MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Posts Tagged ‘kick-backs’

Swiss Court Requires Credit Suisse to Tell Client All About Kick-Backs

Tuesday, August 16th, 2011

The Swiss newspaper NZZ reports today (print only) that the Handelsgericht of the Kanton Zurich (business court) decided that a client has the right to be informed about all kick-backs, retrocessions or distribution fees the bank received from a third party for products sold to the client. The client had sued Swiss private bank Credit Suisse. The bank had sold to him equity notes of J.P. Morgan and did not disclose kick-backs received.


Labor Unions and Wealth Managers Team Up

Thursday, January 20th, 2011

The German minister for consumer protection has announced to send under cover investigators to banks’  wealth advisors to check whether their advice is following the rules and to identify possible weak spots. This latest government measure to protect consumers comes after repeated reports of banks who are  often pushing products with heavy commissions (kick-backs) into the portfolios of their private clients.

All this has lead now to a coalition between wealth managers and the biggest German service employees union. According to reports by the SPIEGEL the union has already collected 60′000 signatures against the new measure to protect bank clients. The report is here (German only).

I think this is great: greedy bankers and leftist unions unite to keep exploiting the consumer. If only Karl Marx knew about this, he would roll over in his grave…


Financial Times Quotes MyPrivateBanking on Anti-Kick-Back-Initiatives

Monday, December 6th, 2010

The Financial Times is quoting MyPrivateBanking’s research director on how kick-backs are on the (slow) retreat in Europa. Frequently, fund sponsors and other financial product providers are paying kick-backs or commissions to private banks and wealth managers when they sell their products to clients. This happens often without disclosing the commission to the private banks’ or wealth managers’ client:

But as in the UK and US, the European Commission and some national governments on the continent are laying track for more consumer and investor protection measures. “That’s a big force - not directly for fee-based consulting, but for more transparency, more disclosures, more fairness, whatever that might be,” Mr Binder says. “There are a number of regulatory initiatives right now - where banks have to disclose the ‘kickbacks’ from fund firms and fund sponsors, for example - that will have the effect at the end of day for more consulting to look like fee-based consulting.”

MyPrivateBanking has just released a report on fee-only financial advice in Germany.


German High Court: Only Banks Must Disclose Kickbacks

Monday, June 14th, 2010

A few days ago the German high court (Bundesgerichtshof, the news is here but only in German) has made a landmark decision on transparency of commissions. The court came to the conclusion that only banks have an obligation to make all fees and commissions transparent to their clients. However, in the case of so-called independent advisers the court requires no mandatory disclosure.

In effect, this decision is a big step back for private clients in Germany. Financial product distributors like MLP or AWD have millions of clients in Germany but also in other countries like Switzerland. With this court decision they are encouraged to keep secret the kick backs they receive when they push certain products into the portfolios of their clients. The consequence of this decision is that the term “independent financial adviser” is probably as misleading as it gets.

The only good part is that the court has re-affirmed its older decisions that banks (as opposed to independent advisers) are required to be transparent to their clients. The financial industry is terrified about more transparency when it comes to investing their clients’ money. This explains the make-no-prisoners-resistance against any step of more transparency. But the industry should make no mistake. Clients become more and more aware of this conflict of interest and are increasingly ready to switch their providers. It is not too late yet for voluntary transparency yet.