Sound capital accumulation advice is important when it comes to providing effective support to consumers to ensure their financial welfare. Financial advisors, banks and investment firms must therefore acquire a proper insight into their clients' needs, correctly estimate the risk profile and arrange suitable aftercare. This is the point made by the AFM in its guidelines on how to provide sound capital accumulation advice, which guidelines were published on 21 December.
On the basis of the findings from previous studies and comparisons of these with the outcomes of talks with market players that already provide sound advice, the AFM has developed a vision on how to provide sound advice on capital accumulation. This vision is laid down in two reports, namely the guidelines on providing sound advice on capital accumulation for financial service providers and for investment firms.
Consumers accumulate capital among other things in order to pay off their mortgages, provide for supplementary (pension) income and future expenditure, and also increase the value of their current capital. One of the AFM's objectives is to promote sound financial services to consumers.
The studies which the AFM has carried out in recent years have given the AFM more and more insight into the points of departure which are important when it comes to providing sound advice to financial service providers, banks and investment firms.
Those points of departure have to do with:
1. A proper translation by the advisor of the view of the client into a suitable solution.
2. A discussion beforehand of the services which a financial enterprise can offer the consumer.
3. Advice on products and services which are in the consumer's interest.
In order to encourage the first point, the AFM has developed a standard classification of risk profiles, which has been made available to market players for consultation purposes.
The second point links up with the various statements the AFM has made about transparency as regards commission. As far as the third point is concerned, the AFM wants to ensure that consumers acquire a proper insight into the choices as regards investment type, for example actively managed funds versus index funds. An advisor, bank or investment firm will also have to focus on transparency as regards remuneration and the standard for suitable commission. The AFM is going to check the latter point in 2010.
The AFM's vision is intended to provide guidance. Financial enterprises are themselves responsible for translating the examples from the reports into daily practice. However, the AFM does expect market players to whom the AFM vision is relevant to read the reports and assess the advice they provide accordingly. It is possible that the AFM will develop aspects of the two reports in more detail in the coming years. This will, in any event, be the case soon as regards the results of the consultation of a standard classification of risk profiles.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.