2 Are there any other changes to the content of statements apart from frequency?

Yes, we may add extra notes to quarterly statements, outlining if there are any assets with legal restrictions, such as bankruptcy orders, court orders or pension sharing orders.

3.3 What methods will you be using to send information to the client?

The updated regular statements will be sent via clients’ preferred method: online or post. Clients can be switched from post to online by the adviser visiting the following screen on the platform: “portfolio management > client details > contact”.

3.4 Will you be compliant with the periodic reporting requirements (provision of trading confirmation notes)?

Yes, we will continue to provide trading confirmation notes to clients for all trades via the Zurich Intermediary Platform, as per the rules in COBS 16A.3. This includes trades performed under portfolio management activities (i.e. DFM trades). Where the trading confirmation is about a regular trade (direct debit, regular withdrawal), these will be included in the regular statements sent each quarter.


4. 10% Portfolio losses - Reporting

4.1 How will you support the 10% fall reporting obligations for assets managed under portfolio management permissions?

On the Zurich Intermediary Platform, we will be monitoring the value of the client’s Zurich Portfolio as well as any investment into each DFM model. If either of these fall by 10% within each quarter, we will notify the adviser via an alert. Where the fall is due to a specific DFM model, we will place an updated valuation document within the client’s document library and also post this to the client if they have selected postal preferences.

4.2 How will you support the 10% fall reporting obligations for leveraged financial instruments?

Leveraged financial instruments are not available via the Zurich Intermediary Platform.

4.3 Who will you notify when a portfolio falls by 10%?

On the Zurich Intermediary Platform, we will be monitoring the value of the client’s Zurich Portfolio as well as any investment into each DFM model. If either of these fall by 10% within each quarter, we will notify the adviser via an alert. Where the fall is due to a specific DFM model, we will place an updated valuation document within the client’s document library and also post this to the client if they have selected postal preferences.

4.4 When will you notify clients of any falls?

Where the fall is due to a specific investment in a DFM model, we will communicate the drop to the client immediately, via their preferred communication method (i.e. valuation placed in the client’s document library or posted). Advisers will receive an alert on the same day that the drop has been calculated with a list of impacted clients.

4.5 Will the drop be calculated against all DFMs the client has access to, or per individual discretionary mandate?

For DFM models, the 10% fall will be calculated on each individual discretionary mandate.

4.6 Will the drop be calculated on any DFM models held inside the SIPP?

On the Zurich Intermediary Platform, the calculation on 10% drops applies to everything held on our platform – pensions too. This will make sure that advisers and their clients get access to consistent information across all wrappers.

4.7 What methodology will you use to calculate the 10% drops?

The Zurich Intermediary Platform will follow the guidance from ESMA on how to treat deposits and withdrawals in terms of calculating the 10% drop as measured against the value at the end of the previous quarterly periodic report.

Any withdrawals will be added back to the current value of the Portfolio before assessing the fall and any deposits will be added to the benchmark set at the start of the quarter.

5. Costs and Charges Disclosure – Ex-ante and Ex-post

5.1 Are you using a third-party data vendor to supply MiFID II information?

Yes, we will be receiving the information using the European MiFID Template (EMT) from our supplier (Financial Express), breaking down costs by one-off, ongoing, transactional and incidental costs.

We will then use this to generate the relevant pre and post-sale disclosures required by the new rules.

5.2 How will you provide the required cost and charges breakdown required by the new MiFID II regulations?

We will use the European MiFID Template (EMT) to disclose costs. The breakdown will include service costs deducted via the platform (such as platform charges, adviser remuneration and DFM fees) and product costs using data supplied from product manufacturers. Costs will be broken down by one-off, ongoing, transactional and incidental costs. This will be included in our revised Charges Information Document (CID) and provided in each wizard prior to their submission. Costs and charges will be broken down in our customer journey for pre-sale disclosure before any investment into assets or changes to any potential service costs.

5.3 When will you provide ex-post reporting for the actual costs and charges incurred by the client?

The requirement to report on an ex-post basis on what the client has actually incurred will be done in our annual statement with the first ex-post report to be in our April 2019 statement.

5.4 Have you considered the disclosure for any advisers who do not facilitate a fee from your platform?

Within the disclosure documentation, we will replay any adviser remuneration charges being facilitated by our Platform. Where the adviser has elected to take a fee directly from the client, we will not be able to include this in our disclosure documentation, and the adviser will need to disclose this themselves in addition to our disclosures.

5.5 Where a client is investing in multiple funds, will your disclosure aggregate all the costs and charges?

Yes. This is a requirement under the ex-ante and ex-post disclosure requirements and our revised Charges Information Document (CID) will show the aggregated costs and charges of all assets being invested in and any relevant service costs and charges.

5.6 Will you be providing personalised projections?

The costs and charges disclosure will be personalised to the transaction that is being carried out by the customer. There is a requirement to provide a view on the cumulative effect of the charges on the return each client has received. This will also be contained within our Charges Information Document (CID), and will show the impact of the expected costs and charges incurred by the customer over the next year on the transaction amount assuming no growth.

5.7 How will you show the cumulative effect of charges as part of the ex-post reporting requirement?

There is a requirement to provide a view on the cumulative effect of the charges on the return each client has received. For ex-post reporting this will be a calculation to show the return the customer would have received if no charges were taken from assets or service charges.

5.8 What template will you be using to disclose the costs and charges?

Our outputs will be based on the proposed EWG (European Working Group) template and the TISA templates. We are involved in the TISA Ex-co meetings for the costs and charges workstream, which has been debating the expected type of formats, when these are required and the content.

6. Terms & Conditions/ Agency Agreements/ Terms of Business

6.1 Will you be updating your client terms and conditions?

Yes, we are reviewing and updating our terms and conditions in line with the regulatory changes imposed by MiFID II.

6.2 Will Zurich be reviewing the terms of business with adviser firms?

Yes, we will be updating our terms of business to reflect the obligation on advisers to ensure they are providing the identification data required for trading in exchange-traded assets where applicable.

7. Product Governance / Appropriateness

7.1 How are you planning to classify clients?

All clients on the Zurich Intermediary Platform are classified as Retail clients.

7.2 How will you identify a product’s target market?

We will be receiving this information from fund manufacturers via the EMT (European MiFID Template). We will then make this available to advisers using the Zurich Intermediary Platform through our tradeable assets list. Some fund managers may also make this available through their own documentation as well.

7.3 How will you identify complex and non-complex products?

We will be asking the product manufacturer for their own view and then take this into account as part of our asset onboarding process when determining our view on the complexity of the financial instrument. We expect the majority of assets offered through the Zurich Intermediary Platform to be classified as non-complex.

7.4 Will an appropriateness test be required for investment into a complex product?

No, as all business placed on the Zurich Intermediary Platform is done on an advised basis, it is assumed that the adviser will have completed the required client suitability assessment and hence provided a personal recommendation, so no appropriateness text will be required.

Appropriateness tests will only be carried out by us on orphan clients. The ‘complexity’ assessment has been designed to increase protection for non-advised clients wishing to invest where they may not have enough knowledge and experience.

7.5 How will you provide MI to fund / product groups regarding the sale of their instruments through the Zurich Intermediary Platform?

Zurich will be providing MI to fund managers in line with the TISA proposed reporting specification. This will detail the end distributor (adviser firm / DFM), type of client (retail) and distribution method (advised / portfolio management).

7.6 Will you be reviewing your range of funds on your platform in light of the target market set by the fund manufacturers?

Yes, we will be reviewing our full platform fund range in Q1 2018, once we have received target market data from all fund managers and will assess whether all the funds that we make available still remain suitable for a retail customer advised proposition. Where, fund managers have indicated this not to be the case we will liaise with the fund manager to understand their rationale before taking any action on the fund.

8. Best Execution

8.1 Will you be updating your Best Execution policy?

Yes, the new rules mean that the definition of ‘best execution’ has been amended. All firms undertaking best execution will now have to take “all sufficient” steps to provide best execution to their clients, rather than “all reasonable” steps. Our policy will be updated to reflect this where appropriate.

8.2 What processes do you have in place to ensure you are taking sufficient steps to get the best possible result for clients?


Under the changes to the regulation, we will continue our current process of analysing and assessing the best execution results that are achieved through our nominated stockbroker (Winterfloods) to ensure that clients on the Zurich Intermediary Platform continue to get the best possible results where possible.

8.3 Will you be providing details of the execution venues you use?


On the Zurich Intermediary Platform, we have one execution venue (Winterfloods) and all trades are executed through them for trading in exchange-traded assets.

In line with the rules we will be publishing an annual execution venues report via our website. This data will be customised depending on the type of financial instruments we offer.

9. Inducements

9.1 Will you continue to offer non-monetary benefits to advisers?

Yes, but more narrow than at present, in line with the more restrictive rules. We will make further information available at a later stage.

9.2 Will you continue to offer non-monetary benefits to adviser practices?

Yes, but more narrow than at present, in line with the more restrictive rules. We will make further information available at a later stage.

9.3 Have you updated your adviser / adviser practice inducement policy?


Not yet, this is currently being worked on.

10. PRIIPs

10.1 Will you be providing the relevant KIDs for PRIIPs?

Yes, KIDs are required for PRIIP instruments such as mutual funds, investment trusts and ETFs. Mutual funds have an exemption to use the UCITS KIID until the end of 2019. We will be making both the KIID and KID available through the Platform where relevant.

As a Platform, we are not planning to provide any guidance in relation to the content of the KIID / KID.