A British consumer advocate says that embedded commissions must be banned to ensure that financial product distributors act on behalf of their clients.
In a speech to a regulatory seminar, Mike Dailly, working group chairman with Britain’s Financial Services Consumer Panel (FSCP), said that proposed changes to European regulations must not do anything to dilute the ban on embedded commissions that is set to take effect in Britain in January 2013.
“We need to ensure that there is no dilution of the ban on commission. The removal of commission is key to ensuring that providers of financial products act as the true agents of their customers,” Dailly said.
Dailly raised concerns about possible dilutions to consumer protection by EU legislation, which was proposed on July 3 and is set to be debated again in the EU Parliament in early October.
He noted that the FSCP believes that many of the changes proposed are positive, such as a requirement that all insurance sales to be undertaken “honestly, fairly and professionally in the best interests of customers”. However, it is concerned about any possible impact on the planned commission ban in Britain, and on the work of the Financial Ombudsman Service (FOS).
In particular, he expressed concerns about any impact on its practice of publishing complaints data, and its ability to make binding decisions. He stressed that the reforms “must not undermine the authority of the FOS to make binding decisions and to publish information such as complaints data.”