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Why the retail investor is going to lose out with Mifid II

Why the retail investor is going to lose out with Mifid II

Frank Investments founder Paul Sedgwick is concerned that the upcoming Mifid II regulation risks squeezing out smaller companies and pushing up prices for the end consumer.

Since Sedgwick (pictured) became a Wealth Manager cover star in April 2014, he has continued to grow the business, offering regulatory umbrella services to new firms.

The company does not disclose assets under management, which he says have increased ‘substantially’ over that period, but its staff headcount has trebled to six and the number of family clients it services has risen from three to 14.

How has your business changed over the last three years?

‘We have expanded the business beyond the wealth management side and we now work with other companies. Now, we are directly regulated by the FCA and have the ability for people to come and work with us, using our license so we’ve grown out the business on that side.

‘There have been a lot of people coming out of the City, a bit like we did five years ago, who want to start a business but are unsure about how the process of getting regulated works.

‘In a similar way, I also had a limited understanding having come from an investment banking background.

‘Basically, it’s to help people who are in a similar situation to the one we were in five years ago.’


How do you see the industry changing?

‘The cost base has remained under pressure for all of the industry, but the real development and big unanswered question is going to be Mifid II.

‘That’s going to put a lot of pressure on businesses, particularly on the small wealth managers because it will add costs and [increase the] regulatory burden.

‘The biggest risk is that the bigger houses will become dominant again because they will squeeze out the smaller guy. I feel quite strongly about this, the smaller guys will get squeezed out and then prices will start to go up and at the end of the day, I think the retail investor is going to lose out.

‘What [European Securities and Markets Authority (Esma)] are trying to achieve and what they will end up achieving, I feel the law of unintended consequences is going to really work hard and come to fruition on this one.’  

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