The European Union set out plans on Wednesday to cut how much retail investors pay banks and insurers for financial products to encourage investment and make the capital market deeper and more efficient.
The retail investment package toughens existing EU investment laws by including a ban on banks and insurers paying commission to sell their products to brokers who do not provide advice to customers, the executive arm of the EU, the European Commission said.
Only 17% of EU household assets will be in the form of stocks and bonds in 2021, well below the US level, as consumers prefer to keep their money in a bank. Fees for retail investors are 40% higher than fees for institutional investors, the commission said.
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Most retail investment products are sold through a commission-based model with customers not always getting the best deal, the commission said.
After heavy opposition from Germany, Italy, France and industry to a full ban on the commission, the EU executive said it would require a “conducted approach.”
It suggests that the limited prohibition of commission is accompanied by more difficult tests of how suitable the products are for the buyer, where advice is offered. Products also have their “value for money” measured against new cost and performance benchmarks from EU regulators.
“The evidence shows that there are some products on the market that provide little, if any, value for money to the retail client, mainly because of the high cost of the products,” the commission said.
EThe U’s Financial Services Commissioner Mairead McGuinness told reporters that a full ban on the commission was still on the table in three years’ time when there would be a review to determine whether the involvement of retail markets increased, the value of money improved, and costs were cut.
consumer campaigner BEUC said despite the lack of a full ban on the commission, the plans have the potential to limit costs for consumers, but not enough.
The UK also introduced greater protections for financial consumers from July to draw a line under a string of mis-selling scandals.
ICI Global, a fund industry body, said it was unlikely that establishing granular cost benchmarks against all 30,000 EU-regulated mutual funds that could be assessed would be fair to a diverse group. of the asset to avoid reducing innovation and choice.
EU states and THE The European Parliament will have the final say on the package with changes likely. The main centre-left party in parliament has said it will push for a complete ban on commission-based sales.
(Reporting by Huw Jones; editing by Sharon Singleton)
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