From 2013 onwards, we owe separate costs for financial advice to the bank, insurer or intermediary for many insurance policies or financial products. From that date, it is prohibited to include the costs of advice in the form of commission in the pricing of the product. But why would we pay hundreds of euros for funeral insurance, for example, when we can also forego advice and choose a cheap alternative on the internet?
To which products does the commission ban apply?
The list below does not claim to be complete, but with effect from January 1, 2013, there is a commission ban for the following financial products:
- life insurance;
- pension insurance;
- mortgage loans;
- unemployment insurance;
- disability insurance;
- bank savings products;
- term life insurance;
- funeral insurance.
The commission ban only applies to products purchased from January 1, 2013. Nothing will change for existing policies, mortgages, etc.
In what form are consultancy costs allowed?
Financial service providers must charge the costs of financial advice separately. These may therefore no longer be part of the pricing of the product. Possible cost variants are:
- an hourly rate;
- a fixed rate;
- a service subscription.
Payment in installments is limited to a maximum period of 2 years, with the restriction that no interest is due for this broader payment option. No consultancy costs may be charged for repairs of so-called extortionate policies (investment insurance policies).
Why pay for financial advice?
Paying separately for financial advice (imposing a commission ban) was encouraged by the numerous financial scandals that have occurred in recent years in the advice of mortgages, usury policies and share leasing. In addition, the role of the financial advisor in the banking industry was often put in a bad light. The commission structure that was used in the financial world for years was characterized by the wrong incentives: it was not the product most suitable for the customer that was recommended, but the product that generated the highest commission for the financial advisor. In that regard, see also the contribution with the telling title “Seeing through the banking advice”.
Can one also opt out of financial advice?
Theoretically, there is indeed nothing wrong with forgoing financial advice and then simply looking for the financial product in question via the Internet at the lowest cost. After all, why would you as a consumer pay approximately 2,500 euros for extensive mortgage advice from the bank if such a mortgage is also offered on the internet on an execution-only basis for no more than 500 euros? Although this all sounds very tempting, the average consumer simply does not understand financial matters enough to arrange a complex product such as a mortgage with all its fiscal ins and outs. Moreover, a product with which people usually commit themselves for a period of no less than 30 years!
The cheapest financial advisor
One may wonder whether financial service providers will perhaps use the commission ban as a price war. The first signs of this could already be seen at the end of 2012 when Rabobank announced that it would only charge 1,750 for comprehensive mortgage advice, while financial advisors from ING and ABN Amro kept it at 2,100. In addition, Rabobank’s offer for some time included the no cure no pay condition. In other words, anyone who ultimately decided not to take out the mortgage from Rabobank did not owe any consultancy fees. Although Rabo did not exceed its limits, as no product was purchased, our national financial watchdog, the Netherlands Authority for the Financial Markets (AFM), has already announced that these types of practices will be strictly monitored. The suggestion that advice when purchasing a financial product is free is unacceptable. The only question is whether the AFM has sufficient manpower to monitor every corner of the market.
Advice is no longer free at Rabo either
People now also have to pay for advice from the Rabo, under pressure from the AFM. Advice is therefore not free, people pay the independent advisor or provider for services provided. However, the independent advisor can include multiple providers in his advice.