A recent vote by the EU’s Economic and Monetary Affairs Committee, known as Econ, to ditch plans to cap advisers’ hourly rates came after pressure from a European IFA trade body, FTAdviser can reveal.
Econ recently voted to ditch plans to cap the hourly rate that can be charged by IFAs at €200 (£167).
FTAdviser has learnt the committee’s u-turn came after the European Federation of Financial Advisers and Financial Intermediaries, known as the FECIF, wrote to MEPs pointing out a cap would create an uneven playing field by “unilaterally favouring salaried sales staff of banks and tied-agents of insurance companies.”
With regard to the total costs associated with an investment, Article 8(2) called for “a clear distinction between what comes under the product manufacturer and what falls under the persons selling investment products, including summary indicators of these costs.”
Yesterday, FTAdviser reported MEPs had abandoned their ‘vague’ plans to cap advice costs.
Chris Hannant, director general at the Association of Professional Financial Advisers, said if the EU had put in place a cap of adviser charges people would have had to find ways to get around it to be profitable.
He said: “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.”