European Commission: Study on the distribution systems of retail investment products

25 April 2018

A study carried out by Deloitte Luxembourg for the European Commission shows the difficulties that consumers in the EU face when trying to buy the most suitable investment fund, life insurance or private pension.

• Retail investors have access to a wide range of products through various distribution channels but face huge challenges in collecting information, comparing data or getting independent advice on the different products on offer.
• The costs for similar product categories vary strongly across Member States.
• European investors, in most Member States, seek advice mainly from non-independent advisors (i.e. banks and insurers) who tend to propose between two and three in-house products
• The potential for new distribution models based on FinTech is promising but needs still to be monitored carefully.

Recent EU legislation (in particular the MiFID II, PRIIPs and Insurance distribution directives) should improve the functioning of the markets for retail investors.

Full study

Better Finance's response: The EC Study on Retail Investment Products Confirms a Dire Need for Simple Investment Products, More Transparency on Performance and Costs and Independent Comparison Tools

BETTER FINANCE thanks the EC for releasing this long awaited but very necessary study on the main source of funding of the EU economy, which for this reason has also been identified as a top priority of the “Capital Markets Union” Initiative of the EU.

The study draws a grim picture detailing the obstacles retail investors face when seeking financial advice or wanting to buy an investment product.

However, this study is limited in its findings by the very limited availability and comparability of costs and charges of the retail investment products (therefore mostly focusing on investment funds which represent only 8% of EU households’ financial savings), and the fact that consumer and individual investor organisations were not properly consulted. Also, the study was conducted in 2017, i.e. before significant regulatory changes - e.g. MiFID II, PRIIPS, IDD - entered (or will enter) into force. [...]

Guillaume Prache, Managing Director General of BETTER FINANCE stated that “BETTER FINANCE again calls on EU Authorities to fulfil their legal duty to promote simplicity and transparency of investment products as well as to follow up on their “consumer financial services action plan” released in 2017 and go beyond the non-binding “Key Principles for Comparison Tools”. The study released today confirms that EU citizens are in dire need of comparable information on past performances relative to the objectives of the providers (their “benchmarks”), and on costs. It should be accessible via independent web-based comparison tools for retail long-term and pension investments. BETTER FINANCE is ready to contribute to this process, since this constitutes a major challenge for EU citizens as long-term savers, for the Capital Markets Union initiative, for the EU economy and for the adequacy of our pensions”.

Full response

© European Commission