The European Federation of Investors and Financial Services Users, Better Finance, and the European Insurance and Reinsurance Federation, Insurance Europe, have expressed their concerns about the commission ban in statements issued on Thursday 12 and Wednesday 11 January respectively.
They argue that such a ban, which would effectively limit the use of brokers paid by these commissions, would drive consumers to other less reliable sources of information. This would make them more vulnerable to scams or high-risk investments or deter them from investing. In December, Insurance Europe had already alerted the European Commission to the risks of this measure (see EUROPE 13087/19) which is part of the EU strategy for retail investors.
The issue was recently revived when the contents of Financial Services Commissioner Mairead McGuinness’ letter in response to MEP and former MiFID II rapporteur Markus Ferber (EPP, German) was made public.
In this reply, the Commission set out its reasoning in favour of a ban on sales commissions paid to retail distributors. It explained that under an inducement-based model, retail investors will often be sold products that are not suitable for their needs, that are more expensive than cheaper alternatives available on the market and will not be advised on how to use them.
For Better Finance, this measure is “reduced to a false choice between an ‘advice gap’ and ‘biased advice’”. The Federation regretted that European consumers would therefore be left without independent advice. “Establishing a system of independent advice would only reduce this gap by making genuine advice available in the first place”, it said.
“It is unfortunate to see the debate around a potential ban on inducements being reduced to a false dichotomy between an advice gap and a lack of transparency”, it added. (Original version in French by Anne Damiani)