22 Mar 2018 | 05.30 pm
Brokers Blast Central Bank ‘Inducement’ Curbs
Financial advisers says commissions system benefits consumers
22 Mar 2018 | 05.30 pm
The organisation which represents 1,300 brokers in Ireland has rejected as “over the top” and anti-competitive the Central Bank of Ireland’s proposals to clamp down on commissions and inducements offered by insurance companies to financial advisers/
The CBI proposals were outlined last November, Intermediary Inducements — Enhanced Consumer Protection Measures.
The CBI proposals centre on certain types of commission and inducements, which would be banned, on what constitutes an “independent” broker, and on the transparency of remuneration arrangements. Its announcement of the measure last November said that the proposals “will establish requirements for financial intermediaries to tell consumers how they are paid and introduce restrictions on financial intermediaries describing themselves as ‘independent'”.
The Central Bank also said its proposals were supported by its consumer research.
The financial regulator wants to outlaw inducements that give rise to conflicts of interest, such as inducements linked to the size of a mortgage loan or inducements linked to targets that do not consider the consumer’s best interests. Examples would be targets linked to volume, profit or business retention.
Brokers Ireland chief executive Diarmuid Kelly (pictured) said: “These proposals are over-the-top. They will deny consumers choice on how they pay for advice and will cost them financially. They will force major alteration in the consumer-broker relationship.
“Once there’s transparency on the cost of advice, consumers should be able to decide for themselves the method of payment — commission or fee. Consumers are best served when systems are fair, transparent and easy to understand. The CBI proposals will overwhelm consumers with even more paper and convoluted website material. Brokers compete for business and encourage innovation among product providers, which keeps the cost of advice and financial products down,” he added.
Kelly claimed that the Central Bank is “wilfully” disregarding EU policy and legislation: “Section 72 of the Insurance Distribution Directive specifically states: ‘This Directive should not be too burdensome for small and medium-sized insurance and reinsurance distributors’.
“Such clear intent is being wilfully disregarded by Irish regulators. They are bringing in excessive regulation by the back door. If implemented it will bring 2,600 intermediaries who fall under IDD under MIFID rules, an approach rejected by EU legislators.”