Irish insurance brokers could soon be made to reveal their commissions
New rules would mean financial advisers will have to be more transparent with customers.
FINANCIAL INTERMEDIARIES, SUCH as insurance brokers, will likely have to be more transparent with consumers under proposed new rules.
The Central Bank has just published a consultation paper with a range of measures to enhance the protections for consumers when seeking advice from financial advisers.
The main intent of the proposals is to make it clearer for consumers as to how their financial adviser is getting paid, and how independent they really are.
One of the suggested rules would mean that brokers would be required to prove that they are giving the customer the best deal possible and are avoiding any conflicts of interest.
For example, if a broker had an arrangement with an insurance company that it would get a bonus every time it sold 100 premiums, this could be regarded as a conflict of interest.
Under the proposals traders would be required to keep records to demonstrate how conflicts of interest arising from inducement arrangements, such as large commission payments, have been avoided for each transaction.
It would require the likes of brokers to present a summary document showing anything that could lead to a conflict of interest to customers before any products are sold.
Conflicts of interest
Intermediaries could also be required to publish a summary of any arrangement that they have with a product provider on their website and in their practise.
This would include information like any commission that a broker received for selling a product, the value of the commission and any other ways that the broker could get money from a transaction.
“The purpose is that consumers are informed about factors that have the potential to influence an intermediary’s recommendations and, therefore, can identify potential conflicts of interest themselves,” the Central Bank said.
“Greater transparency can also act as a discipline on the market in a wider sense, as it will be clearer to all concerned what nature of arrangements are in place.”
Another proposal would mean that intermediaries would only be able to describe themselves as ‘independent’ if all of their activities “are provided on the basis of a fair analysis of the market”.
The suggested measures would also put a ban on intermediaries receiving certain types of commission, such as where incentives are linked to the size of mortgage loans.
The UK introduced a ban on all commissions for retail investment advice in 2012, however brokers have said a similar move here could cut the number of financial advisers in the market and make them unaffordable for the average punter.
Following the publication of the consultation paper, the Central Bank is taking submissions on the issue. The closing date is 22 March 2018.
