The European directive on markets in financial instruments known as "MiFID II" now imposes strict conditions on the collection by investment service providers (ISP) and distributors of financial instruments of retrocessions of commissions as remuneration for services rendered to their customers, going so far as to prohibit them in certain cases.

As part of the ongoing MiFID II review, the European Commission has decided to re-examine the regulatory framework applicable to these retrocessions of commissions, considering possibly a general ban. In this case, the investor would remunerate the ISP/distributor by paying them a fee directly. In particular, the customer wishing to be advised on his savings would then have to pay his financial intermediary directly to benefit from this service. This fee-based model is the one practiced in the United Kingdom and the Netherlands.

To contribute to this debate, decisive for the access of retail investors to financial products, several French, Spanish and Italian professional associations, including AMAFI[1], have mandated KPMG to carry out a comparative study of these two models. The study focuses notably on the costs borne by the investor, with the objective thus to verify the competitiveness of the model with retrocessions of commissions, present in all the Member States with the exception of the Netherlands, compared to the model based on fees.

Main findings

In terms of costs, the study finds that the two models are comparable for retail investors. The total cost of ownership of the products borne by an individual investor does not depend on the distribution model, commission- or fee-based.

Furthermore, the study concludes that, in countries where retrocessions are banned, investment advice is only accessible to investors with a certain amount of financial assets: £100,000 in the United Kingdom and £500 000 € in the Netherlands. Below this threshold, customers are offered standardized and/or digital advice, delivered by robo-advisors for example. This finding should be put into perspective with the observation that a very large majority of retail investors in these countries, as well as in France, consider that advice should always include some human interaction[2].

Finally, the study looks at the arrangements put in place by financial intermediaries remunerated by commissions, to prevent and manage conflicts of interest. It concludes that robust guarantees to protect investors are in place, in particular since MIFID II strengthened its requirements in this regard.

Based on this study, the participating Associations conclude that no model should be favoured over another. Investors must have the freedom to choose the advice model that best suits their needs, as long as they benefit from clear information on the method of remuneration used.

Download the study