No ban on commissions ‘at this stage’ Central Bank says

Regulator says prohibiting payments could be a ‘bigger shock’ for Irish market than UK

The director of consumer protection at the Central Bank has ruled out an outright ban on commission payments for financial advisors, arguing that such a move could be a "bigger shock" for the Irish market than a similar ban has turned out to be in the UK.

Commission payments to intermediaries is one of the key areas of focus for the consumer protection directorate at the regulator over the coming year, but when asked if he would consider an outright ban, director Bernard Sheridan said, "At this stage, no".

“We don’t want to jump in to a situation where it disrupts the market and where consumers end up losing out,” he said, noting that the experience in the UK, which banned commission payments in 2012 and subsequently saw a decline in the number of financial advisors available in the market, has “made us more cautious”. Given the structure of the market here, he also thinks banning commission payments could be a “bigger shock” than it was in the UK.

Following on from a recent discussion paper the regulator will later this year consider specific issues related to commission payments, including volume-based and over-ride commissions, as well as how “independent” advisers are remunerated. Under forthcoming European regulations, independent advisers across Europe won’t be able to accept and retain inducements, and so will have to charge a fee for their services - Irish advisers can currently accept payment via a fee or commission. However, while this ruling is mandatory from January 2018, Ireland does have scope in terms of how many advisers must comply with it.


Elsewhere in the report, which sets out the regulator’s consumer protection priorities for the year ahead, the absence of a consumer-focussed culture within firms is noted as presenting “a significant risk” to consumers.

“It’s an ongoing challenge if you like, but we do see some progress in some firms,” Mr Sheridan said.

Mortgage switching will also be on the agenda, as the regulator seeks to assess whether or not there are further measures it could introduce to facilitate consumers who wish to switch their mortgage. “More people should be switching,” Mr Sheridan said.

Of the ongoing tracker mortgage redress review, the Central Bank expects that all all relevant lenders will have identified and commenced engagement with most impacted customers by mid-2017, “with the payment of redress and compensation extending beyond this point for some lenders”.

The regulator expects to conduct a range of themed reviews and inspections this year, including: insurance companies selling niche/add-on insurance; payment institutions’ safekeeping of client funds; and retail intermediaries’ compliance with minimum standards.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times