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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 Inducements

CFA 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.

Main takeaways:

•    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

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

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.