MiFID

What does MiFID do?

You can find more information here.

How it works

A MiFID set-up produces two independent outcomes from the same questionnaire.

	Investment profile	Product availability
Question	How much risk is the client willing and able to take?	For which products does the client have enough knowledge and experience?
Result	One profile per questionnaire (e.g. CONSERVATIVE … DYNAMIC)	A pass/fail per product (e.g. STOCKS: available, DERIVATIVES: not available)
Driven by	The score on question choices, a profiler and a profile definition	The test type and ID product on questions, plus the thresholds on the FSP definition products
Shown in flow step	INVESTMENT_PROFILE	TEST_RESULTS

Nothing in the profile calculation decides which products are available, and vice versa. Both are shown to the client and the advisor, who then decide which products can be sold.

For the details, see profile definitions and the Products & commercial products on the FSP definition.

Instructions

Follow these steps in order. A full example is available at the end of this page.

1. FSP definition

Modules

At least the following modules need to be enabled:

• ADVICE
• FLOW
• MIFID

The MIFID and ADVICE modules can be limited to specific dossier types with the setting enabledWhen, for example to only enable them when the dossier type is INVESTMENT or INSURANCE.

Products

Under Products you add the products that need to be tested and set, per product, the knowledge test threshold and the experience test threshold. See Products & commercial products.

Harmoney supports the following products with respective id:

1. CASH
2. STOCKS
3. STOCKS_EMERGING_MARKETS
4. BONDS
5. BONDS_EMERGING_MARKETS
6. CONVERTIBLE_BONDS
7. SUBORDINATED_BONDS
8. PERPETUAL_BONDS
9. FUNDS
10. INSURANCE_CONTRACT_BRANCH_21
11. INSURANCE_CONTRACT_BRANCH_23
12. INSURANCE_CONTRACT_BRANCH_26
13. STRUCTURED_PRODUCTS_WITH_CAPITAL_PROTECTION
14. STRUCTURED_PRODUCTS_WITHOUT_CAPITAL_PROTECTION
15. TRACKERS_EXCHANGE_TRADED_FUNDS_ETF
16. REAL_ESTATE_CERTIFICATES
17. GOLD_PRECIOUS_METALS
18. PRODUCTS_LINKED_TO_NATURAL_RESOURCES
19. DERIVATIVES
20. HEDGE_FUNDS
21. PRIVATE_EQUITY
22. FORWARD_TRANSACTION
23. ASSET-BACKED_SECURITIES
24. EXECUTION_ONLY
25. WEALTH_ADVICE
26. WEALTH_MANAGEMENT
27. PRIVATE_PLACEMENT_IN_BONDS

2. Questions

Configure the questions: add a score to the choices, and set the test type (KNOWLEDGE or EXPERIENCE) and ID product (see list above) on questions that are part of a product test.

3. Form definition

Configure a form definition taking the following into account:

• Bundle all questions related to financial situation in a section with subsegment FINANCIAL_SITUATION
• Bundle all questions related to knowledge in a section with subsegment KNOWLEDGE
  • bundle all related questions to a single insurance product in a section.
• Bundle all questions related to investment objectives in a section with subsegment GOALS
• Add a section with subsegment ADVICE

4. Flow definition

1. Make sure the responsibilities FINANCIAL_SITUATION, KNOWLEDGE and GOALS are enabled
2. Add respective flow steps MIFID_V2_FINANCIAL_SITUATION, MIFID_V2_KNOWLEDGE_EXPERIENCEand MIFID_V2_GOALS with module MIFID
3. Add the flow steps that show the outcome: INVESTMENT_PROFILE for the profile and TEST_RESULTS for the available and non-available products.

5. Profile definition

A profile definition needs to be requested.

• Define which scores should lead to which profiles.
• Define which question identifiers are linked to which responsibility.

There is a template available on Confluence.

6. Dossier definition

Create a dossier definition with type INSURANCE. The service should be equal to an insurance product in order to be able to manage the RBA sensitivity. Don't forget to link the profile definition in the Profile configurations (see profile configuration).

Example

The example below shows a set-up with five profiles and three tested products.

Products on the FSP definition

Product	Knowledge threshold	Experience threshold
STOCKS	1	1
BONDS	1	1
INSURANCE_CONTRACT_BRANCH_23	1	1

{
  "financialSpProducts": [
    {
      "productCode": "STOCKS",
      "experienceTestThreshold": 1,
      "knowledgeTestThreshold": 1
    },
    {
      "productCode": "BONDS",
      "experienceTestThreshold": 1,
      "knowledgeTestThreshold": 1
    },
    {
      "productCode": "INSURANCE_CONTRACT_BRANCH_23",
      "experienceTestThreshold": 1,
      "knowledgeTestThreshold": 1
    }
  ]
}

Profile definition

Profile	Minimum score	Maximum score
CONSERVATIVE	0	120
DEFENSIVE	120	250
BALANCED	250	500
HIGH	500	750
DYNAMIC	750	100000

Questions

Question	Test type	ID product	Choices (score)
"Do you currently have objective indications that your financial situation will change within a period of 1 year?"	empty	empty	No (50), Yes (100)
"How would you describe your knowledge of stocks?"	KNOWLEDGE	2	Correct answer (1), others (0)
"How often did you trade stocks in the last 3 years?"	EXPERIENCE	2	Never (0), occasionally (1), regularly (1)

Outcome for a client

• The scores of the profile questions are summed by the profiler. A total of 310 gives the profile BALANCED, because 250 ≤ 310 < 500.
• The knowledge question on stocks is answered correctly (1) and the experience question is answered with "occasionally" (1). Both scores reach the threshold 1, so STOCKS is shown as available. If the experience answer had been "never" (0), STOCKS would be shown as non-available.
• Products for which no questions were answered with an ID product, such as BONDS in this example, get no test result.

Fine-tuning

I want to…	Change
Make a product easier or harder to obtain	The thresholds of that product on the FSP definition
Make a product always available	Set its thresholds to 0
Change which score leads to which profile	The score ranges in the profile definition
Change which questions count for the profile, or how scores are combined	The profiler class (request it)
Change the score of an answer	The score on the question choice
Let the advisor or client pick a lower profile	selection allowed on the profile configuration