The selling rules: Who advises you, and who pays them

You walk into a branch to invest your savings. Opposite you, someone suggests a product. But in what capacity?

In Europe, a directive governs this exact moment: MiFID. Its second version has applied since two thousand eighteen.

It rests on three words: inform, advise, and check that the product suits you.

First distinction, essential: are you receiving advice, or simply placing an order?

If you are advised, they must recommend a product suited to your situation. And justify it in writing.

If you place the order alone, on an app for example, the intermediary executes it. The choice is your responsibility.

Two very different responsibilities. And in a dispute, the whole question is which one applied.

To advise you, they must first know you. That is the role of the profile questionnaire.

Your experience, your knowledge, your income, your wealth, your goals, and how much loss you can bear.

In the app, this chapter is animated and narrated, card by card. Start free trial.

On paper, it is a protection. In practice, it is often filled in quickly, sometimes with the seller's help.

One answer too optimistic, and the risky product becomes "suitable". You sign this questionnaire: answer it carefully.

That leaves the awkward question: who pays the adviser?

Often, not you directly. It is the fund he sells you, through a kickback called a retrocession.

Say a fund that takes two per cent a year. It can pass half, one per cent, to whoever distributed it.

On fifty thousand euros, that is five hundred euros a year. Every year, as long as you stay.

Over ten years, with the same capital, five thousand euros. Paid by you, but invisible on your statement.

French rules allow it, provided you are told. An adviser who takes these commissions cannot call himself independent.

Independent advice must hand these commissions back. It is paid another way: through fees, which you can see.

The twist: "free" advice does not exist. It is paid for, but elsewhere, and often more dearly.

The United Kingdom and the Netherlands chose to ban these commissions in advice. France did not.

A conflict of interest is not dishonesty. It is a slope. And it is better to know which way it tilts.

Three questions to ask: is this advice? Are you independent? How much do you earn on this product?

The answer is your right. And the way it is given often says more than the product itself.