investment management - deloitte united states · third parties article 24(7) and (8) allowed to...
TRANSCRIPT
copy 2016 Deloitte 1
Investment Management
conference
copy 2016 Deloitte Audit 2
Luxembourg Funds - Trends
Introduction
1000
3000
5000
7000
9000
11000
13000
15000
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 mar-16
Funds Sub-funds and Net Assets in Luxembourg(EUR million and units)
Number of funds Number of Fund Units Net Assets (millions of euros)Source CSSF amp ALFI
copy 2016 Deloitte Audit 3
Fund initiators in Luxembourg by country of origin
Introduction
US GB DE CH IT FR BE NL LU DK Others
-
100000
200000
300000
400000
500000
600000
700000
800000
Market share of initiatorsat 30 April 2016
Net Assets (EUR million)Source CSSF amp ALFI
copy 2016 Deloitte Audit 4
Danish footprint in Luxembourg IM Markets
Introduction
SIF ndash Confidential promoter
copy 2016 Deloitte 5
Agenda
815 - 845 Registrering og morgenmad
845 - 855 Velkommen v Deloitte
855 - 920 Distribution v Jan Stieg Rasmussen Independent Director Fund
920 - 945 Regulatory strategy v David Moalem Bech-Bruun
945 - 1020 Paneldebat Implementation of MiFID II regulation
1020 - 1035 Kaffepause
1035 - 1110 Paneldebat Denmark Luxembourg ndash other regulatory updates
1110 - 1150 Digital and Fintech in Asset Management v Simon Ramos Deloitte Luxemborg
1150 - 1220 Digital and Fintech in Asset Management v Johan Lindberg RBC IampTS og Pontus
Kristiansson Kollektiva
1220 - 1230 Wrap-up v Martin Pedersen
1230 Networking og frokost
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte Audit 2
Luxembourg Funds - Trends
Introduction
1000
3000
5000
7000
9000
11000
13000
15000
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 mar-16
Funds Sub-funds and Net Assets in Luxembourg(EUR million and units)
Number of funds Number of Fund Units Net Assets (millions of euros)Source CSSF amp ALFI
copy 2016 Deloitte Audit 3
Fund initiators in Luxembourg by country of origin
Introduction
US GB DE CH IT FR BE NL LU DK Others
-
100000
200000
300000
400000
500000
600000
700000
800000
Market share of initiatorsat 30 April 2016
Net Assets (EUR million)Source CSSF amp ALFI
copy 2016 Deloitte Audit 4
Danish footprint in Luxembourg IM Markets
Introduction
SIF ndash Confidential promoter
copy 2016 Deloitte 5
Agenda
815 - 845 Registrering og morgenmad
845 - 855 Velkommen v Deloitte
855 - 920 Distribution v Jan Stieg Rasmussen Independent Director Fund
920 - 945 Regulatory strategy v David Moalem Bech-Bruun
945 - 1020 Paneldebat Implementation of MiFID II regulation
1020 - 1035 Kaffepause
1035 - 1110 Paneldebat Denmark Luxembourg ndash other regulatory updates
1110 - 1150 Digital and Fintech in Asset Management v Simon Ramos Deloitte Luxemborg
1150 - 1220 Digital and Fintech in Asset Management v Johan Lindberg RBC IampTS og Pontus
Kristiansson Kollektiva
1220 - 1230 Wrap-up v Martin Pedersen
1230 Networking og frokost
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte Audit 3
Fund initiators in Luxembourg by country of origin
Introduction
US GB DE CH IT FR BE NL LU DK Others
-
100000
200000
300000
400000
500000
600000
700000
800000
Market share of initiatorsat 30 April 2016
Net Assets (EUR million)Source CSSF amp ALFI
copy 2016 Deloitte Audit 4
Danish footprint in Luxembourg IM Markets
Introduction
SIF ndash Confidential promoter
copy 2016 Deloitte 5
Agenda
815 - 845 Registrering og morgenmad
845 - 855 Velkommen v Deloitte
855 - 920 Distribution v Jan Stieg Rasmussen Independent Director Fund
920 - 945 Regulatory strategy v David Moalem Bech-Bruun
945 - 1020 Paneldebat Implementation of MiFID II regulation
1020 - 1035 Kaffepause
1035 - 1110 Paneldebat Denmark Luxembourg ndash other regulatory updates
1110 - 1150 Digital and Fintech in Asset Management v Simon Ramos Deloitte Luxemborg
1150 - 1220 Digital and Fintech in Asset Management v Johan Lindberg RBC IampTS og Pontus
Kristiansson Kollektiva
1220 - 1230 Wrap-up v Martin Pedersen
1230 Networking og frokost
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte Audit 4
Danish footprint in Luxembourg IM Markets
Introduction
SIF ndash Confidential promoter
copy 2016 Deloitte 5
Agenda
815 - 845 Registrering og morgenmad
845 - 855 Velkommen v Deloitte
855 - 920 Distribution v Jan Stieg Rasmussen Independent Director Fund
920 - 945 Regulatory strategy v David Moalem Bech-Bruun
945 - 1020 Paneldebat Implementation of MiFID II regulation
1020 - 1035 Kaffepause
1035 - 1110 Paneldebat Denmark Luxembourg ndash other regulatory updates
1110 - 1150 Digital and Fintech in Asset Management v Simon Ramos Deloitte Luxemborg
1150 - 1220 Digital and Fintech in Asset Management v Johan Lindberg RBC IampTS og Pontus
Kristiansson Kollektiva
1220 - 1230 Wrap-up v Martin Pedersen
1230 Networking og frokost
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte 5
Agenda
815 - 845 Registrering og morgenmad
845 - 855 Velkommen v Deloitte
855 - 920 Distribution v Jan Stieg Rasmussen Independent Director Fund
920 - 945 Regulatory strategy v David Moalem Bech-Bruun
945 - 1020 Paneldebat Implementation of MiFID II regulation
1020 - 1035 Kaffepause
1035 - 1110 Paneldebat Denmark Luxembourg ndash other regulatory updates
1110 - 1150 Digital and Fintech in Asset Management v Simon Ramos Deloitte Luxemborg
1150 - 1220 Digital and Fintech in Asset Management v Johan Lindberg RBC IampTS og Pontus
Kristiansson Kollektiva
1220 - 1230 Wrap-up v Martin Pedersen
1230 Networking og frokost
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
USA 4840
Canada 290Brazil 280
Asia amp Pacaific 1190
Americas (excl USA Brazil and Canada) 040
Luxembourg 950
Europe (excl Luxembourg) 2370
Africa 040
Source Investment Company Institute (ICI) figures as per 31 Dec 2015
Global AuMeuro 3693509 bn
(kr 27516642 bn)
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Country Total AuM euromn Market Share
Luxembourg 3 506 201 279
Ireland 1 898 825 151
Germany 1 729 234 137
France 1 682 808 134
United Kingdom 1 479 696 118
Switzerland 501 528 40
Sweden 285 561 23
Italy 281 564 22
Denmark 258 369 21
Spain 254 368 20
Others 702 458 56
Total 12 580 612 1000
Source EFAMA figures as per 31 Dec 2015
Country Total AuM euromn Market Share
Luxembourg 2 946 860 361
Ireland 1 446 873 177
United Kingdom 1 083 481 133
France 762 929 93
Switzerland 410 199 50
Germany 309 852 38
Sweden 262 445 32
Italy 226 043 28
Spain 185 420 23
Denmark 107 871 13
Others 426 138 52
Total 8 168 113 1000
UCITS amp AIFs UCITS
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
8achieve
real AuMsuccess
21achieve partial success
71fail to ever reach meaningful size and scale
Source Fund Radar January 2015
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
67
20
4
2
2
Luxembourg
Ireland
France
Jersey
United Kingdom
67 of all UCITS registered in 3 or more countries are Luxembourgish
Source Lipper LIM amp PwC Analysis as per 31 Dec 2014 (poster PwX March 2015)
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Source Global Fund distribution analysis ndash March 2016
Luxembourg market share of foreign cross-border funds registered for sale
Peru 46
Chile 60
Germany 59
France 61Switzerland 65
Bahrain 75
Singapore 69
South Korea 94
Japan 55
Taiwan 76Hong Kong 74
Poland 95Denmark 62
Finland 65
Norway 70
Sweden 64
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
MiFID IIrsquos regulation of inducementsA possible roadmap forward for the new business models
Partner David Moalem PhD 16 June 2016
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
2
Content
1 Introduction and overview helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
11 What does the MiFID II regime look like4
12 Which investment opportunities do the customers have in the bankhelliphelliphellip8
13 How does the MiFID II ban on inducements affect the services 10
14 What does the Danish legislative act passed on 3 june 2016 entail13
2 A possible way forward for the new business models helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip18
21 Whatrsquos all the fuzz about19
22 Can we develop a method to assess the third party payments under MiFID II21
23 What and when are the three third party payments allowed25
24 Does the MiFID II cost transparency regime affect the new business models32
25 What does the future look like for the asset management industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip34
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering1 Introduction and overview
3
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering11 What does the MiFID II regime look like
4
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
5
High level overview of the MiFID II regime
Level 1 MiFIR
(Direct effect)
Capital Market Act Danish Financial Business Act
Level 1MiFID II
(Implementation required)
Level 2RTS and ITS
(Direct effect)
Level 2RTS and ITS
(Direct effect)
Level 3ESMA guidelines and QampArsquos
(Optional implementation)
Level 3ESMA guidelines and QampArsquos
(Optional implementation
Delegated Acts
MiFID II
Delegated Acts Delegated ActsDelegated Acts
Level 2Inducements Product governance
and client assets(Implementation required)
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
6
Overview of the EU legislative process (12)
Level 1 MiFIR
Level 1MiFID II
Qualifying holdings Volume CapSafeguarding productgovernance amp inducements
Organisational requirements
Derivatives ndashClearing
Derivatives ndashTrading obligation
Algorithmic trading -Marketplace
Market MakingDerivatives -direct and foreseeable effect
Algorithmic trading ndashOrganisational requirements
Fee structures
Data reporting- Services providers
Access CCPUnexecuted orders to transactions
Material market ndash
liquidity
Tick Size
Suspension Calculation and the application of position limits
Benchmark Admission of financial -instruments
Access to regulated market
Clock synchronization Transaction reportingBest Execution Maintenance of relevant dataReferencedata
Transparency requirements -shares
Derivatives ndashDeinition
Transparency requirements -bonds
Level 1
Level 2
RTS
Supervisory measures
Cooperation betweencompetent authorities
Ancillary servicesThird country investmentfirms - Permission
BranchThird country investmentfirms - Application
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
7
Overview of the EU legislative process (22)
MTF amp OTF -Functioning
Market -Crossborder cooperation
Qualifying holding
Positions -Reporting to ESMA
Cooperation betweencompetent authorities
Sanctions ndashReporting
Investment Firms ndashPermission
BranchndashPermission
Suspension Reporting of positionsData service providers
Level 2
ITS
Level 3
QampA
and
Guidelines
Definitions in Sections C6 and C7 of Annex I
Transaction reporting
Qualifying holdings QampA ndash CFD Quality enhancing services
Assessment of knowledge
and competence
Complex debt instruments and structured deposits
Cross-Selling Practices
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering12 Which investment opportunities do the customers have in the bank
8
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Overview of the customersrsquo investment opportunities in the bank
9
Customer [X] Bank
Execution-only(internet banking etc)
Execution of orders
Portfolio management agreement
Independent investment advice
Non-independent investment advice
Same MiFID II regulation of inducements
Same MiFID IIregulation of inducements
Other investment services
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering13 How does the MiFID II ban on inducements affect the services
10
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducementsrsquo application on third party payments
11
Investment service Main rule Exemption Necessary payments
Portfolio management and independent investment advice
Non-independentinvestment advice and all otherservices
Ban on accepting and retaininginducements paid by third parties
Article 24(7) and (8)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they
(i) are capable of enhancing the qualityof the service provided to a client
(ii) Do not impair compliance with the requirement to act in the bestinterest of the client and
(iii) the client has been informedprecedingly
Article 24(7) and (8)
Allowed to receive rdquonecessarypaymentsrdquo that
(i) Make it possible or arenecessary to provide the service and
(ii) Do not impair compliance with the requirement to act in the best interest of the client
Article 24(9)
No legal basis in MiFID II to receive such payments
Ban on acceptinginducements paid by third parties
Article 24(9)
Allowed to receive inducements if the payment
(i) is designed to enhance the quality of the relevant service to the client and
(ii) Does not impair compliance with the requirement to act in the best interest of the client and
(iii) the client has been informed preceedingly
Article 24(9)
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A graphic overview of the regulatory model of third party payments
12
All third party payments
Ban on inducements
A fundamental legal principle
What is not prohibited by law is allowed
Allowed payments
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering14 What does the Danish legislative act passed on 3 june 2016 entail
13
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
14
30 March 2016
Denmark is partly rdquofrontrunningrdquo MiFID II with half a yearhellip
Proposal for earlyentry into force of the ban on inducements
1 July 2017October 2016
Entry into force of MiFID II incl allowed inducements and cost
transparency
3 January 2018
Expected MiFID II proposal incl allowed inducements
and cost transparency
Entry into force of the ban on inducements
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The ban on inducements is extended to Danish collective pool schemes
15
Investmentservice
Main rule Exemption Comprised entitiesEUDKrules
Portfolio management and independent investmentadvice
Savings in collectivepool schemes
Ban on acceptingand retaining feespaid by third parties
MiFID II Article 24(7) and (8)DFBA Section 46bAIFM Section 19b
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
MiFID II Article 24(7) and (8)DFBA Section 46b no 3 delegated actsAIFM Section 19b no 3 delegated acts
Credit institutions
Credit institutions Investment firms MC Mortgage credit
institutions AIFM Investment advisors
(separately regulated)
Ban on accepting and retaining fees paid by third parties
DFBA Section 50(2)
Allowed to accept rdquominor non-monetarybenefitsrdquo if they(i) are capable of enhanving the quality of
the service provided to a client (ii) Do not impair compliance with the
requirement to act in the best interestof the client and
(iii) the client has been informedprecedingly
DFBA Section 50(2) delegated acts
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Not a total ban on inducements in Denmark
16
[X] Bank
Portfolio management agreement
Non-independentinvestment advice
Independent investment advice
MiFID IIInducements
DKSolution
Execution of orders
Execution only
Other investment services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Important official pointers in the Danish legislative workshellip
Focus on costs rdquoThe legislation is aimed at credit institutions and other distributors of units in UCITS UCITS play a major role in the development and production of fund units However they do also play a major role in the question of inducements and the extent of these The Danish FSA will increase the supervisory focus on UCITS and the costs that UCITS holds especially the costs relating to inducements payed to credit institutions and other business partnersrdquo (Legislative proposal page 7)
Sector rdquoTo follow up on the Danish report on inducements the Danish FSA will - aside from the legislative proposal ndash initiate discussions with the financial sector with the purpose to agree on guidelines to ensure that clients receive better investment advice better and easily understandable investment products and to ensure more transparent investment products to a lower costrdquo (Legislative proposal page 8)
Inducements rdquoMiFID II fundamentally changes the rules on how and when certain kinds of third party payments (fees commissions or any monetary or non-monetary benefits) may take place MiFID II use the term rdquoinducementsrdquo that includes all kinds of non-necessary incentivizing fees commissions or any monetary or non-monetary benefits that may give rise to a conflict of interest in relation to MiFID IIs requirement to act in the best interest of the client rdquo (Legislative proposal page 22)
Profit loss rdquoWe are talking about a possible cost reduction for the consumers of app 1 billion DKK and that is really really a lot of moneyrdquo (The Danish Ministerrsquos speech in connection with the Parliamentrsquos 1st reading of the legislative proposal and later in connection with QampArsquos on the proposal)
17
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering2 A possible way forward for the new business models
18
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering21 Whatrsquos all the fuzz about
19
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
The MiFID II business models doesnrsquot fit in the shoehellip
20
Third Party
Client
Bank
Inducements Ok if positive test
Third Party
Client
Bank
Inducements Not allowed
Client experience Free service
Client experience I have to pay
Non-independent adviceand other services
Portfolio management and independent advice
Third Party
Client
Bank
InducementsOk
Client experience Free service
Investment advice and portfolio management
Inducements are today integrated in the payment flows on the Danish market
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering22 Can we develop a method to assess the third party payments under MiFID II
21
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Method tree for assessing third party payments under MiFID II
22
Type of service
Portfolio management Independent advice
Non-independent adviceand all other services
Inducements
Costs
Banned
Allowed
Inducements
Costs
Allowed if test is positive
Allowed
Necessary payments Allowed
Banned if test is negative
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Overview of MiFID IIrsquos treatment of third party payments
23
Investment service 1 Costs 2 InducementsInducement test passed
3 Neccesary payments
Portfolio management and independent investment advice
Non-independent adviceand other services
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
24
MCIF
X Bank
UCITS
Allowed third party payments in the new business models
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs 3 Necessary payments2 Inducements
Portfolio management and independent investment advice
Non-independent investment adviceand other services
MCIF
X Bank
UCITS
Payments in accordance with UCITS-regulation
Client
Client payment
1 Distribution costs
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering23 What and when are the three third party payments allowed
25
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 1 Distribution costs paid by a third party
No conflict of Payments that are not incentivizing for the bank will continue to be legal under MiFID II Such payments are legal payments received by the bank from third parties which does not create a conflict of interest between the bank and the client
Costs Since MiFID II forbids the bank to make a profit or other similar benefit from third parties the only legal non-incentivizing third-party payments will be costs
Documentation Payments from a third party to the bank which verifiably only cover costs will not be able to create a conflict of interest and will therefore be legal under MiFID II
Example An important practical example is where a UCITS andor an investment manager covers the distribution costs of a bank covering the distribution of the units in the UCITS to the end-client
In this case the banks costs for the service are covered by the UCITSmanagement company which otherwise would have had to carry the distribution out on its own
26
interest
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Examples of allowed distribution costs
27
Capacity costs Amount
Providing infrastructure including physical locations trading platform []
Link to the banks data center CSD []
By name registration of investors []
Setup for trading maintenance of payment structures []
Internet banking solutions []
Additional development and operation of IT systems investor portals etc []
Statutory storage archiving of data personal data []
Reports of buying and selling rates dividends etc to the tax authorities []
Training of own employees with a view of product understanding etc including participation in courses certification ongoing re-certification
[]
Creation and registration of clients including money laundering registration etc []
Completion of the aptitude test appropriateness test []
Provide the customer with regulatory information documents info etc []
Managing and securing complaint handling []
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Allowed inducements
28
MCIF
Client
[X] Bank
UCITS
Inducement
Conditions Content Assesment
1 Quality enhancingservice
The inducement must contribute to ensurethat [X] Bank provides a quality enhancingservice to the client
2 Best interest of the client
The inducement must not impair [X] banksrsquo abilities to act in the best interest of the client
3 Precedinginformation
The client must clearly be informed on the fact that [X] bank receives inducementsprecedingly
The inducement test
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 2 Business development- Inducements paid for extra serviceshellip
29
Source The delegated directive see recital nos 22-24 including Chapter 4 - Inducements article article 11 no 2(a)
MiFID II requirementsNon-independent advice and other
services
rdquoHigher service levelrdquoThe same service however on a
higher level
Indtaeliggter
rdquoAdditional servicesrdquoOther services next to the service in
question
The inducement test
rdquoDoes the inducement lead to (i) an additional service or (ii) a higher service level to the client while beingproportional with the inducement receivedrdquo
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Payment 3 Necessary payments
Wording rdquoThe payment or benefit which enables or is necessary for the provision of investment services such as
custody costs
settlement and exchange fees
regulatory levies
and legal fees
hellipand which by its nature cannot give rise to conflicts with the investment firmrsquos duties to act honestly fairly and professionally in accordance with the best interests of its clients is not subject to the requirements set out in the first subparagraphrdquo
Content There is no additional interpretation available with regard to the detailed content and it is uncertain whether further Level 3 guidance will be issued
But with the wording such asldquo which is followed by a listing of examples of necessary payments follows the implication that the list is non-exhaustive meaning that there must be other types of necessary payments
30
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering24 Does the MiFID II cost transparency regime affect the new business models
31
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
A rdquogame-changerrdquo affecting the Bank amp Customer relationship
32
Bank amp Customer
MiFID II - Inducements
New business models
New language for payments
Re-calibration of payments
MiFID II ndash Cost transparency
New detailed disclosure
Direct disclosure to the customers
Also prof clientseligible counterparties
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Spg 1 ndash Vil de nye investorbeskyttelsesregler paringvirke forretningsmodellerne
Transparent and detailed reporting direct to the individual customer
33
A Product
B Service
Total costs EUR and Illustration of the effect of the total costs on the investorrsquos returns
Commissionsrsquo share of the total cost
ESMA Proposal Possible illustration
Total costs
CommissionsInvestment(EUR)
At the beginning of the period
At the end of the period
Yield before costsamp expenses
EUR
Year 1 - Costs amp expenses
EUR
Year 2 - Costs amp expenses
EUR
Year 3 - Costs amp expenses
EUR
Net yieldEUR
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny regulering25 What does the future look like for the asset management industry
34
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Overview of the size of third party payments before and after MiFID II
35
Today
Portfolio management and investment advice
MiFID II
Non-independent advice
100
MiFID II
Portfolio Management and
independent advice
[100] [70-80]
Costs
Necessary payments
Allowed inducements
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
To budskaber til arbejdet med implementering af ny reguleringQuestions amp comments
36
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
CopenhagenDenmark
AarhusDenmark
ShanghaiChina
T +45 72 27 00 00wwwbechbruuncom
37
David Moalem
Partner Attorney-at-law PhD middot Copenhagen
Capital Markets amp Financial Institutions
T +45 72 27 33 24M +45 25 26 33 24E dmmbechbruuncom
Contact
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte 19
Panel discussion
Implementation of MiFID II regulation
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte 20
Panel discussion
DenmarkLuxembourg ndash other regulatory updates
Anders Klinkby Danish Investment Fund Associaion (DK)
David Moalem Bechbruun (DK)
Florence Stainier Arendt amp Medernat (Lux)
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
How will Fintech impact fund
distributionFintech is reshaping the operating model of asset managers distribution
intermediaries and their service providers
June 16th 2016
Simon Ramos
Partner ndash Advisory amp Consulting
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
274
269
133
121
95
82
67
269
Lending
Payments
Personal Finance
Equity Finance
Retail investment
Small Business Tools
Banking Infrastructure
Other
Fintech is reshaping the financial services sector
Investment in Fintech is growing globally Luxembourg today has more than 150 Fintechs
Active Fintech clusters number of firms
Emerging technological innovation in the financial sector
Global Investments from 4 billion USD in 2009 to 122 billion
USD in 2014 US is at forefront
EU showing promise around 2 billion USD in 2014
Lower costs more efficiency threat to financial institutions
FinTech partner with non-financial digital giants (Google)
Asset managers to pay attention and act now
Luxembourg has a dynamic FinTech sector
Amazon Payments PayPal Rakuten Yapital established
quarters in Luxembourg along with Startups
Online discretionary portfolio service
Storage and payment solutions for Bitcoin
Payment solutions for (e-)merchants based on e-
wallet
Anti-Money Laundering software
Customer risk-profiler for Financial Advisers
Free financial calculation tools for private individuals
Human Recognition Technology analyzing behavioral
data
Stock market forecasting tools
Incubators attracting new companies (Luxfuturelab)
Proximity to clients IT infrastructure government support
public research talent pools in finance and technology
Other Small business tools crowdfunding security and fraud remittances financial technology investments financial technology investments
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reservedDeloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Product
management amp
marketing
New generation of investors
Technological innovations Data surge
bull Stay in control (do it yourself)
bull Tailored amp multi channel advice
bull Peers and social networks
bull Digital front-end
bull Downside protection and hedging
bull Yield and service of WM clients
bull Social responsible investments
bull Blockchain
bull Digital payments
bull Machine learning
bull Digital investment platforms
bull P2P lending
bull Growing quantity of sources and data
bull Need for powerful data processing
bull Allow for real-time information
bull Shifting mix of required analytical
capabilities
mdash Algorithmic
mdash Predictive
Now
bull AIFM UCITS V
PRIIPS MiFID
AMLD IV CRD
EMIR
Complex and evolving regulatory landscape
Trade order
processing
Post trade
servicing
Tomorrow
bull Shared ledger
bull Smart contracts
bull Online payment
bull Data
confidentiality
bull Cybersecurity
1 2
Regulation and Cybersecurity 3
Fund distribution
value chain
Mega trends are driving the Fintech revolution in
investment management
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Benefits for asset managersPractical applications
Tailor advice and products to client needs
Improve marketing strategies
Tailored market intelligence
Provide digital front end
RegTech and Cybersecurity
Intuitive guided online platforms
Goal-based investments
Robo advisory
Engage with the end investor
Offer better risk data analytics
Improve wealth reports
Fintech applicationsHow can Fintech facilitate
Portfolio and transaction data
AML amp KYC client data
Collect and analyze data
Make sense of data
Investor proximity with asset managers
Social investments
Enhanced online platforms (more than
execution)
Growing interest in execution only
Banks and investment firms are moving
Big data and the growing use of D2C channels see very tangible Fintech applications
1
2
Big data
D2C channels
Product management and marketing1
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicing Blockchain and other
initiatives
Hybrid asset servicing transition model
Blockchain Ongoing initiativesNo lsquobig bangrsquo blockchain
transition but rather a hybrid
asset servicing model will offer
cost efficient and automated
services to asset managers
bull Disruptive new technology providing access to smart
contracts and shared ledger technologies
bull Potential process disintermediation
bull Order management
bull Record keeping amp ownership verification
bull Asset servicing (eg corporate actions)
bull Settlement and clearing
bull Payments
bull Fund order management and execution platforms
bull Digital passport
bull Online KYC register
bull Post trade asset servicing automation
bull Automated reconciliation
bull Data analytics and risk metrics
bull RegTech
bull T2S
Enhanced digital platforms Regtech White labelling amp managed services
Efficiency for non-subjective tasks via
specialized Fintech solutions (eg
regulatory screening online KYC)
bull Social investments
bull Tailored robo-advice
bull Market intelligence
bull Wealth and performance reporting
Act as a one-stop-shop managed
services and white label solutions for
asset managers
2
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Regtech to address continuous
regulatory challenges
Confidentiality
Payment services
Smart contracts
New financial products
Consumer protection
Cyber-security
Increased regulatory requirements in a
Fintech world
Regtech as support
New innovative and agile Fintech solutions to tackle regulatory requirements
The proposition of Regtech principally articulates around four advantages
Cost ndash you pay for what you use
Flexibility ndash customised control over data access to and sharing of data
Performance Scalability ndash ability to easily add or remove service features
Security ndash data encrypted during transmission and while at rest
Regtech could provide Luxembourg with a competitive edge
White label Regtech solutions could assist asset managers in the following
areas
bull Transactions reporting (MiFIR EMIR SFTR MAD)
bull Regulatory reporting (AIFMD Solvency II)
bull Regulatory watch (Automatic screening)
bull Online KYCAMLCFT
3
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
Asset servicers can offer one-stop-shop Fintech services to asset managers
Product management and marketing
Trade processing amp post trade
Transfer agent
Data
Custodian
Central administrator
Order mgmt platformAsset
servicers
AM1
AM2
AM3
White label Fintech solutions
bull Online order management
bull Risk metrics
bull Online performance attribution reports
bull Investment advisory algorithms (based on
investment patterns and behaviors)
bull Digital payments
bull Online market insights reports
bull Improved automated reconciliation process
bull Automated order aggregation
bull Improved management and clearing industry
standards
bull Distributed ledger KYC services
One-stop-shop managed services
bull Fund set-up and liquidation
bull Distribution and registration support
bull Operational tax management
bull AMLCFT
bull Regtech
Hybrid asset
servicing
model
Blockchain
1
2
D2C
Ongoing initiatives
Fintech provides opportunities for asset managers
in Luxembourg from front to back
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
Deloitte Digital Copyright copy 2016 Deloitte Digital LLC All rights reserved
This publication contains general information only and none of the member firms of Deloitte Touche Tohmatsu
Limited its member firms or their related entities (collective the ldquoDeloitte Networkrdquo) is by means of this
publication rendering professional advice or services Before making any decision or taking any action that may
affect your business you should consult a qualified professional adviser No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication
As used in this document ldquoDeloitterdquo means Deloitte Consulting LLP a subsidiary of Deloitte LLP Please see
wwwdeloittecomusabout for a detailed description of the legal structure of Deloitte LLP and its subsidiaries
Certain services may not be available to attest clients under the rules and regulations of public accounting
Copyright copy 2015 Deloitte Development LLC All rights reserved
Member of Deloitte Touche Tohmatsu Limited
Thank youContact us
Simon Ramos
Partner ndash Strategy Regulatory
Carlo Duprel
Director ndash Strategy Regulatory
Patrick Laurent
Partner ndash Technology amp Enterprise
Application Leader
Francois-Kim Huge
Director ndash Regulatory Strategy
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte 29
Session
Digital and Fintech in Asset Management
Implementing Robot AdvicePlatform to
enhance distribution
Johan Lindberg RBC IampTS
Pontus Krisitansson Kollektiva
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte
copy 2016 Deloitte 30
Session
Wrap-up
Martin Pedersen Deloitte