Commission ban no big deal
As regulators' war on commissions goes global, a local financial adviser industry spokesman says the issue of a possible ban on investment commissions has been overblown.
Wednesday, August 29th 2012, 7:00AM
by Niko Kloeten
The European Government is the latest to look at some sort of ban on commissions for financial intermediaries and like elsewhere the move has prompted controversy within the industry.
The International Adviser website recently reported that the Fédération Europpéene des Conseils et Intermédiaries Financiers (Fecif), a group representing financial advisers, is campaigning strongly against the proposal.
The proposal to ban commission forms part of the European Commission's review of the Markets in Financial Instruments Directive, known as MiFID2.
International Adviser reports Fecif chairman Vincent Derudder has described the measure as "highly anti-democratic" and said it would hurt small businesses and investors.
But according to Institute of Financial Adviser chairman Nigel Tate, it wouldn't be a major issue for either advisers or investors if investment commissions were banned in New Zealand.
"It's not as big an issue as people tend to think... it's something that has been amplified beyond its real position," he said.
He said that as more and more jurisdictions around the world implemented various forms of commission bans, the likelihood of it occurring in New Zealand increased.
"It's probably five years away but I don't have any particular issues on it and most investment people these days are charging a fee anyway."
He said most investment products are now set up to pay a fee as opposed to a commission but there are some legacy products that have been structured to pay commissions, hence why any ban is still likely to be some time away.
Vocal protests like those against the European proposal could occur here if an investment commission ban was proposed but they would be from a minority, Tate said.
"Like anything you get a small minority who cause a problem which the majority have to pay for."
Niko Kloeten can be contacted at email@example.com
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