"Ban on commission would eliminate private supply"

In a move aimed at promoting transparency and ethical practices, the Greens and the Left Party have proposed the abolition of commission-based financial advice in favour of fee-based advice. However, this shift has sparked debate and concerns among experts and the public alike.

The proposed changes would see citizens paying for financial advice either based on consultation effort or a flat rate, as opposed to the current system where advisors are remunerated through commissions. While this shift is intended to eliminate potential conflicts of interest, it has raised questions about the affordability and accessibility of financial advice, particularly for low-income earners.

One of the main concerns is the cost of fee-based advice. Hourly rates can be high, burdening customers' liquidity immediately and in a lump sum. Additionally, VAT of 19 percent must be paid on fees, while commissions are tax-free, making fee-based advice more costly for consumers.

Michael Heuser, the scientific director of DIVA (German Institute for Asset Building and Retirement Provision), has been critical of the proposed pension reform plans of several parties, including the Greens, SPD, Left Party, Union, and FDP. Heuser has also criticized the FDP's equity pension plan.

Online advisory services, while convenient, may not provide sufficient support for prioritizing and correctly dimensioning financial products. The lack of personal interaction could lead to existential risks remaining uncovered, potentially putting citizens at risk.

The Left Party has proposed strengthening the responsibility of consumer centers in advisory matters, aiming to provide more accessible and affordable options for those who may struggle with the costs of fee-based advice.

However, the proposed changes could potentially lead to a decline in the number of financial advisors, affecting around 250,000 intermediaries. This could complicate consumer decision-making, as the proliferation of offers, advertising, and comparison portals in the digital space may already make it difficult for consumers to navigate the financial advice landscape.

Moreover, the proposed changes may not effectively address consumer protection concerns, as fee-based advice can be more expensive, especially for low-income citizens. This could leave many at risk, particularly those who may not have the means to afford professional financial advice.

In light of these concerns, it is crucial for policymakers to consider the potential impact of these changes on various stakeholders and to develop a statutory fee order in cooperation with consumer centers and the industry to ensure fair and accessible financial advice for all.