18 December 2022

InsuranceEurope: An EU-wide ban on commission would unnecessarily limit consumers’ access to financial advice

A group of financial sector associations — including Insurance Europe — have written jointly to the European Commission to highlight the fact that the impact of an EU-wide ban on commission would vary greatly across member states; could negatively impact consumers in countries with a commission-based model; and severely undermine the goals of the EU’s Retail Investment Strategy (RIS).

If properly calibrated, the RIS presents a significant opportunity to promote an open and competitive financial market where consumers can invest with confidence and have access to a diverse range of investment opportunities.

To achieve the goals of the RIS, it is important to recognise the value offered by professional advice to consumers. Such advice enables consumers to take effective investment decisions, plan for their future and meet their sustainability preferences. Therefore, an EU-wide ban on commission, which would limit consumers’ access to advice, would disrupt the market at the expense of consumers.

While any professional service and advice come at a price, the cost of not being able to access advice when needed would be extremely high for consumers. Some risk turning to other sources of information like social media and being more exposed to scams or high-risk investments, while others would be less likely to invest, and then less prepared for retirement. Furthermore, an EU-wide ban would not respect market diversity in terms of distribution systems, clients’ preferences and supervisory culture.

Moreover, the Insurance Distribution Directive (IDD) introduced strong safeguards against conflicts of interest and mis-selling, and member states have added specific national provisions where appropriate. The approach taken in the IDD must, therefore, be preserved.

The RIS should focus on what is really useful and necessary for a simple and smooth consumer experience; make disclosures more consumer-friendly and fit for the digital age; and promote much needed financial and insurance education.

The other signatories are: The European Fund and Asset Management Association, the European Association of Cooperative Banks, the European Structured Investment Products Association, the European Banking Federation, the European Association of Public Banks, and the European Savings and Retail Banking Group.

InsuranceEurope

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