Wednesday, 3 October 2012

Objectivity of financial advice to consumers still not a given

Last week BEUC issued a press release in which it expressed its concerns about the European Parliament's plans to update the MiFID (Markets in Financial Instruments Directive). (Consumers left stranded: self-serving financial commissions survive EU vote) The draft of the EP's Economic Affairs committee apparently permits financial intermediaries to keep all their commissions and incentives received from the parties they are representing, as long as they disclose to consumers that they have received them. This system of disclosure is not seen as guaranteeing sufficient protection to consumers, taking into account the often aggressive practices that intermediaries use to sell the product from which they are themselves earning the most, and not the one that would be the most suitable for the consumer. Another proposal that may endanger consumers is the qualification of certain investment products as 'non-complex' at a European level (e.g. Undertakings for Collective Investment in Transferable Securities - UCITS), which would reduce the level of advice and warning about their risks that needs to be provided to consumers.

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