By Pádraig Hoare
Brokers should let customers know what commission they are being paid by financial firms if selling a product, the Central Bank has said.
The bank outlined proposals which also suggested certain types of commission and other inducements would no longer be acceptable. They would include bigger commission on bigger loans, or bonus payments for hitting targets.
The proposals would require brokers to tell consumers how they are paid and introduce restrictions on firms describing themselves as independent, said the Central Bank. Its consultation paper came after research found almost three-quarters of consumers wanted financial brokers who were independent.
Just under a third of consumers were unaware how brokers were paid, while almost half said they would like to pay brokers a one-off fee because it made the process easier and cheaper.
The watchdog’s financial conduct director Derville Rowland said the proposals would bring greater clarity to consumers. The main body representing brokers in Ireland said the proposals on transparency were welcome but advised against further restrictions on commission.
Chief executive of the 1,300-member Brokers Ireland, Diarmuid Kelly said: “Ending inducements such as targets linked to volume, profit or business retention is very much in a consumer’s interest and creates a level playing field among financial advisers, small and large.” He said Ireland needed to take on board the lessons from the UK ban on the commission method of paying for financial advice.
“The introduction of regulations in the UK in 2012 has resulted in the cost of advice increasing, leaving the less well-off unable to afford impartial advice,” he said.