MiFID II
 

The recent release of JCS software, 27.004.07, on 3rd Jan 2018 includes some important updates for MiFID II requirements. We will also be planning further updates in this area to help you in the future.
What's in this release:

Storage of Legal Entity Identifiers

This has been added to both personal and business clients, even though in reality it will only ever be used for business clients. It is likely that in a future release, the field for personal clients will be changed to be Natural Person Identifier. For UK nationals this will normally be their National Insurance Number, but for other nationalities the appropriate identifier should be used as set out in guidance from the European Securities and Markets Authority (ESMA). Available here.

New Tradable Instruments Structured Deposits

MiFID II applies certain requirements for selling or advising on structured deposits, and the FCA have created a new investment type for structured deposits, which firms must add to their FCA permissions if they are to carry out regulated activities on these products. To enable handling these products in JCS, we have added a new product type, Structured Deposit Plan. There is currently no extra reporting added around this new product, as we have not identified a requirement for that yet. However, they can be reported on and broken down in the usual way to allow general reporting of new and existing business etc should this be called upon by the FCA or your PI insurer.

Peer to Peer Loans

While we were adding Structured Deposits, we decided to also include Peer to Peer Loans as a new product type as well. This is not a direct requirement of MiFID II, however recent clarifications by the FCA, showed that Peer to Peer products should be treated as Retail Investments for RMAR purposes. If you have already recorded a number of plans of this type in JCS as another product type, please speak to us, as we may be able to help change the product type in your data for you.

Other new features: MiFID II aside, we have also added support for obtaining electronic valuations of policies on the Aegon platform, namely the ARC SIPP and the One Retirement Plan, and improved the Personnel Import functionality. The reduction of the MPAA to 4,000 and support for Property and Trading Allowances have also been added once again, now that legislation has finally been approved from the first budget of the year.

Other areas of MiFID II:

10% Reporting Rule

Our current view for the 10% reporting rule is that this responsibility sits with the DFM or Platform for managed portfolios. However, we are keeping this under review.

Additional Requirements for Suitability Reports and Ex-Ante Costs and Charges

JCS has never provided suitability reports directly. However, most firms create document templates that pull in bookmarked information about the client/policy, and then allow the adviser/paraplanner to add in any other required sections manually. This is largely taken from Provider literature, and we have been told that providers will be updating their own documents to include enough information to cover the ex-ante cost disclosure as well. If we can assist in this area at all by adding extra bookmarks, or data fields to JCS that can be bookmarked to make these templates easier to produce please let us know. We can perform industry research, but our most valuable information source is our clients. As each firm uses different suitability templates, we can offer assistance on an individual basis, with any improvements benefitting all users. Again, any feedback you have in this area would be of great value.

Additional Requirements for Periodic Ex-Post Costs and Charges Disclosure

The European Working Group last year issued a European MiFID Template (EMT) which had an aim to allow information exchange between fund managers, platforms and advisers allowing the charges information to bubble up through the supply chain. We were watching this keenly as this seemed to be the only sensible way of collecting this data. However, to our knowledge, this has failed to materialise at the adviser level, and we are not aware of any providers intending to supply charges information electronically for the time being. Instead they will be supplying a pdf or paper copy of their costs and charges. This will leave each adviser firm to rekey all of this information manually before adding their own charges and supplying this to their clients.

We do understand that some platforms will be providing firms with costs reporting, however this only works provided all adviser charges are raised through the platform. We, along with the other back office suppliers are pressing for providers to produce this information electronically as soon as possible. Due to the regular ex-post reporting not being compulsory until 3rd April 2019, the industry standards body is not starting on this until quarter 1 2018. We are watching developments in this area closely. Ad-hoc Ex-Post reporting is required for transactions starting 3rd January 2018, and for the time being this will have to be a manual process for firms as everyone gets to grips with the requirements. The 3rd April 2019 deadline comes from the requirement that the longest reporting period is year 1 (to 2nd January 2019) and reports have to be produced within 3 months.

The industry body TISA issued a document detailing the approach in December 2017 (available here), but if you have any further insight in this area, we would love to hear from you. In the meantime, we are actively pushing for standards bodies and providers to get involved with regular ex-post reporting before it is too late, and because all of the data for this reporting must come from the providers/platforms, there is very little we can do until we start seeing what they will output.

Provider Valuations and Fund Mappings

If you regularly use JCS to electronically value policies against Providers' online services, and you perform valuations at the fund holding level, you will be aware that this was a rather cumbersome task, with very little in the way of suggestions to help the end user throughout the process.

In the November release of 2017, this part of JCS has been overhauled to assist the user as much as possible.

JCS will now attempt to make relevant suggestions for both Fund Providers and Fund Names based on the information made available by each provider. Although, it should be pointed out that not all providers are the same, and some supply very rich data, and others supply the absolute minimum of data.

fundmapping1

The first thing that stands out, is the colour system being used to indicate the status or type of suggestion. This is simple to remember:

Fund name is already mapped to an existing fund in JCS

Fund is not mapped, but the highest ranked suggestion is an existing Fund Provider/Fund Name in JCS

Fund is not mapped, but the highest ranked suggestion is to create a new Fund Provider or Fund Name in JCS

Unless you think a mistake has been made, the entries in green can be ignored as they have all been mapped previously.

All suggestions are made on a ranking basis, the highest ranking suggestion being the first/top item in the drop down list, with other entries below in descending order of ranking.

Suggestions may be existing Fund Providers/Fund Names, or the suggestion to create a new Fund Provider/Fund Name in JCS.

The ranking algorithms involved are heavily dependant on the data within JCS, and previous choices made by users, meaning the more you use it, the more the algorithms will be able to assist by making better suggestions.

Take for example, the Fund Description of "Standard Life Asian Income Fund". With no other information, previous mappings, or existing providers in JCS, should the Fund Provider be "Standard" or "Standard Life"? In this situation, the highest ranked suggestion would be "Standard", with a Fund Name of "Life Asian Income Fund". However, as soon as the Fund Provider "Standard Life" is selected, created and mapped, all future suggestions will place "Standard Life" higher than "Standard".

fundmapping2

It is now also possible to auto suggest, map and unmap individual funds, so that you can work your way through the list of funds and save any work along the way.

When a fund has not been seen before and is unmapped, it will start off as being empty. If you click on the "Auto" button on the right hand side, it will automatically select the highest ranked suggestions, which will fill with either blue or red suggestions. If the fund type and unit type are still unknown, then these will need to be selected before being able to click on the "Map" button. This entire line will then turn green to show it is mapped.

If you make a mistake, or find an incorrect mapping, you can now unmap a fund from the same screen. It might be that a previous user selected the wrong fund type, unit type, or that you just want to create a new fund with a cleaner name. Just click on the "Unmap" button, and then go through the same process as above.

Sometimes, a fund description does not contain enough hints as to what fund type or unit type it is. However, if the provider also supplies any industry standard fund codes, these will be shown on the screen, and it is possible to double click on the code itself to open an Internet browser. This will either take you to a provider own fund information website, or perform a simple google search. The type of search is dependant on the provider. We have found throughout testing, that ISIN codes return the best results when using a search engine.

Whilst these updates cannot assist that much when using providers that supply limited information, we hope that these changes will make fund mapping just a little bit easier for you.

Copy and Paste Charts

Here’s a quick tip, which may save you some time.

If you want to insert a chart produced by JCS insert into a Word, Excel or Powerpoint document:

1) Move the mouse pointer over a white area of the chart. Right-click and a drop down menu will appear with various options.
2) Click on Copy. This doesn’t appear to do anything, but the chart will now be copied to the Windows clip board.
3) In the document where you want to place the chart, right-click and select Paste.

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Calculating a Client's Tapered Annual Allowance

The annual allowance for pension contributions is currently £40,000, and after the recent budget announcement, it has been confirmed that this will stay the same into the 2018/19 tax year as well.

However, for anyone who is deemed a higher earner, this allowance may be restricted/tapered anywhere from the full £40,000 down to £10,000, based on the individual's Adjusted Income amount.

The calculations can be relatively easy for an individual with a simple salary and pension arrangement, but they can quickly become almost indecipherable and time consuming when an individual has a mixture of income types, occupational pension schemes, personal pension schemes etc, and you need to work out the individual's Net Income, Threshold Income, Adjusted Income, and then get confused between Adjusted Income and Adjusted Net Income and a multitude of other amounts required for a full Income Tax Calculation.taperedannualallowance1

The good news is that JCS can do all that work for you with a click of a button. Just make sure that you have selected to let JCS calculate Income Tax and NI Automatically for the client in question, and then click on "Details" next to Income Tax.

Looking at the full details of the Income Tax computation, it is possible to see total pension inputs, employer contributions, the calculation of the Annual Allowance (in this example, this has been tapered), as well as the amount of excess contributions and the charge made against excess contributions, in the current tax year.

So the next time you find yourself trying to calculate a client's Tapered Annual Allowance on a scrap of paper, plug the details into JCS and let it do all the hard work instead.

taperedannualallowance2

 

Fidelity Funds Network Changes

If you use the Fidelity FundsNetwork platform, I am sure that you will be aware that there are big changes being made very soon. By now some details will have been communicated to you directly by Fidelity, but in summary the following will be happening:

• Legacy ISA tax years no longer supported
• Consolidation of some products schemes
• New cash management services available from Q4 2017
• New share dealing services available from Q4 2017

The changes to the Legacy ISA tax years and consolidation of product schemes will be ready to go live on Monday 17th July. Later this year, firms will be migrating to Fidelity's new operating system on a one by one basis, meaning you may not see the new products for Cash Management and Share Dealing until later this year.

Full details of each change, and how they affect your handling of Fidelity policies in JCS are listed below.

Legacy ISA tax years no longer supported

Back in 2013, Fidelity no longer allowed the separation of ISAs by tax year from the tax year 2013 onwards, but allowed advisers to keep historic ISA plans separate. Since changes last year stopped any renewal commission from being paid out from these legacy tax year ISA plans, Fidelity believe that most advisers will have consolidated all of these legacy plans already, and so the impact will be minimal.

Impact in JCS: All legacy ISA tax year fund holdings will be reported as held under the main ISA plan when performing either a bulk valuation or an RTV. To prevent duplication of these funds holdings, the original tax year plans should be merged in JCS with the main ISA plan to copy over all notes, contributions, documents, history, diary etc.

Please note you should only do this AFTER Monday 17th July.
 

Consolidation of some product schemes

Historically, Fidelity split unit trust/OEICS holdings into separate plan references based on whether the holdings were on-platform or off-platform. Fidelity unit trusts would use the scheme name of UKUT, and Funds Network unit trusts would use the scheme name of ISM. This was causing some confusion for clients and advisers, so Fidelity offered the option of product consolidation to ensure both used the same external scheme name of “Funds”. The new service will only offer the consolidated version, where all unit trusts use the scheme name of “Funds”.

The same was also true of offshore plans where the plan could be split into the scheme names of FIDF, FIDC and FIDM. The product consolidation option allowed these to be consolidated into the one scheme name of “Offshore”. The new service will only offer the consolidated version, however, they have gone one step further to merge with the rest of the unit trusts as well, using the scheme name of “Funds”. The effect is that Fidelity now offer a single General Investment Account that holds on-platform, off-platform and offshore funds all in the same scheme name.

Impact in JCS: Any Fidelity plans that use the scheme name of UKUT, ISM, FIDC, FIDF, FIDC, Offshore and Funds should be merged in JCS to a single plan to copy over all notes, contributions, documents, history, diary etc. The resultant plan policy number/reference should contain the suffix of “:Funds”.

Please note you should only do this AFTER Monday 17th July.

New cash management services available

Clients will have access to a new cash account. This will use the scheme name of “CASH”. It will only contain cash and is used for moving money from and to external bank accounts, and to and from product cash accounts.

Impact in JCS: This cash account will appear in any bulk valuation, and can be mapped to an Interest Bearing Account in JCS. Any bulk valuation or RTV will update the balance of the case.

Each ISA and General Investment Account will also have additional cash holdings called “Product Cash” and “Phased Cash” used for account transactions and phased investments respectively.

Impact in JCS: These cash holdings will just appear as a “cash” holding in the list of funds within the ISA or General Investment Account, and will be named appropriately.

Please note that these additional cash holdings will only appear after your firm has been migrated to the new service later this year.
 

New share dealing services available

Fidelity will be launching new share dealing services that will enable clients to access a wider range of investments including: Investment Trusts, ETFs, UK Equities, Irish Equities, CDIs and UK Fixed Income Securities. These investments will be available from the ISA and General Investment Account.

Impact in JCS: Any shares found within an ISA or a General Investment Account during the valuation will be added as a holding of fund type “share” and included within the overall value of the case.

Please note that these additional share holdings will only appear after your firm has been migrated to the new service later this year.

 

As always, if you need assistance, guidance or help in this area please contact our Technical Support team.

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