Ban commissions in financial sales: consumer advocates demand urgent action

Ban commissions in financial sales: consumer advocates demand urgent action

According to a report from www.versicherungsbote.de, the European Commission plans to propose a ban on commissions in financial sales. As a result, consumer advocates in Germany also support such a measure and are collecting arguments for a ban. The Baden-Württemberg consumer advice center sees commission-oriented investment advice as financial harm to consumers. According to the consumer advice center, such investment advice creates false incentives and cannot act in the interests of those seeking advice. The consumer advice center names three points that characterize commission sales from their point of view: the targeted distribution of products for which commissions are paid, a high level of reallocation of existing investments to advertise new investments in exchange for commissions and the sale of investment products to those seeking advice, even if they do not need new contracts. These practices lead to high costs for consumers and particularly affect the returns on retirement savings. According to Niels Nauhauser from the consumer advice center, most consumers would be many thousands of euros wealthier if they had received needs-oriented advice. Small investors in particular are the ones who suffer the most, as they have the fewest financial resources to bet on sales pitches that run counter to their own interests.
A ban on commission is seen as a solution by the Baden-Württemberg consumer advice center. Various points are mentioned that such a ban should include, such as the clear separation of advice and sales, the designation of “financial advisor” for people who do not receive commissions or benefits, a uniform definition of “financial advice” based on the needs of those seeking advice, the supervision of financial advisors by BaFin and the setting of licensing requirements to ensure that financial advisors have the necessary qualifications to provide needs-based advice.
This proposed measure could have a significant impact on the financial distribution market and consumers. A commission ban would fundamentally change financial advisors' business model because they would no longer receive commissions. This could result in some advisors leaving the industry and having to develop new advisory models in order to continue to be financially successful. For consumers, a commission ban could lead to lower costs because commissions would no longer have to be included in the products. It could also lead to greater transparency and tailored advice as financial advisors would no longer be influenced by the payment of commissions. However, strict control mechanisms would need to be implemented to ensure that financial advisors are qualified and able to provide independent advice. A ban on commission would therefore have both positive and negative effects on the market and consumers. It remains to be seen how the European Commission will design its proposal and how it will be implemented in Germany.