Consultation on the Green Paper on Retail Financial Services in the Single Market

Transcription

1 Consultation on the Green Paper on Retail Financial Services in the Single Market The Fédération Européenne des Conseils et Intermédiaires Financiers (FECIF) was chartered in 1999 for the defence and promotion of the role of financial advisers and intermediaries in Europe. Today, FECIF represents approximately 300,000 intermediaries across Europe through 46 national trade associations and 16 commercial groupings. FECIF is the only European body representing European financial advisers and intermediaries ( (1) Do you agree with the objectives and priorities set out in this paper? We are at FECIF globally in agreement with most of the points raised in this paper. Indeed, there is a need for a new definition of the priorities of the Financial Services Action Plan to reinforce freedom of cross border developments, more open competition, a better education of both consumers and professional players. (2) Are there issues that are not covered in this Green Paper, which are important for the integration of retail financial markets and to which the Commission's attention should be drawn? For example, are consumers in their everyday life confronted with requirements or limitations from either financial services providers or other stakeholders (employers, social security, administrations, businesses, etc.) which restrict their ability to use cross border financial services (such as an obligation to have a bank account or insurance policy in one specific country, etc.). Consumers are restricted everyday in their freedom to select the most attractive solution for their needs, and this situation is caused by the protectionism imposed by the industry regulators appointed by the Member States. This is very frustrating as much as being obliged to be a French resident to buy a train ticket on the SNCF website or similar situations An example: in many Member States, collective investments have historically been issued as bearer securities, usually requiring a custodian bank, whereas in the UK the owner s name appears on the fund manager s share register. Undoubtedly, this is what has given rise to the distinction between banking products and insurance products. Since all products are registered in the UK it is equally understandable

2 why they have fallen under one regulator, the FSA, but, to the contrary, the CBFA in Belgium for instance does not really understand the concept of unit trusts being bought by an individual applicant in registered form. However the result is unfortunate. An intermediary can create a portfolio of unit trusts/sicavs wrapped inside a life policy but is not authorised in Belgium to create an identical portfolio by investing directly in the same SICAV s, although this is a cheaper alternative for the client which carries exactly the same investment risk. This is nonsense and is not in the client s own interests. The only means to prevent such situations is for the Commission to invite the Member States to organise a proper co-regulation where the consumers are involved in the process along with the representatives of the industry (intermediaries, banks, insurance companies, etc.). One of our member, ANASF of Italy has produced a document (la Carta dei Diritti dei Risparmiatori copy attached) which is a perfect example of what co-operation between the various players can provide as a practical answer to the questions raised by the development of the Financial Services Action Plan. (3) The Commission has undertaken several initiatives to improve consultation with consumers and to secure their input into its policy making. Should further steps be taken and, if so, what steps? In order to allow a harmonious development of a single market, it is important to encourage a better communication between the various players: to facilitate permanent consultation between consumers, intermediaries and providers would help dramatically a more efficient input into the policy making process but, if there is no political willingness from the Member States to promote the development of the Financial Services Action Plan, it will be another useless exercise. (4) Is consumer choice unnecessarily limited by restrictions on the providers and channels through which they access retail financial services? What are, in your experience, these restrictions? Most of the Member States have a very restrictive policy of distribution of products and services which is obviously the main cause limiting access to broader financial services solutions. The defence of the concept of general good is the excuse generally used by regulators in order to protect the financial interest of too often the dominant local players. Italy was a perfect example with the concept of monomandato intermediary (tied agent), status which has been amended thanks to the opening of most operators to open-architecture concept.

3 (5) Despite efforts, in particular the creation of FIN-NET, the handling of cross border consumer complaints in the field of financial services still remains problematic. The Commission would welcome input as to the ways to improve the current situation. For example, should Member States be obliged to ensure that alternative dispute resolution (ADR) schemes are in place? Should providers be obliged to adhere to an ADR scheme? Should they be contractually obliged to offer ADR mechanisms to their clients? Undoubtedly, to oblige Member States to ensure that alternative dispute resolution (ADR) schemes are in place and to oblige providers to adhere to an ADR scheme, will improve the current situation. We are of the opinion also that providers should be contractually obliged to offer ADR mechanisms to their clients. Arbitration and consultation through co-regulation may avoid crisis like the misselling crisis in the UK. (6) The creation of the Single Euro Payments Area (SEPA) offers challenges and opportunities for businesses and consumers alike. What do stakeholders think of SEPA's impact on consumers? Should consumers be more involved in the governance and the preparation of SEPA? SEPA is such an important task that it is obvious for us at FECIF that both consumers and representative of all the concerned operators should be involved in the policy making process. (7) With view to the launch of its study on credit intermediaries, later this year, the Commission would like to know whether stakeholders believe the current legislative framework to be sufficient and if consumers face any particular problems in dealing with credit intermediaries, particularly on a cross-border basis. We do have a very serious problem with the multiplication of legislation covering activities complementary to each other: very often, an independent intermediary will advice his client on insurance cover, investment issues, contracting a mortgage and why not restructuring his credit portfolio. Does it mean that the same intermediary has to comply with four different pieces of legislation? If incidentally this intermediary is dealing on a cross border basis, bearing in mind that each Member State may have a different interpretation of the EU legislation, should the intermediary be dealing through 108 different pieces of legislation? Is it reasonable? We are in favour of a consolidation of legislation dealing with mediation: one basic rule for all intermediaries, irrespective what kind of product and/or service they present to the consumer. There are some fundamental issues which have to be taken

4 care of such as licensing, professional indemnity cover, information to the consumer, etc. These basic requirements could be organised through one single piece of legislation. (8) The Commission believes that it has an important role to play in developing a competitive, open and effective market for long-term savings, retirement and pension schemes that meet consumers' needs. Do stakeholders agree and how could the Commission contribute? Could an optional legal EU-wide regime ("28th regime") for savings and/or 3rd pillar pension products be envisaged? We definitely agree that a strong initiative that meets consumers' needs is required sooner than later. The Commission could invite the Members States to engage in a broad consultation with the consumers and the representatives of the industry to decide how to improve information on, distribution of long-term savings, retirement and pension schemes. The optional legal EU-wide regime ("28th regime") for savings and/or 3rd pillar pension products should also be envisaged and is recommendable to avoid unnecessary delay in the implementation of such a process. The tax issue is of up most importance as any perceived replacement to pension and/or health cover should remain tax free. It is fair to say that if the Member States quite rightly decide to transfer the responsibility to the citizens, the process of the investments/insurance cover must be tax exempt. (9) Do you think that there could be benefits for both banks and consumers, if banks would have the opportunity to offer an optional simplified standardised product, which would have a good level of consumer protection, would be easy to understand, and could be offered across borders without the need to be modified to fit local rules? We are basically in agreement with such an idea. Nevertheless, we believe that this should not only apply to banking products but also to any product offered by any UCITS/SICAV or insurance company. In addition, simplified standardised product is not always the best answer to better consumer protection, in absence of a proper co-regulation of supervision to allow all concerned parties to insure that simplified standardised product is not another excuse for large groups to impose monopolistic terms to consumers. (10) The Commission believes that more could be done to improve consumers' financial literacy and capability. Possible measures include developing guidelines or promoting best practices. The Commission would welcome input on how this policy should be further developed at the European level.

5 The consumer of today is much better informed than it was 10 or 20 years ago: generalised access to Internet, availability of specialised press, interest of the press in general for economic issues, etc. have improved the basic knowledge of the average consumer. In addition, a strong interest for financial affairs and more evidently a real concern for the financing of its future pension and health cover, have help the consumer to better understand financial issues. More competition, the opening of the borders to new concepts, etc. is of great help also. Generally, there is a lack of basic knowledge of most of European citizens for economic affairs but this is a political issue: most of the European government during the last 20 or 30 years have neglected the teaching of economics because it was conformed to a political option of certain politicians. It is clear that the Commission should invite Member States to reintroduce teaching of basic economics at school level. At our level, several trade associations members of FECIF such as ANASF in Italy and AFIZ in the Czech Republic have launched initiative to create the adequate framework for a better education of consumers (see 2 above). In the same time the Commission should support the initiative of some trade bodies such as FECIF who are trying to encourage a better education and training of professional intermediaries. (11) Do you think that, as they stand, the provisions on consumer information contained in financial services directives are adequate and consistent with one another? Were it not the case, how could the Commission ensure that information requirements are set at the right level, ensuring proper information but without creating any overload? Do you think that informing consumers is sufficient or that advice should also be provided? If yes, should that be compulsory or on request? Consumer information is generally adequate if not always consistent! Again, we notice at FECIF certain distortion between the various Member States as to regard the level of information required at providers level and rarely in favour of the consumer because the most heavy-handed regulators ask for a level of information which turns the information into an unreadable exercise The Insurance Mediation Directive is the piece of legislation which requires in the best possible format a measured, complete and realistic level of information by the intermediary to the consumer.

6 The consumer must be free to look for advice most of them are in demand of advice, but this advice must be unbiased, impartial and independent. It is another reason why an obligation of information such as the one set in the Insurance Mediation Directive is necessary. (12) Measures to improve lenders' access to credit data will be discussed in the context of the forthcoming White Paper on Mortgage Credit. The Commission believes that more could be done to promote the accessibility of credit data, in particular on a cross-border basis. Who should be able to access consumer credit data? How could the cross-border transferability of consumer credit data be improved, ensuring in particular that mobile credit data follows increasingly mobile consumers? Could a memorandum of understanding, ensuring smooth data circulation between credit bureaus, be a workable solution? Transparency is a must, but all guarantees must be provided also to consumers regarding the accuracy of the data stored, transferred, made available. A right of recourse at a European level must be made available (through a procedure similar to Fin-Net?). (13) Fragmentation of retail insurance markets, for example in the field of motor insurance, does not allow consumers to reap full benefits of EU integration in this area. Do you think that more should be done at EU level to address this fragmentation? Probably yes, but how? (14) Customer mobility and competition are closely associated. The Commission would welcome input as to how customer mobility could be enhanced. In particular, in the field of bank accounts, and as a follow-up to the Expert Group's work, would stakeholders see merits in, for example, having EU wide account switching arrangements? Will SEPA have an impact on customer mobility? Indeed, but we have serious reservation about certain recommendations made by the Commission in the paper (see attached copy of AILO letter to the European Parliament). For similar reasons we would like the Commission to move towards removing the distinction between banking/investment products and insurance products so that intermediaries can really select what is in the best interest of the client without falling foul of the law. As far as the expatriate market is concerned we feel that any collective investment product that is authorised in one European country should be freely available in any

7 other European country regardless of whether it holds a passport or not, provided that it is issued in registered form through a regulated insurance or investment broker. This will also provide impetus to some of the other steps being taken to combat both money-laundering and tax evasion and the indigenous market could also benefit from the same approach. As a matter of conclusion, we would like to draw the attention of the Commission on some issues highly detrimental to the best interests of consumers and intermediaries alike: About two years ago one of our member was invited by clients to become one board member of a new charitable foundation that they had created, the sole purpose of the appointment was to strengthen the financial awareness of the foundation s board of directors. A lawyer was forming the foundation and our member asked him, as a matter of openness with the local regulators, to write to both banking and insurance regulators asking them to confirm they would have no objection. The insurance section replied immediately saying they had none, whereas the banking section considered there would be a conflict of interest and forbade it. A foundation is not a company whose shares could be (mis)sold with insider knowledge to the public, so how can two sections of the same organization have such opposing views? There would have been more logic if they had both objected. At various time one of our member has provided information to the insurance regulator and to the banking regulator. There seems to be no communication, exchange of information or centralized document retrieval system and each department refuses to go to another one for the data. Typical conversation: Our member: We sent you that in our letter of.../../.. The regulator replies Yes, but that department is in another department/building and we cannot get hold of it so you must send it again to us. One of our members wanted to appoint a new and experienced director following a merger with his insurance brokerage. The insurance section had no objection whereas the banking section refused his request for approval to his appointment (on the grounds of insufficient experience nearly 20 years) despite the fact assurances that the person would only handle insurance cases. Just a few of the numerous complaints we received from our 300,000 strong membership Brussels, 10 th July 2007