The €200 cap was contained within a draft of the Key Information Documents for Investment Products (KIDIP) regulations published in early November.
The proposed KIDIP regulations are primarily aimed at creating a workable information document which can be supplied to a retail investor when purchasing an investment product, similar to the Key Investor Information Document introduced by the Ucits IV directive.
However, the scope of the regulation has widened and the recent draft included a new clause which, among other things, set out stipulations in relation to adviser fees, including the €200 cap, but also around fee disclosure.
Representatives from across the savings industry in Europe reacted angrily to the proposals.
Chris Hannant, director general of the Association of Professional Financial Advisers (APFA) in the UK, said even the principle of a fee cap was unworkable and expressed relief the proposal was scrapped.
APFA had been working in conjunction with BIPAR (the European Federation of Insurance Intermediaries) to pressure Members of the European Parliament involved in the legislation to drop the cap.
“Capping the amount advisers can charge amounts to a form of price control,” said Hannant. “History has shown it doesn’t work. Regulators must seek to promote competition within financial advice, not fetter it. The best protection for consumers comes through choice and transparency. A price cap would undermine that, as well as being hugely damaging to advisers.”
According to research published in May by intermediary database My Touchstone, advisers in the UK, who have had to use a fee-based structure since the beginning of 2013, charge an average hourly rate of £164.92 – around £3 less than the proposed €200 cap.
Paul Stanfield, chief executive of the Federation of European Independent Financial Advisers, said the concept of introducing a cap on a transparent fee was “bizarre”, and added that, while this was not an official view of his organisation, it seems to introduce a “restriction on trade”.
“Lawyers and accountants don’t have a cap, fees are set and clients decide who they want to use and therefore whether to pay them,” said Stanfield. “Furthermore, introducing the cap at such a level would be down-valuing the worth of the adviser.”
The comparison between the intermediary profession and others similar was also drawn by Vincent Derudder, chairman of pan-European intermediary trade body FECIF who said: “To limit hourly rates of any profession totally contradicts the intention of the European Union to create a free single market for investment products.
“Moreover, the amount spent for a service is a client’s independent decision and prices for advice follow the law of supply and demand.”