EFAMA wholeheartedly supports a retail investment strategy that gives EU citizens the necessary tools and the confidence to put their savings to work by investing in capital markets.
While the themes covered in the European Commission consultation on a retail investment strategy for Europe are all highly relevant[1],
they focus primarily on technical amendments to already existing rules.
At this stage, the consultation fails to outline a comprehensive
strategy to increase retail investors’ participation in capital markets.
The patchwork of rules currently governing retail
investor participation is either misaligned or tends to focus too
narrowly on investor protection and on the risks associated with
investing. There is an urgent need to also concentrate on the benefits
of investing. It is a well-documented fact that people lose money by
leaving their savings in their bank accounts. EFAMA’s latest Market Insights
evidenced that, on average, UCITS equity funds delivered a total net
return of 108% in real terms between 2010-2019, whereas bank deposits
lost 10% in net value over the same period.
Easy access to financial advice for retail investors
is essential to ensure that retail clients invest in financial
instruments that are suited to their individual needs and preferences.
The ban on inducements contemplated in the consultation document would
make it harder for less affluent citizens to access much-needed
financial advice, thereby contradicting the CMU objective of increasing
retail participation in capital markets.
Tanguy van de Werve, EFAMA Director General: ”We
consider investment advice and its availability paramount to increasing
retail participation in European capital markets, alongside improved
financial disclosures and increased financial literacy.”
A successful retail investment strategy would also need to integrate the following recommendations:
- Early education of EU citizens to increase their financial literacy
and foster a better understanding of capital markets. Higher literacy
will ensure that basic concepts are more easily understood by retail
investors than is currently the case. EFAMA believes the European
Commission should play a coordinating role and bring together existing
best practices of Member States.
- Aligning financial disclosures across various regimes,
providing meaningful – rather than conflicting – information. Digital
disclosures can provide a more tailored experience and enable
well-informed investment decisions while avoiding information overkill.
Also, the current ESG-related disclosures must be enhanced to provide
clarity and simplicity for retail investors.
- A PRIIP KID that focuses on information relevant for each type of investment product,
as each type of investment product provides a different value
proposition and thus requires different disclosures. Indeed, the PRIIP
KID’s fundamental problems stem from its conflicting objectives of
providing at the same time clear, fair and not misleading information
and comparability between widely different types of investment products.
A loss in theoretical comparability will be more than offset by
improved explanations of the fundamentals for each type of investment
product and more meaningful information.
EFAMA also considers it vital for the Commission to
invest more time and resources into proper consumer testing of policy
options with retail investors before submitting legislative proposals to
the EU co-legislators. This should ensure that the proposed changes
create tangible incentives and clear benefits for retail investors, the
financial industry and the EU as a whole.
EFAMA
© EFAMA - European Fund and Asset Management Association
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