EFAMA proposes alternative solutions to benefit investors within the Retail Investment Strategy

27 November 2023

This document outlines the needs of EU investors, how the European Commission’s proposal is expected to help them, and what still needs to be adjusted.

EFAMA is pleased to release a leaflet entitled “Retail Investment Strategy: positive elements for European investors and ones that should be reconsidered.” This document outlines the needs of EU investors, how the European Commission’s proposal is expected to help them, and what still needs to be adjusted. While the proposal has covered several aspects which should help investors, like digital-friendly disclosures, comparable rules for investment and insurance products, improving financial literacy, and tackling financial influencers, other measures are counter-productive and need to be addressed.
 

We specifically propose the following solutions:
 

• Remove quantitative ‘value-for-money’ benchmarks, which go too far towards market price setting, and instead introduce quantitative and qualitative value assessments across the whole value chain (including product manufacturers and distributors), overseen by national supervisors and building on the already existing MiFID requirements.
• Remove the ‘best interest’ test, which overlaps with existing MiFID suitability rules, and instead maintain the existing quality enhancement test and extend it to cover insurance products.
• Instead of banning commissions on execution-only trades, which could limit access to digital trading platforms that rely on these in their business model, rather apply the quality enhancement test to these trades, to ensure that commissions are improving investor services.
• Avoid adding potentially unclear or repetitive dashboards to investor disclosure documents such as the PRIIPs KID.
• Instead of limiting the ‘suitability-light’ regime to independent advisors, rather apply it  to highly regulated and relatively safe investment products like UCITS, regardless of the distributor the investor has chosen.
• Set a dynamic implementation deadline for 18 months after essential technical standards are developed by ESMA, to ensure a clear and smooth implementation.

Tanguy van de Werve, EFAMA Director General, commented: “If we want to increase retail participation in capital markets, the debate around the retail investment strategy should focus on more than just commissions and costs. We need to talk about creating value for investors, assessing their different needs and goals, and looking across the entire investment value chain. While key levers, like pension systems and taxation incentives, are not covered by the proposal, there is still plenty we can do to improve the strategy. We hope that the proposals we are putting forward will contribute positively to the ongoing debate on how to best serve retail investors in the future.“

EFAMA

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