Abstract
Abstract Inducement regulation is intended to target the conflict of interests between financial advisors and their clients. Nonetheless, it may also represent a ‘public policy device’ meant to conform the activity of European distributors with investor protection goals; indeed, by selecting the conditions under which distributors can freely collect inducements, the European regulator simultaneously shapes the market for financial services. Accordingly, ‘spot advice’ (which poorly performed in the past) is indirectly banned by the quality-enhancement provision set forth in art. 24 MiFID II, and the acknowledged importance of on-going monitoring of the portfolio opens up the collection of inducements linked to the provision of ‘periodic advice’. Since this new regime will probably increase the overall costs of investment advice enlarging the ‘advice gap’, the European regulator tries also to foster the development of FinTech permitting the collection of inducements even outside the strict provision of investment advice. Nevertheless, the concerns regarding investor protection raised by FinTech services (which allow only a mere ‘self-assessment’ of the investor’s profile) suggest a broader interpretation of inducement regulation, with the purpose of enabling investment firms to provide low-cost financial advice capable of effectively encompassing every stage of the investment relationship, from the early assessment of clients’ characteristics and objectives to the on-going management of the investments (‘simplified advice’).
Highlights
With the exception of the Netherlands, the business model of European distributors is mostly based upon ‘inducements’:1 commissions, fees and other nonmonetary benefits typically paid back to financial intermediaries by asset managers for the distribution of their products.Such a remuneration scheme may create a severe conflict of interests between distributors and their clients
It may represent a ‘public policy device’ meant to conform the activity of European distributors with investor protection goals; by selecting the conditions under which distributors can freely collect inducements, the European regulator simultaneously shapes the market for financial services
Since this new regime will probably increase the overall costs of investment advice enlarging the ‘advice gap’, the European regulator tries to foster the development of FinTech permitting the collection of inducements even outside the strict provision of investment advice
Summary
With the exception of the Netherlands, the business model of European distributors is mostly based upon ‘inducements’:1 commissions, fees and other nonmonetary benefits typically paid back to financial intermediaries by asset managers for the distribution of their products. The stricter these rules are, the more ‘disruptive’ such a change is going to be In accordance with these premises, this article intends to examine how – and to what extent – inducement regulation is going to shape the European distribution systems of investment products, assessing whether the new rules are able to adequately protect retail investors in the recent technological and ‘cultural’ evolution of financial markets (sections 2–4). From this new perspective, the article will analyze the overarching architecture of MiFID II investment services, discussing in more detail the role of the new inducement regulation in modeling the provision investment advice (sections 5–9). Because FinTech – and especially robo-advice – may represent only a partial solution, section will attempt to solve this problem, while section will conclude
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
