How Prudential is supporting advisers with MiFID II and IDD
MiFID II & IDD
As you’ll know, new disclosure requirements came into play in 3 January 2018 for MiFID financial instruments under the second Markets in Financial Instruments Directive (MiFID II).
Similar requirements, as a result of the Insurance Distribution Directive (IDD), will take effect from 1 October 2018 for insurance based investment products.
Our costs & charges information
Initial (ex-ante) disclosure
If you’re a ‘distributor’ of our products, you’ll need to provide your clients with details of all the costs & charges they’ll incur as result of making their investment. This will include product and fund charges, any additional services charges and your advice charges. You’ll also need to show your client the effect that these will have on any future return.
The information we provide you with, is sufficient to meet the product costs & charges element only. You’ll need to let your clients know about any other costs & charges they may incur in some form of durable medium.
The following explains this in more detail.
- MiFID II
Link Fund Solutions Limited is the Authorised Corporate Director (ACD) of the LF Prudential OEIC funds, which are Prudential’s only MiFID funds.
From this web page we direct you to the Link Asset Services’ website which holds generic costs & charges documents for each of the OEIC funds they manage.
If your client is investing in the Prudential ISA, please use our ISA Costs & charges Calculator which conveniently provides you with all the information you’ll need, in one place.
The new disclosure requirements as a result of the IDD apply to you if you are involved in ‘insurance distribution activities’, including activities such as advising on insurance-based products. This would apply equally to new business, top ups, fund switches and exercising options under an existing contract in scope of IDD.
Disclosure documents, such as the PRIIP KID, include all the relevant product costs & charges information required under COBs; however, these documents will not include details of any distribution costs & charges. These will need to be disclosed separately in a durable medium.
Periodic (ex-post) disclosure
- MiFID II
Where your client has invested in any of our OEIC funds, including within the Prudential ISA, Link Fund Solutions will send them a costs & charges disclosure document each year. The reporting period will follow the calendar year. Your client can expect to receive this information in the post at the end of the first quarter of the following year. The first reports are expected to be posted at the end of March 2019.
For some of our products, your client’s annual benefits statements (ABS) already disclose costs & charges. Where the ABS for other products are in an older format, we are aiming to meet the periodic reporting requirements for insurance based investment products by 1 October 2019.
Where your client has invested in PruFund through the life policy, within the Prudential ISA, Link Fund Solutions will also send costs & charges information annually to your clients. This will meet the ongoing disclosure requirements of product costs & charges under IDD.
Remember that where you are providing an ongoing service, you’ll also need to periodically provide your client with details of other costs associated with services and transactions undertaken during the reporting period, not covered in the disclosures above.
You’ll need to let your client know that, although we don’t pay you for recommending a Prudential product, we do offer you other support. This requirement applies for all products falling under MiFID and IDD.
To help you explain this, we’ve created a handy inducements document called ‘How we are supporting financial advisers’ which we include in all pre-sales packs for products open to new business.
Remember that you’ll need to make the same disclosure for clients looking to top-up an existing product, and you can download the document here.
Our target Market Information
As a manufacturer of products and funds which are in scope of MiFID and IDD, we’re required to provide you with target market information for these products.
These documents explain who we believe the products are, and are not, suitable for. Naturally, this is based on Prudential’s opinion and don’t take into account your clients’ individual circumstances.
We provide this information only for products open to new business.
Naturally we want to ensure that our products continue to be sold to their intended target market. Please share any feedback with us via your Prudential account manager.
To make things simple, we’ve divided this section into ‘MiFID II’ and ‘IDD’.