By Jens Jørgen Holm Møller, Experienced executive - international expert in asset management and business strategy

In January 2019, I finalized the first European survey on how to ensure quality in the annual ex post reporting, that is mandatory according to MiFID II. Since then, distributors of investment products for the first time have provided annual ex post information about all costs and charges to their clients.

In general, the reporting based on 2018 data was late and incomplete. As expected fund groups chose different frequencies for updating the EMT (daily, monthly, quarterly, or annual) and different deadlines for updating after New Year.  Finally yet importantly, some fund groups chose the calendar year as reporting period whereas others chose another 12-month period. These differences caused a number of operational challenges for distributors and furthermore, information was not comparable from fund to fund. This definitely led to extra expenses, increased risk and operational inefficiency for the industry.

Unclear legislation created this situation, and therefore I made a short follow up on my survey in December 2019 by approaching the same fund associations and market participants in Germany, France, UK, Luxembourg, Belgium, Sweden, Norway and Denmark as last year. The countries cover 2/3 of the AUM in European UCITS; hence, the survey gives a good picture of the current state of affairs in ex post reporting and the challenges that lie ahead.

During 2019, FinDatEx launched Version 3 of the EMT template that solves a number of issues, and the industry endorsed it in December 2019. This standardization is very beneficial, but my survey above shows that there still is a need to define when manufacturers should publish the year-end EMT template and ex post costs and charges in practice. After all, the purpose of the EMT template initiative is to facilitate the distributors’ work by providing the information needed for their product governance process and client reporting.

In order to meet the challenges we have seen, leading Nordic distributors have now introduced deadlines and other reporting requirements to fund managers in order to promote efficiency and avoid excessive expenses. The reason may be that distributors of investment products have the legal liability if product manufacturers do not report in a manner that enables good and reliable information to clients. Even though, it is not a legal obligation to comply, the requirements show the Nordic distributors’ commercial expectations, and is a step towards standardization of workflows (on top of the standardization of the data definitions and syntax) to the benefit of clients.

Here you can see the Nordic distributors’ letter regarding their expectations for annualized Ex-post costs and charges figures as of 2019. The letter states that fund groups must report their Year-End EMT data to FundConnect’s free golden source concept that support the distributors’ reporting needs.

Distributors will then get access to a clean Year-End EMT data delivery that allows them to easily organize and isolate the Year-End data, and ensure quality in the annual ex-post client reporting. Fund Distributors can get an overview of the concept here.

Need for improvements in 2020

Despite the improvements in 2019 related to EMT version 3, there is still a need to continue the standardization efforts beyond the current level. The objective of promoting cost efficiency for the industry as well as high quality information to investors is as important as ever.

I hope that such efforts will reduce the national differences shown in my survey when we make a follow up status one year ahead. 

Copenhagen, 23 January 2020

Jens Jørgen Holm Møller

Jens Jørgen Holm Møller on LinkedIn