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The European Commission proposes to replace the current suitability-appropriateness duality in the MiFID II and insurance distribution Directives, with a new, unique, and standardised suitability regime for all categories of retail investment products, including “IBIPs” (insurance-based investment products).
BETTER FINANCE previously voiced its concerns regarding the detrimental effects of the suitability-appropriateness test duality, pointing to the fact that the appropriateness regime brings little added value for retail investor protection.
BETTER FINANCE sees benefits in harmonising the suitability questionnaire and providing standard investor profiles, under certain conditions: first, to adequately define and differentiate the risk-return trade-off, which proved inadequate for long-term investment products; second, the rules behind the standardised asset allocation and the investor profiles must allow for the independent advisor to accommodate for a wider variety of risk profiles, investment horizons, and objectives.