Brussels backs down plans to ban asset managers and insurers from paying financial advisers to endorse investment products, amid heavy industry lobbying despite warnings from consumer groups. I gave in.
An analysis by the European Commission last year found that a complete EU-wide ban on incentive payments made by investment product manufacturers to financial advisors would be the most effective way to eliminate conflicts of interest and improve end-investor outcomes. I concluded that there is.
However, according to a draft EU investment strategy for individuals obtained by the EU, the EU has now backed off from that position and replaced the ban on inducement payments with the so-called ‘execution-only’ sale of investment products in which financial advice is not provided. will be limited to FT.
“A complete ban on solicitation would have significant and sudden effects on existing distribution systems, the consequences of which are difficult to predict,” the commission said.
The commission has focused on the practice of paying for financial advice, claiming it distorts markets for consumers. Increased transparency will encourage more retail investors to enter the investment market I hope that.
We plan to release the final version of our investment strategy for individuals on May 24, but at this stage it is unlikely that our plans will change.
Many of the EU’s largest asset managers and investment product distributors, owned by banks and insurance companies, opposed the solicitation ban. They argued that the ban would create an advice gap and put retail investors in a worse position.
The European Funds and Asset Management Association had previously said that an EU-wide ban on inducements would “effectively limit access to affordable and qualified advice for the majority of EU citizens”. .
German and Austrian finance ministers also wrote letters of objection to the European Financial Services Commission’s Mairead McGuinness.
Other members of the European Parliament have called on the commission to push for a total ban.
“Disproportionate payments to financial advisors must be banned urgently. Countries where solicitation is banned, such as the UK and the Netherlands, have increased trust in financial advisors,” says Finnish MEP. says Eero Heinäluoma.
Guillaume Plache, managing director of investor rights campaign group Better Finance, said the leaked draft was “not good news for consumers, but the commission is asking financial advisors in enforcement-only sales.” “There has been progress in the decision to ban the rebate of
Better Finance is a committee to introduce harmonized rules to deal with conflicts of interest covering the sale of investment products to retail investors as different standards currently applied under Mifid and insurance regulations He said he welcomes the efforts of
Independent investment consultant Julie Hudson said it was “not surprising” that the commission withdrew in the face of industry lobbying.
Hudson said banning execution-only investment platforms while allowing banks and insurers to continue to make incentive payments could exacerbate conflicts of interest in the market.
The level of trust in financial service providers remains low among European retail investors. According to a recent Eurobarometer survey, only 38% of consumers said they believed the investment advice they received from financial intermediaries was primarily in their best interest.
Commission publishes new annual report with performance data and information on costs and charges, including payments to third parties, to ensure financial service providers adhere to enhanced ‘best interest of the client’ principle I hope to
Hudson said all of these ideas would work “only if actively implemented by regulators.”
Additional reporting by Javier Espinoza from Brussels