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Part II Investment Firms and Investment Services, 6 Independent Financial Advice

Paolo Giudici

From: Regulation of the EU Financial Markets: MiFID II and MiFIR

Edited By: Danny Busch, Guido Ferrarini

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 24 September 2020

Subject(s):
Conduct of business regulation — Enforcement — Investment business — Regulated activities — Supervision

The quickest policy indication for increasing households’ trust in financial markets, to the benefit of the economic system, seems to be the offer of professional financial advice on affordable terms. The problem is how to convince investors to pay for advice, and how to protect investors who do not want to pay for advice from conflicted advice and from hard sell under the guise of personal recommendation—an area where MiFID I has not performed well. MiFID II’s answer is to pose a new set of information duties on financial advisors with the clear intention of nudging investors towards independent, fee-only advice. The intention is good. However, the new regime raises many important issues, including the ambiguity of the ‘independent’ suit, the interaction between the product governance regime and the suitability assessment, the regulatory inconsistency that it is emerging between investment advice and portfolio management, and the potential costs of the written statement of suitability.

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