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Archive » March 2023 » Remuneration models in the European financial industry: the impacts of a revision of the regulatory framework

Remuneration models in the European financial industry: the impacts of a revision of the regulatory framework

Angela Maria Bracci, David Sabatini
March 2023 - n. 3
Keywords: Banche, modelli distributivi, modelli di remunerazione, investitori
Jel codes: G21, G28

The European Commission is working on the Retail Investment Strategy to strengthen protections for retail investors and increase their participation in capital markets. The actions include the revision of the inducement regime envisaged by MiFid. One of the possible options is a ban on such incentives, as already operating in some European countries. The article compares the two commission-based and fee-based models present in Europe, highlighting how, if they do not present significant differences in the total cost incurred by customers, they differ from the point of view of retail investors' access to the advisory service, with a marked advice gap in the former, and widespread access to advice and services with high added value for clients in the latter, made possible by the relegation mechanism. The article concludes that the distribution model based on retrocessions of commissions is better suited to the needs of customers with limited resources and low level of financial education and, therefore, drastic and generalized measures do not appear justified.

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