More than half (52%) of British financial advisors believe that the additional regulatory and compliance demands resulting from the introduction of the European Union's second Markets in Financial Instruments Directive is likely to encourage IFA firms to review their business models to become more efficient, according to a new study by Investec Wealth & Investment.

One-fifth (20%) of advisers believe MiFID II will have little effect on their firms.

Advice-giving firms are most likely to review and change their compliance functions to accommodate MiFID II, according to 52% of advisors, with 42% most likely to improve their fee structures to allow consumers to know more about their charges. Almost four in ten (38%) intermediaries believe that MiFID II will encourage IFAs to 'de-risk' by reviewing their professional indemnity cover and other things.

DFMs ascendant

According to nearly a third (31%) of advisers, a key result of this latest regulatory overhaul will be a drive among IFAs to outsource client portfolios to discretionary investment managers/discretionary fund managers or DFMs, with boutique adviser firms the most likely to follow this trend.

Brexit woes

The research shows how the introduction of MiFID II comes at a time when advisors are occupied with the consequences of Brexit. Almost one in four of them (24%) reported that Brexit had prompted clients to take a greater interest in their portfolios, while almost half (47%) said that clients were seeking more advice about how to protect their portfolios from post-referendum market volatility.