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Ban on commissions for complex products in the Netherlands announced

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Brechje van der Velden

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03 October 2011

During the past few years the statutory regulation of advice regarding, and the sale of, complex financial products in the Netherlands has increasingly been tightened.

One of the main objectives of this new regime was to achieve a cultural shift in the intermediary market from product-driven sales to consumer-oriented advice. However, an evaluation in 2010 showed that this shift has not yet taken place. As a result, the Minister of Finance has proposed several far-reaching measures to achieve this goal, including a complete ban on commissions on complex financial products as of 1 January 2013.  In this article we examine the proposed ban on commissions and other measures. 

Existing regime

The Dutch regulations on commissions are contained in the Act on Financial Supervision (Wet op het financieel toezicht (Wft)) and the Decree on the Supervision of the Conduct of Financial Enterprises pursuant to the Act on Financial Supervision (Besluit Gedragstoezicht financiële ondernemingen Wft (BGfo)). The regulations on commissions not only cover complex financial products1 and mortgage credit, but also payment protection insurances and funeral insurances. The regulations are primarily aimed at eradicating perverse stimuli that can be created by the payment of commission, at enabling consumers to impact market discipline, and at providing financial supervisors with measures to intervene against excesses in the market.

The regulations are based around three main themes:

  • Remuneration transparency: in the precontractual phase a consumer should be informed of the amount of the reward and the extent of the services of the intermediary (Article 58 BGfo). This information should be contained in a so-called information provision document  (dienstverleningsdocument) which must be provided to a consumer prior to the advice or broking activities (article 149b BGfo).
  • Balance and repayment rule: to prevent so-called “hit-and-run” advice. This was a major problem in the 1990s and early 2000s, with intermediaries advising on securities lease products and investment-linked policies and receiving large commission payments at the outset of the transaction. The initial commission paid to the intermediary, as a percentage of the total commission, has been reduced during the past few years. In this regard the balance rule provides that the initial commission an intermediary receives from the provider cannot exceed more than half of the amount of the total commission (initial commission plus all ongoing commissions) (Article 150 BGfo).  The repayment rule determines that if the consumer terminates the contract early (within five years) through unnatural attrition (eg not through the death of the consumer or sale of the underlying real estate), the initial commission is reduced proportionally (Article 151 BGfo).
  • Inducement rule: to ensure that an intermediary acts in the interest of the consumer, the inducement rule prohibits commissions that are not necessary for the provision of the performed service, or to enable it (Article 149a BGfo).

Is the current regime working?

The current regime was evaluated in 2010 by order of the Minister of Finance. The goal of the evaluation was to establish whether the tightened-up regime had actually led to the desired cultural shift in the financial market, ie a transition from product-driven sales to consumer-oriented advice, whereby the  intermediary and the provider of the financial product pay more attention to the consumer and his requirements. 

The evaluation led to three main findings:

  • First, potential consumers are not well enough informed about the service and the costs they can expect. As a result, consumers are not capable enough to provide a counter voice to intermediaries. This was found to be partially due to a lack of transparency in information provision documents, and partially due to consumers themselves, who do not take notice of (all of) the provided information. 
  • Secondly, the most influential perverse stimuli and ‘hit-and-run’ practices had disappeared from the market, providing evidence for at least some success of a stricter regime.  
  • Thirdly, although market players comply with the rules, they have not yet internalised the desired cultural shift, and the link between providers
    and intermediaries is still very strong, with the provider – and not the consumer – determining the level of the remuneration.

Proposed measures

Ban on commissions

As a result of these findings, the Minister has proposed several measures that should speed up the desired cultural shift. The most important measure, and the one that will have the biggest impact on the market, is a complete ban on commissions on complex financial products, mortgage credits, loss-of-income insurances, funeral insurances and service provision under the national MiFID regime.  According to the Minister, this is the only way to break the strong link between providers and intermediaries, and to reach a pure market model whereby the consumer and intermediary determine the reward for the service. The intermediary would then no longer receive perverse stimuli to act in his own interest, and would be able to provide truly objective advice. In addition, the Minister expects the ban to lead to a simplification of the regulations on commission. Both providers of financial products and intermediaries have already expressed their support for this proposal.  

Standardised information provision document

To tackle the issue of the lack of transparency in the information provision document the Minister has proposed to standardise it. Although the new format for this kind of document has not yet been worked out in detail, the purpose of the standardisation will be to make it more transparent, more recognisable and easier to compare with information provision documents from other intermediaries.

If the proposals for the ban on commissions and the standardised information provision document are accepted, they will enter into force on 1 January 2013. We understand that the decision is not being appealed.

Open standard for remuneration

The Minister has proposed an open standard to guard against excessive direct remuneration. Currently, there are no rules of public law regarding the direct remuneration of intermediaries by consumers. The Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, or AFM) has signalled that this lack of regulation can lead to consumers being charged excessive remuneration. Although the consumer is in those cases often being informed about the (excessive) amount of remuneration charged, he is not capable of changing this. An open standard would provide the AFM with a measure to take enforcement action against these intermediaries, or even impose a sanction.

Ban on bonus provisions for non-life insurances

To prevent providers from shifting the commission from those products that will fall under the announced ban, to non-life insurances that will not fall under it (the so-called waterbed effect), the Minister has also announced a ban on bonus provisions for this kinds of insurance. Only initial and ongoing commissions will still be allowed.

Both these latter measures are meant to cut off avoidance routes that market parties may be tempted to use with the announced ban on commissions for complex products. These measures will enter into force on 1 January 2012. 


The proposed changes will change the landscape of financial intermediation significantly. Where the intermediaries now can currently still rely on the financial institutions to provide them with a commission for each product sold, they will, after the implementation of the ban, more than ever need to convince customers of the value of their advice and service, as the consumers will become their direct source of income. If it is up to the Minister, consumers will not be able to save this money by instead turning to the bank or insurance company itself or an authorised agent. The Minister has already announced other measures to keep a level playing field between the different market players. 

For authorised agents, who do not fall under the commission regulations, the Minister will introduce a rule prohibiting payments that are detrimental to the obligation of financial institutions and authorised agents to act in the interest of the consumer. Volume-related payments will no longer be allowed. The Minister also wants to introduce the information provision documents for the direct sales channel. The document should become an orderly and recognisable document on the basis of which consumers can easily compare the different service concepts and the accompanying costs.  

To reach a perfect level playing field it is of course necessary that the price of a financial product offered through an intermediary is lower than when distributed through the direct sales channel. With a good market in the pure market model this difference should become noticeable. If however for some reason the market does not reach this point, the Minister has already announced that he will implement further measures. 

Finally, it should be noted that, despite all the new regulations on commission, consumers can still choose not to seek advice when purchasing a financial product. 

If this product is a complex financial product or another high impact product, the Minister has proposed to ascertain that a customer has enough knowledge and experience to be able to purchase the product without seeking advice. If he does not, the customer needs to be warned that it is wise to seek advice after all. The starting point however is that a customer has the freedom to choose a distribution channel and whether or not he wants to seek advice when purchasing a financial product.


  1. In article 1 BGfo a number of financial products are defined as complex. Among these products are: (i) a combination of two or more financial products that contain at least one financial product whose value depends on developments, in the financial markets or other markets, (ii) a life insurance, other than funeral provisions insurance or other insurance, which serves exclusively for paying monetary benefits providing for the funeral of a natural person, or insurance whereby the insurer’s obligation to make a payment or a series of payments only arises if the death of the person to whose life the insurance relates occurs before the date specified in the policy, (iii) a combination of a mortgage loan with life insurance as referred to under (ii), or with a savings account, and (iv) an investment object.

Further Information

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