Consumer information

Clear professional titles for independent investment advice

On 1 August 2014, the Fee-based Investment Advice Act entered into force. As a result, the official job profile of the independent investment advisor was defined for the first time. The act specifies that fee-based advisers may only be paid by the customer. Fee-based advisers are thus not dependent on commission payments from the providers of financial investment products. This is reflected in the title “fee-based adviser”. However, consumers often associate this title only with the fee aspect and not with the independence and recognised qualifications of the adviser.

Financial Investment

Financial Investment

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Fee-based advice as an alternative to commission-based advice is to be strengthened

In the coalition agreement of 2013, the Federal Government resolved to further strengthen fee-based advisory services as an alternative to advice provided on a commission basis. To this end, the central features of fee-based advisory services should be clearly identifiable to the consumer in the professional title.

Clear and comprehensible professional titles help consumers to choose the right services

The professional title for advisory services not provided on a commission basis should have the following features:

  • The customer pays for the advisory services
  • The adviser does not receive commission and is independent of the provider
  • The adviser takes into consideration products from different providers
  • The professional qualifications of the adviser are verified by a government agency.

It was unclear whether consumers associate all of these features with the term “fee-based adviser”. For that reason, possible alternative terms were developed in focus groups with consumers and subsequently tested with more than 1000 persons in an online survey on associated features, comprehensibility and clarity.

The professional titles “free advisers” and “independent advisers” are most likely to lead to accurate notions

The survey involving more than 1000 persons showed that the existing title “fee-based adviser” was mostly associated with the concept of the customer paying for the advisory services. The expectation of high costs is a possible obstacle to people making use of their services. At the same time, the title “fee-based adviser” does not make it clear that the adviser does not receive commission. Titles such as “independent adviser” or “free adviser” were regarded as being much more accurate. In particular, there was a marked difference between participants with little and those with substantial knowledge of financial matters. The independence aspect was more frequently unclear to people with little knowledge of such matters than to persons with substantial knowledge.

This shows that the professional titles “independent adviser”, “free adviser” or “free expert” are better suited than the title “fee-based adviser” to conveying the key features of fee-based advisory services (only acting in the service of the customer, independent of commission payments, paid by the customer, etc.).

This finding was made available for the further ministerial and parliamentary processes

On behalf of the Federal Ministry of Justice and Consumer Protection