Richest Clients Are Being Penalized by MiFID, Nordea Bankers Say

(Bloomberg) -- High net-worth customers may be losing access to the best investment offers because of revised European market rules, according to the people running debt and market sales at Nordea Bank Abp.

Philip Asp, head of debt and risk solutions at the biggest Nordic bank, and Henrik Kall, head of markets sales and distribution, say Europe’s revised Markets in Financial Instruments Directive distinguishes between retail and professional investors in a way that doesn’t necessarily reflect how sophisticated a client is.

If someone is categorized as a retail investor, he or she might not be granted the same access to complex investment products despite having the relevant expertise, the bankers said.

“The thresholds become a bit arbitrary,” Asp said in an interview.

MiFID II, as Europe’s revised directive is known, was enforced in January in an effort to help investors by trying to introduce more transparency to markets. That includes trying to protect investors from complex products that they might not understand.

To be sure, retail investors can still access highly complex instruments, but it requires a good deal more work on the part of advisers to document that they’ve taken all the necessary precautions to protect clients.

The Nordea bankers say the upshot has been that sophisticated, high net-worth retail investors are losing out because investment firms don’t necessarily want to burden themselves with the extra paperwork.

“If you look at primary order books, today you have fewer lines, i.e. fewer investors, than you’ve had before because there’s a sub-segment of the market today that is unlikely to be able to play, because it’s decided by the issuer, probably in consultation with the arranger, not to facilitate that segment of investors,” Asp said.

According to Kall, high net-worth clients have effectively “been locked out of that market.”

©2018 Bloomberg L.P.