A European Parliament proposal to cap adviser charges at €200 (£167) has been withdrawn from a final draft text of new rules introducing new ‘key information documents’, which was successfully voted through yesterday (20 November).
The EU plenary vote withdrew a proposal to cap adviser charges, with the Association of Professional Financial Advisers says was “vaguely worded” and could have resulted in total costs being limited to €200, rather than an hourly limit.
The amendment had said: “When an hourly rate is charged, the total amount charged should not exceed €200.”
Speaking to FTAdviser, Chris Hannant, director general at Apfa, said it was unclear whether this meant total amount charged per hour or overall, and that the abandonment of the proposal meant legal advice would not be sought to clarify the point.
Mr Hannant said Apfa was in contact with MEPs in the principal parties and worked in partnership with BIPAR, the European federation for intermediaries.
He added that the idea was mooted by Sharon Bowles MEP, member of the European Parliament for south-east England, who had seen the news how adviser charging could prevent the mass market from seeking financial advice.
Mr Hannant said: “If it was effective, people would not have have given advice or, quite often, those proposals are ineffective and people find ways to get around it. We don’t want advisers put in a position where they have to get around rules to do business on a profitable basis.
“Capping the amount advisers can charge amounts to a form of price control. History has shown it doesn’t work. Regulators must seek to promote competition within financial advice, not fetter it.
“The best protection for consumers comes through choice and transparency. A price cap would undermine that, as well as being hugely damaging to advisers.”
The European Parliament vote backed proposals for a key information document to be adopted across all financial products.
The document is based on the key investor information document which was introduced to regulated investment funds under Ucits IV rules in 2011. The new document will apply to structured products and other products aimed at retail investors.
In 2012, the European Commission announced proposals for legislation aimed at providing greater protection for retail investors, including new regulation on Key Information Documents for Packaged Retail Investment Products.