What does MiFID II mean to you?

There’s been a lot of noise in the media this week about MiFID II or to give it its full name “Markets in Financial Instruments Directive” but what does it mean for UK consumers?

The principle behind MiFID II is to produce a transparent, level playing field for all EU residents when purchasing financial products listed in the EU, such as stocks and shares ISAs and pensions.

The focus is on the underlying investments and funds that sit within these financial products, the details provided about what costs are incurred, as well as how suitable these investments are for you, the consumer. The companies providing each investment need to decide on the target market – in other words the types of clients who would be most appropriate for each investment, and the Independent Financial Adviser (IFA) then needs to ensure these are the right fit for clients that fall into that category.

If you’re an existing investor with investments managed on a discretionary basis, then your portfolio  valuation updates you receive periodically will now be provided on a quarterly basis. You may only see your adviser once or twice a year, but under the MiFID II rules, you will receive information on your investments each quarter giving you greater visibility over your finances.

If you’re still yet to take the plunge into the world of financial investment, MiFID II will, put simply, allow you greater transparency, confidence and protection.

There are several other measures introduced by MiFID II that are “behind the scenes” improvements aimed at providing additional security for investors, allowing the regulatory bodies the ability to monitor transactions more closely and identify any that look suspicious.  As a client you’re also likely to hear more messages stating “your telephone call is being recorded”, providing greater clarity in the event of any confusion, with records being maintained for a minimum of six years!

If you are a charity, trust or other form of corporate entity you may also be required to apply for a Legal Entity Identifier (LEI).  If you are buying or selling certain investments you will need to provide your LEI before the transaction can take place. For consumers this is typically your National Insurance number that is used as your unique identifier, the LEI is the equivalent for corporates, although it is 20 digits not 9!

Although MiFID II started on 3 January 2018, there will over time undoubtedly be additional aspects to follow, and clarification on how some elements were expected to be interpreted.

The main message for clients is not to worry! There may be some additional information required before investments can be made, but this is based on increasing the protections you receive on an ongoing basis.


Apprenticeships within the Financial Services Industry

With the BBC’s “The Apprentice” show in its thirteenth series, it isn’t just Lord Sugar who hires apprentices.  With university students facing ever increasing debt and many school leavers not wishing to go onto higher education, apprenticeships are proving to be an ideal stepping stone between academia and the work place.  Whilst the perception of apprenticeships tends to be “trade” orientated, many more sectors are now seeing them as ideal opportunity to boost their workforce with record levels of apprenticeships – 491,300 – starting in the 2016/17 academic year*.

Within the financial services industry, the NLPFM group, consisting of Birchwood Investment Management Ltd and NLP Financial Management have between them taken on 4 apprentices over the last 4 years, 3 of whom are now full-time employees.  All 4 apprentices said that whilst at school, the emphasis was purely on university places with little or no advice for those students who wanted to work straightaway, or were unsure of where to take their career.

Charlie Ferry joined Birchwood in 2013 age 17, as an apprentice through John Laing Training (JLT).  Initially he worked as a paraplanner support administrator.  After passing his GCSE’s with the costs involved of going to university he decided to build on his entrepreneurial spirit (he still sells Christmas trees during the festive season) and apply for an apprenticeship to earn as he learned.  Fast forward 4 years he’s worked hard to develop his position and is now an established member of the team, storming through his para-planner exams with his eyes firmly focussed on eventually qualifying as a financial adviser.

As Charlie moved up in Birchwood, his original role became vacant, so following advice from Charlie, Sam Rafferty applied through the same apprentice scheme and started at Birchwood in mid 2014.  Sam, who was 24 when he joined, had already worked in a few companies, but had also experienced redundancy and zero-hour contracts and credits the apprentice scheme for giving him a pathway into the financial industry that he would never otherwise have found.  Like Charlie, Sam became a permanent member of the team after his first year and is now half way through his studies to become a fully qualified para-planner and then financial adviser.

Whilst Dom Mason was at school, he knew he didn’t want to go to university so after a stint working at a ‘well known’ DIY retailer, he started looking around for roles that would provide him with more prospects.  Having not initially thought of financial services, in 2016 aged 18, he applied for an administration apprentice position (also via JLT) that Birchwood needed to fill and has never looked back.  Now permanently employed as an administrator, Dom loves the responsibility of his role and sees his future firmly within Birchwood and the world of finance.

Denise Amagyei had started university to study accountancy but felt it wasn’t the right fit for her.  Following retail work she needed a full time role and applied for a JLT administration apprenticeship at NLP Financial Management starting in March 2017.   Although she’s still unsure of her future, Denise has learnt invaluable skills working within an office environment but would highly recommend her experience of earning whilst receiving “on the job” learning.

For the NLP FM group, working with apprentices has been a positive and mutually beneficial experience.  They’ve secured 3 new team members who have had bespoke training from the bottom up and gained helpful insights from the perspective of younger people entering the workplace.

*Source –   https://www.gov.uk/government/publications/key-facts-about-apprenticeships/key-facts-about-apprenticeships

Election Deadlock

The general election has resulted in a hung parliament but, whilst it is yet another major surprise result, it is likely to represent little immediate change in either economic or political affairs for the UK.

In practice Mrs May has lost 12 conservative MPs and gained 10 DUP MPs, who have tended to vote with the conservatives on most issues in previous parliaments.

The prime minister has certainly suffered a loss of authority and, as financial markets hate uncertainty, it is no surprise that Sterling has initially fallen in value against both the Dollar and the Euro.  This has in turn produced gains for the FTSE 100 index.

When the dust has settled there may be some changes in emphasis on policy, or personnel, but for now it is business as usual.  We do not, therefore, see any need to make any change to our investment strategies.

Trevor Simms, Managing Director @ Birchwood Investment Management

The opinion of Trevor Simms on the re-opening of the M&G Property Fund

The opinion of Trevor Simms, Managing Director of Birchwood Investment Management, on the re-opening of the M&G Property Fund..

“ I am pleased to learn that the M&G Property fund has been able to re-open the fund as quickly as they have been able to and the fact that other managers have also been able to restore liquidity relatively painlessly gives us reassurance that the sector is in better heath than the initial position may have implied.

The initial reason to stop dealings in the fund was not a concern about the quality of the holdings or their longer term value but one of cash flow considerations.

Normally this kind of property fund retains approximately 12 -15% liquidity to ensure that it can deal with normal inflows and outflows of capital without having to sell a large property at short notice that would damage fund performance for those people remaining invested.  However, following the results of the Brexit referendum institutional investors who had larger exposure to Commercial Property than they would normally hold because they were using Commercial Property as a proxy for the lower yielding fixed interest investments they would traditionally use to generate income started reducing their property exposure to normal levels, and this led to a drain on the cash reserves of the property funds.  When all the major managers saw their liquidity fall below 5% they had to take some action and most decided to put a temporary halt to all dealings in the fund.

We were very pleased to see how quickly they have been able to restore the necessary level of liquidity to be able to restart dealings.  Standard Life were able to sell some properties above book value and the M&G fund only had to accept a reduction of 3% on valuations to restore their liquidity. This is very modest when compared with the equity market fluctuations following the Brexit referendum.

We are therefore happy to continue to hold the existing exposure to the sector as an important asset class diversification.”



Trevor Simms, Managing Director at Birchwood Investment Management