We help you future proof your system:
The Markets in Financial Instruments Directive (MiFID II) aims to make financial markets more efficient, resilient and transparent. Central to this is the strengthening of investor protection. This includes creating more transparency around third-party inducements received by investment advisors by requiring them to disclose these to their end-customer.
MiFID II: implications for financial institutions
1. Different treatment of independent and fee-based advice
The current draft directive regulates the acceptability of third party payments. Independent financial advisors are no longer allowed to receive third party inducements and must shift to a fee-based advisory model. In parallel dependent and commission-based advisory/sales models continue to exist. The (partial) abolition of trailer fees means that many investment companies have to rethink, or at any rate, adapt their fee models
2. Cost transparency and reporting at customer level
MiFID II requires investment firms to provide an exact breakdown of the cost of services rendered to their customers
Many firms do not have a process in place that enables them to track and report exact costs at a customer level.
Let us provide you with a centralised system to handle all your service fees.
calculo masters all fee structures related to independent and fee-based advisory. It enables you to manage and process all service fees through a single system. As calculo is based on a flexible, rules-based framework, the relevant department can react to regulatory changes immediately and adjust the software with little effort.
Through flexible interfaces, calculo integrates seamlessly with existing systems and allows modular expansion.
German investment tax law §5 (InvStG)
For many years, the basic principle of the German tax treatment of investment funds has been the restricted transparency principle in accordance with section 5 InvStG, which taxes on the investment investor level.
§5 InvStG: Implications for investment companies
To prevent punitive taxation, investment companies are required to drastically increase their data procurement, data cleansing, as well as their tax calculation and documentation efforts, in accordance with the law.
Meeting these requirements costs time and can require additional human resources.
With calculo regulatory reporting requirements can be fulfilled effectively.
• Aggregation and mapping of debiting accounts
• Electronic customer reporting
• An approval mechanism for auditors
Through automation, calculo relieves the relevant department of error-prone manual procedures and thereby reduces operational risks.
calculo increases the efficiency and quality of preparing tax statements and other reports. Furthermore, calculo’s flexible data interface makes it possible to connect it securely to your existing fund accounting systems.
With calculo as a system integrated solution, it is also possible to respond quickly to future changes and requirements without risking loss of data or process errors in the template.
A new element of the UCITS V regulation is a general ban on outsourcing by custodian banks, with the exception of a defined catalogue of activities.
UCITS V: Implications for custodian services
Fund monitoring can no longer be outsourced. It has to be performed by the custodians themselves. Depending on the translation of the directive into national law, already the use of a management company provided system may be interpreted as outsourcing. Subsequently, affected custodians must monitor fees on their own systems.
To establish an in-house fund monitoring system.
calculo replicates the fee models of all management companies. The data is stored separately through a technical solution. This makes it possible to monitor all funds’ fees centrally, through a single platform.
BaFin sample cost clause (Musterkostenklausel)
The German Federal Financial Supervisory Authority (BaFin) has restricted performance-based remuneration.
Implications for management companies
Predefined calculation parameters
When calculating performance-based fees, parameters such as the accounting period and the carrying forward of losses are prescribed.
Some of BaFin’s guidelines are not formulated clearly
Management companies have to invest a lot of effort into interpreting the sample cost clause, in order to be able to implement it.
Depending on the starting position, significant changes may be required.
In close cooperation with customers, Sowatec has developed an interpretation of the sample costs clause, in relation to performance-based fees. The result is a tried and tested standard model. Customers can use this model as a reference. This reduces costs and saves time.
Swiss Federal Supreme Court decision on retrocessions
The decision clarifies how to deal with potential conflicts of interest.
Implications for asset managers
Independent asset managers now have to disclose fees received from third parties.
Assigning the exact fees to the customers’ respective portfolios is difficult, as many banks and asset managers receive third-party fees as a lump sum.
Establish a single platform for customer and provider-side settlements, payments and reporting, by introducing calculo.
Because everything is on one platform, fee payments, for example, can be coupled to actual income or made subject to manual checks prior to release. Waivers are taken into account via exclusion lists.
Swiss Collective Investment Scheme Act revision (CISA)
The revised Collective Investment Scheme Act (CISA) intends to create the same standards as within the EU.
Implications for Swiss asset managers and custodians
• Swiss asset managers will in future be subject to a record keeping obligation
• Licensees will now have to disclose the amount and purpose of all direct and indirect fees to investors
Many firms don’t yet have a process in place that enables them to track, aggregate and report exact costs at a customer level.
• calculo automates the settlement of complex fees, as well as customer reporting
• Changes are documented, traceable and audit-compliant