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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, similar 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.