CFA Institute Global Survey on Inducements
This survey examines the implications of possible regulations restricting inducements on the sale of specific investment products. Findings suggest that a complete ban would fail and regulators should focus on improving of cost-disclosure standards.
CFA Institute Global Survey on InducementsCFA Institute Global Survey on Inducements
This global survey is an update of a previous one conducted in 2013, “Restricting Sales Inducements,” which focused on the issue of the mis-selling of financial products and the implications of the inducements practice. Inducements are payments, commissions, or kickbacks, which are usually associated with the sale of specific financial products. These are typically paid by distributors to financial advisers.In the past years, a few competent authorities in some jurisdictions, such as the Netherlands and the United Kingdom, have put in place restrictions on inducements regarding advice for particular investment products, while regulators in other jurisdictions have been considering the introduction of new measures regulating commission payments. In light of such developments, this new survey gauges CFA Institute members’ opinions on the introduction of possible reforms related to the payment of inducements to advisers and the consequences of these measures on the offer of financial products and advice to retail investors.
• Linking remuneration to the sale of specific financial instruments or their sales volume does not encourage distributors to provide services in the clients’ best interests. The two most desirable regulatory reforms to address the mis-selling issue are to mandate clearer and full disclosures of all commission and fees paid and to improve product information, including cost structures, to clients.
• A complete ban on inducements paid to financial advisers is not seen as a solution. Such a measure could have a negative impact on the variety of products offered to clients. In particular, distributors may stop (or reduce) offering third-party products.
• Regulators should focus on the enhancement and clarification of standards on cost disclosures, simila to the standards that are in place for performance information.
• Strengthening investor education is a priority and should be the regulators’ main focus before introducing new regulatory measures.
About the Author(s)
Josina Kamerling is head, regulatory outreach, for CFA Institute for the Europe, Middle East, and Africa (EMEA) region and is based in the Brussels office. She is responsible for supporting CFA Institute's EMEA policy development, advancing the impact of advocacy efforts, and promoting capital market integrity and investor protection issues.
Roberto Silvestri is EU policy specialist for CFA Institute, and is based in the Brussels office. He supports CFA Institute capital markets policy activities and developments for the Europe, Middle East, and Africa (EMEA) region. Prior to joining CFA Institute, Roberto was a Robert Schuman trainee at the European Parliament in Brussels where he worked in the ECON Team of the Policy Department for Economic, Scientific and Quality of Life Policies. Previously, he had an internship at Assonime (Association of Italian joint stock companies) in Brussels.