News

The current crisis in financial markets has been a reminder of how vulnerable financial markets are to imprudent behaviour and uninformed choices of financial products by customers. The increasing range and complexity of financial products make it extremely difficult to assess the risks associated with specific products. The ability for customers to make informed decisions about financial products in the situation of purchase is decisive, and highly dependent of the quality of advice provided by employees.



The Commission will send out a communication 21 April on forthcoming policy initiatives on retail investment products that aim to enhance the protection of retail investors.



“For UNI Finance, the Commission must ensure that remuneration and incentive systems as well as working practices put customers first – not profit and sales targets,” said Oliver Roethig, Head of UNI Finance. “Exclusively rewarding sales of products increases the risk of financial products being sold to customers, which they neither need nor want or even cannot afford.”



Proper safeguards for retail investors are needed – to protect consumers, but also to mitigate the risk of the recurrence of a similarly devastating crisis. Therefore:



1. Incentive structures for employees in sales and advice functions should encourage good customer services and qualified advice and not only sale of products. Remuneration structures should not be linked to individual sales targets.



2. Prudent supervision should oversee that incentive structures for employees sales and advice functions are appropriate, customer-oriented and risk conscious. Authorities should be able to penalise inappropriate practice.



3. There should be structured dialogue between unions in the finance sector and supervision authorities at all levels to address this issue and other internal practices affecting companies’ risk management and the stability of the financial system.



4. Charters on responsible sale of financial products should be developed by each financial institution and to be agreed between management, unions and other stakeholders



5. Measures should be taken to ensure sufficient and continuous training of employees to keep up with the rapid innovation and increasing complexity of the financial products they sell. Employees must have a full understanding of the products they sell, in particular in terms of the implications for customers.



“Consumers have the right to good advice,” said Roethig. “In its future legislation the EU must ensure that finance workers’ get the right to give good advice.”



For the text of the submission, see "Related Files".

Further contributions to the EU were given on:

• financial markets supervison
• remuneration in the financial services sector
• financial inclusion

UNI Finance's statement and key issues paper on finanical reform can be found here:

"http://www.uniglobalunion.org/Apps/iportal.nsf/pages/20090324_flp3En"