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Dear Vice-President Dombrovskis
Dear Commissioners McGuinness and Reynders,
We are writing to you on behalf of BETTER FINANCE, BEUC and Finance Watch, as the principal civil society organisations working on financial consumer protection at the European level, to encourage you to continue with an ambitious approach with regards to the Retail Investment Strategy and the stated goal of creating bias-free advice.
As you know, the inducements-based sale of financial products generates significant conflicts of interest, which are harming consumers on a massive scale.1 It is therefore the reason why we would like to insist on the importance of banning this practice in the European Union.
Naturally, the debate around a ban on inducements turns the attention to the examples of such bans that have already been established, namely in the Netherlands and in the United Kingdom. We fully agree that these examples serve well to assess the possible effects of a ban on inducements in the EU and have therefore fielded them in the past.
As evidenced, for example, by a recent report commissioned by the European Commission2, in these two European countries where inducements were banned, retail investors now have lower investment costs and better value for money. And we note with satisfaction, that this seems to be generally accepted now.
In most of the EU, inducement-based sales of financial products are the norm. Advice driven by inducements is not advice at all but merely a sales pitch, often resulting in a product being offered to a customer not because it provides value for money for the customer but because the sale of the product provides monetary benefits for the seller. Thus, the status quo effectively leaves EU consumers without independent advice as it stands. For example, BaFin (the German Federal Financial Supervisory Authority) lists only 17 independent advisors being registered in Germany, meaning that real financial advice is functionally unavailable to most consumers there.
Establishing a system of independent advice would only reduce this gap by making genuine advice available in the first place...
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