Response to consultation on draft Guidelines for cross-selling practices

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Question 2: Do you agree with the identified potential benefits of cross-selling practices?

Yes, we generally agree with the identified potential benefits of cross-selling practices.

Question 3: Do you agree with the identified potential detriment associated with cross-selling practices?

Yes, we generally agree with the identified detriment associated with cross-selling practices.

Question 4: Please comment on each of the five examples in paragraph 13, clearly indicating the number of the example to which your comment(s) relate.

We agree with the examples 1, 3 and 4 and have no particular comments.

With regards to Example 2, we question whether “teaser rates”* are always of negative value for customers. We believe that the intention of the example should rather focus on the customer being made aware that these rates are currently lower (than the current components put together) and to disclose when and by how much an increase is going to take place.

With regards to Example 5, one has to take into consideration that an investment firm will not always have a complete picture of a customer’s overall portfolio, which is the essential assumption that has been taken by the ESAs. This is, in particular, the case for online sales where there is no advice provided to customers. Furthermore, clients might not be aware that there is a specific advantage for the second product and it is therefore appropriate for the firm to offer such product to its clients. The example should therefore be rephrased to speak about a firm not offering products from which it explicitly knows that the customer cannot benefit.

* Para. 13, Example 2: “cross-selling offer by advertising/promoting the fact that, as of the day of sale, the overall amount of costs and charges payable by the customer is below the cumulated price of each component as sold separately, where in reality this amount of costs and charges are already scheduled to be raised to a higher amount overtime due, for instance, to the accumulation of running costs/fees.”

Question 5: Please comment on the proposed guidelines 1 and 5 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

Guideline 1 (para. 14) should not create an additional layer of disclosure, but should rather reinforce that this Guideline can be fulfilled by providing the existing cost disclosures as stipulated in the relevant legislations (e.g. MiFID II, PRIIP KID, UCITS KIID).

Question 6: Please comment on the proposed guidelines 2, 3, 4 and 6 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

We agree with the proposed Guidelines 2 and 4.

With regards to Guidelines 3 & 6 and in line with our above comments, we ask for further clarification how, in practice, a firm can use “a simplified or jargon-free language” without creating additional disclosure requirements. While we certainly agree with providing customers with easy-to-understand information, we need to take into account that disclosure information differs from one piece of sectorial legislation to another. Will providing the sectorial specific disclosure requirements (e.g. UCITS KIID) still be in line with the ESAs’ cross-selling Guidelines or would this require an additional layer of disclosure information that is not yet present in the Level-1 legislation? Since the Guidelines cannot alter the Level-1 text, we believe that disclosure of each component according to the respective rules, as well as disclosure of the package costs, should be sufficient and that this should be clarified in the final Guidelines.

Question 7: Please comment on the proposed guideline 7 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

In line with the Guidelines’ para. 4 stating that it is not intended to prevent the offering of “indivisible packages”, we suggest to amend para. 23 to clarify that bundled packages do not have to be offered unbundled, but that a customer rather makes a conscious decision to accept the bundled package:

23. Competent authorities supervising firms which distribute a bundled package, of which the component products can be purchased separately, should ensure that firms design their internet internal default options in a way which enables customers to actively select a purchase and therefore to make a conscious decision to buy the component product or the bundled package.

Question 8: Please comment on the proposed guideline 8 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

We disagree with Guideline 8 (as set out in para. 25) as this conflicts with the MiFID II requirements, as it does not differentiate between the appropriateness and suitability tests but regards them as one single test.

It is correct that in the case of MiFID services other than advice and portfolio management, the appropriateness of a bundled package has to be assessed. Unlike the suitability test, the appropriateness does not include an assessment of the customers’ financial situation and investment objectives, which means that the firm is obliged only to assess the appropriateness, which relates to the customer’s experience and knowledge. The requirement to assess or evaluate a potential benefit of the “cross-sold” components for the client would in fact trigger a suitability test when a non-advised cross-selling takes place.
We therefore consider that these Guidelines are in conflict with the Level-1 text and we suggest a revision of Guideline 8 (and its relevant examples, such as Example 2) that clearly distinguishes between the requirements to test suitability and/or appropriateness.

Question 9: Please comment on the proposed guidelines 9 and 10 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

We generally agree with Guidelines 9 and 10, but would highlight that their wordings are not aligned with the relevant provisions under MiFID II. We would therefore ask for either an alignment with the MiFID II text or further clarification in the Guidelines that fulfilling the MiFID II obligations is sufficient to fulfil the Guidelines’ requirements.

Question 10: Please comment on the proposed guideline 11 as well as the corresponding examples, stating clearly in your response the guideline paragraph number to which your comment relates.

We are concerned that para. 29 of Guideline 11 requires the splitting of previous bundled packages at a later stage, which was neither discussed nor envisioned in the Level-1 text of MiFID II and therefore goes beyond the ESAs’ mandate. It should clearly be sufficient to inform the customer in advance whether or not the components may be purchased separately. This allows the customer to be aware of the particular conditions when buying the package without retroactively allowing him to withdraw from parts of this transaction at a later stage.

Question 11: Please provide any specific evidence or data that would further inform the analysis of the likely cost and benefit impacts of the guidelines.

As stated previously, we are of the strong opinion that these cross-selling Guidelines should not create additional disclosure requirements that cannot be satisfied within the existing sectorial legislations. With regards to investment firms, it should therefore suffice to follow the MiFID II standards for bundled products in order to comply with these Guidelines.

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EFAMA