Monday, October 22, 2012

Inducements: the problem continues

Finance Watch


If you were choosing an investment product, would you want the salesman to recommend what's best for you – or what's best for them?

 On 26 September 2012, the European Parliament voted to drop a proposed ban on so-called "inducements" paid to financial advisors. "Inducements" are payments that banks make to financial advisors for recommending one product over another. They work something like this:



These payments put the interests of financial advisors in direct conflict with the interests of their customers. Some Member States* have already decided to ban them but in others, consumers are still unprotected.

Finance Watch is urging EU policymakers to protect all European consumers – and in the long-run providers too – from the potentially dramatic consequences of miss-selling investment products.

If you want to know more about the European Parliament's vote on the EU directive and regulation on markets in financial instruments called MiFID2, please have a look on Finance Watch website

*The UK, Netherlands and Denmark have bans or restrictions on inducements in place or planned from 2013. The UK ban follows a period in which British banks face billions of pounds in compensation claims after miss-selling payment protection insurance and interest rate swaps to consumers and small businesses.

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