NewsInvestors May Find Their Advisers Are Putting Them at Risk

Intriguing new research conducted by Aisa  International clearly shows the differences between types of adviser firms and warns investors to understand the differences – and potential for increased risk and reduced consumer protections – between firms offering financial management services. 

Specifically, the research concludes that the consumer protections offered to investors through  Markets in Financial Instruments Directive (MiFID) firms are vastly preferable over Insurance  Distribution Directive firms, known as IDDs. The reasons lie in the comprehensive licensing,  credentials, and regulatory requirements and protections of MiFID firms. 

The services offered by each type of firm cater to different aspects of financial wellbeing.  Investment (MiFID) firms help individuals grow wealth through strategic investment, while insurance (IDD) firms focus on protecting against financial loss due to unforeseen events.  

“Most consumers do not consider the type of firm they are receiving advice from, whether the firm specialises in insurance products or investments or, indeed, if the firm only has licences for insurance products or investments. The impact on the consumer is vast, though, when things go wrong! 

Therefore, understanding this helps individuals make more informed decisions about how to manage their finances and mitigate risks. One firm has warranty funds, increased liquidity and capital adequacy requirements (often four times as high) and risk management and reporting requirements and specific PII investment cover. The other has none of this. 

If I was a consumer seeking investment or wealth management, I would want to know that with one type of firm, I have virtually no protection for investments made, and even the PII cover that the firm has probably excludes most MiFID investments,” says James Pearcy-Caldwell, Co-Founder and Compliance Officer of Aisa International.

The white paper produced by Aisa International is available to everyone who is interested in learning how MiFID and IDD companies differ and for which specialties each type of firm or adviser is best.

The white paper is available here: OF_MiFID v IDD_Feb 2024 v1.1