In response to warnings about an “advice gap” if inducements – or rather sales commissions – were to be banned, BETTER FINANCE stresses that there can be no “advice gap” if there’s no “advice”: biased advice is not really advice.
The discussion in Brussels between advocates and opponents of bias-free advice (the stated objective of the EC) for retail investment products is coming to a head in 2023. On the eve of 2022, in reply to a letter from the former European Parliaments’ Rapporteur on MiFID II, Commissioner McGuinness outlined her reasoning for a ban on sales commissions paid to retail distributors (surprisingly and mistakenly labelled as "investment advisors"), stressing that under an inducement-based model, retail investors will often be sold products which are more costly than other cheaper alternatives available on the market and not be advised on the best or most suitable products.
Indeed, the current situation effectively leaves EU consumers without independent advice. BaFin (the German Federal Financial Supervisory Authority), for example, lists just 17 independent advisors registered in Germany, so real financial advice is virtually unavailable to the majority of 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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