Ban on commissions

To calculate advice and distribution costs for products covered by the ban on commissions, direct providers must draw up a cost model. The cost model applies to all costs incurred by the direct provider in the direct channel between the initial client contact and the signing of the agreement.

Accordingly, the cost model applies to direct providers who give financial advice about products covered by the ban on commissions and to providers who offer these products on an ‘execution only’ basis, i.e. without advice.

A request for information by the AFM in May 2013 showed that, in many cases, providers translate the outcomes of the cost model into a commercial rate by rounding the numbers up or down. The desire of market parties to state the prices for their services in round numbers is understandable.

However, when they round their prices, providers must bear in mind that the advice and distribution costs they ultimately charge must reflect the actual costs incurred for advice and distribution services. Any deviation may mean that the costs stated in the financial services document do not match the actual costs. The AFM considers that rounding costs within a range of five percent is not unreasonable.

Yes. Direct providers and independent advisers/intermediaries may offer clients a free introductory meeting. In this meeting, providers can explain to the client how they will provide their services and how much those services will cost. If the client decides to obtain advice, providers must charge the client directly for the cost of providing that advice.

No specific advice

Usually, one meeting is sufficient for an introduction. It is not the intention that specific advice will be given during an introductory meeting or that the specifics of the client’s situation will be examined. As soon as a provider starts to give advice, they must charge the client an advisory fee.

Of course, providers can also give clients a free introduction to their services during the management phase.

Is it necessary to have a statutory auditor check the cost model?

Providers who give financial advice about products that are covered by the ban on commissions or who offer such products on an ‘execution only’ basis, must create a cost model to determine the advice and/or distribution costs. The cost model must be checked by an accountant to ensure it is accurate. In addition, every year, an accountant must check that the estimated advice and distribution costs are correct and fully attributed to the financial products.

The check by an accountant is necessary to ensure that the advice and distribution costs, which must be set out in the financial services document, match the estimated costs.

The cost model must be checked by a statutory auditor. This may be the same statutory auditor who checks the direct provider’s financial statements.