Explainer - What do I need to know about using a retail intermediary/financial broker?
Retail Intermediaries are commonly known as brokers or financial brokers.
Their role is to advise consumers in relation to financial products including insurance, mortgages and investment products. They also assist in buying these products on behalf of consumers.
Brokers sell financial products and services by searching the market for financial products from a number of providers. This is different from going directly to a mortgage, insurance or investment provider, who will usually only sell their own products.
There are around 2,500 brokers regulated by the Central Bank. They range in size from large companies to sole traders.
All regulated brokers must comply with the Consumer Protection Code (CPC) and the Minimum Competency Code (MCC). This means that their staff must have a certain level of professional training in the products they are selling to you the consumer. The Central Bank monitors compliance with these requirements through inspections, regulatory returns and firm level engagement.
You can find out if the firm you are dealing with is regulated by the Central Bank by checking our registers.
What can I expect if I use a broker?
A broker will usually have access to a wide range of financial products and services, from a number of providers. Their role is to search the market for the mortgage, insurance policy or investment product that suits your needs.
Where a broker represents a large number of product providers, they are classed as having carried out a “fair analysis of the market”.
In some cases, they will provide services on behalf of only one or a small number of product providers. In these cases, the firm provides a “limited analysis of the market”. Others that provide their service on behalf of one product provider only are known as “tied agents”.
When dealing with a broker they will gather information from you to ensure that any products or services sold to you are suitable for your needs. The level of information gathered will change depending on the type and complexity of the product or service you require. Brokers must ensure that products sold to a consumer or advice provided are suitable and appropriate for you.
They must also provide you with appropriate information so that you can make an informed choice about the product or service.
Once a broker has gathered the information needed they must provide you with a Statement of Suitability. This is an important document that sets out why a particular product is suitable for you based on the information you have provided.
Can a regulated broker sell unregulated products?
Yes.
Some brokers may sell products that are not covered by regulatory protections. Where a firm does this, they must clearly distinguish their regulated business from any unregulated products they provide.
Unregulated products do not have many of the investor protections that apply to regulated investment products, including access to the investor compensation scheme.
If you deal with a broker that is regulated by the Central Bank, they must explain to you whether the product they are providing or recommending to you is regulated or not.
Your broker should ensure that you understand the implications of purchasing an unregulated product. This should include explaining that the investor protections that apply for regulated investments, such as access to compensation schemes and client asset protections do not apply to unregulated investments.
If you are thinking about investing in an unregulated investment product, you are encouraged to get professional advice to ensure you fully understand the product and the risks involved.
What else do I need to know?
Always make sure the broker you are dealing with is regulated by the Central Bank by checking our registers. In particular be aware of ghost brokers which are professional fraudsters selling forged or invalid discounted insurance policies to unsuspecting consumers. If a firm is not authorised to provide that service, do not use it.
Remember, if you deal with unregulated firms you will not have access to the following protections:
- Investor compensation schemes which compensate consumers for the negligence of regulated firms
- The services of the Financial Services and Pensions Ombudsman
- Unregulated firms are not subject to the rules and regulations of the Central Bank.
The Central Bank publishes warning notices naming persons or firms who are providing financial services without the appropriate authorisation or who are holding themselves out to be a regulated financial service provider where they do not have the appropriate authorisation to provide financial services.
If you have been approached about an investment scam - or think you are a victim you can report the unauthorised firm to the Central Bank. You may also like to report the matter to An Garda Síochána.
How can I make a complaint?
You have a right to complain to your broker if you are not happy with the service provided. Your complaint must be dealt with in line with the requirements set out in the CPC. You can find information on how to make a complaint from the Competition and Consumer Protection Commission. If you are not satisfied with the outcome of the complaints process, you can bring a complaint to the Financial Services and Pensions Ombudsman (FSPO).
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