How Not to Bundle Financial Products

It is common for investment firms, asset managers and banks to bundle products (sometimes it's called cross-selling).
 
Broadly speaking, European regulations require financial institutions to offer bundled or tied products only when these products meet the needs and the best interests of the clients - and be very transparent about all cost components related to each product or service included into a “package”.
 
ESMA Guidelines (11/07/2016 | ESMA/2016/574) published an interesting list of examples that are clearly not compliant – and I believe it could be useful for you to know. Here are my 3 favorite cases:
 
 
Examples of detrimental cross-selling practices
 
The examples below provide, in accordance with Article 24(11) of MiFID II, a non-exhaustive list of situations in which cross-selling practices are not compliant with the obligations laid down in Article 24(1) of MiFID II
 
Bundling with higher costs structure is not allowed

• Offering two products together in a package where the price of the offer is higher than the price of each component separately offered by the same firm (well, this is obvious)

Bundling with planned price increase when you use the price factor for promoting is not allowed

• Inducing a client to buy a 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 client 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. (this is an interesting example, because it protects the customer from known and planned price increases, for example, next year)

 Below is my favorite – by far - offering unwanted products 🙂

• Offering a product bundled with another product that has not been requested by the client when the firm is aware or should be aware that the product unnecessarily duplicates another product that the client already has and cannot benefit from (including because the customer is not eligible).

P.S. Checkout our FREE DOWNLOADS section - many helpful templates are available there!

P.P.S. Did you know - I just recently created a LinkedIn group for FinTech professionals (because many of you felt a bit concerned about Facebook group) - you are welcome to join!