New directive for IFAs advising overseas

by Gill Montia

Story link: New directive for IFAs advising overseas

The Association of Independent Financial Advisors (AIFA) is urging its members to prepare for the introduction of the Markets in Financial Instruments Directive (MiFID), which comes into effect at the beginning of November.

The MiFID, which replace the existing Investment Services Directive, stipulates that investment advice is to be regulated in all European Economic Area (EEA) states, some of which have large expatriate communities.

The Treasury and Financial Services Authority (FSA) have been active in ensuring that the requirements will not apply to UK independent financial advisors (IFAs) working with clients resident in the UK.

However, IFAs need to comply with MiFID if they are advising clients living in another EEA country.

This means that while firms advising client from their UK base may not be in breach of FSA rules, advice given directly to a client while they are residing abroad, whether by phone, email or letter, could breach the MiFID rules.

Regulators in EEA countries are likely to deem any UK firm giving investment advice to clients living in another state as operating “cross-border”.

Meanwhile, research from Alliance & Leicester shows that 70% of those leaving the UK to live and work abroad do not open an offshore account as soon as they relocate.

A&L is encouraging people to do so, and suggests that with Internet access now widely available in most countries, expats can safely and easily take advantage of the best offshore savings opportunities.