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The European Fund and Asset Management Association (EFAMA) responded to the European Commission consultation on the Packaged Retail Investment Products initiative (PRIPs). EFAMA fully supports the overall aims of the PRIPs initiative, which seeks to address crucial issues of investor protection and the lack of a level playing field in the distribution of retail financial products across the European Union.
The financial crisis and the developments that followed showed clearly the lack of sufficient disclosure to investors and quality of advice to retail investors. Investors were withdrawing their assets from long-term investments prematurely, thus confirming the losses and missing the benefits of a subsequent recovery. This raises questions as to whether the forces that currently drive individual’s investment decisions are optimally structured and regulated.
In EFAMA’s view, a level playing field needs to be ensured between different savings products to protect the interests of investors properly and bring true efficiency to the single European market. This means that distribution standards across product categories must be harmonised and transparency at the point of sale needs to be improved and harmonised. The PRIPs initiative taken up by the European Commission is a crucial initiative to deliver these goals.
EFAMA is, however, not convinced that the European Commission is being ambitious enough in its approach, as indicated by the way the initiative has been split into many legislative dossiers, and the scope of the proposals has been defined narrowly. They wish to draw particular attention to their recommendation that not all pensions should be excluded from the PRIPs initiative: specifically, personal, voluntary pension products should be covered by the initiative, because when choosing such products the investor will be making decisions where she/he is in particular need of adequate transparency and investor protection.
Commenting on the European Commission consultation, Peter De Proft, Director General of EFAMA said: “It is to be welcomed that after many years of preparation the Commission is taking this initiative forward. EFAMA strongly believes that PRIPs is a crucial initiative to enhance investor confidence in saving for their future needs. What we need are common European rules which ensure transparent investment products and distribution, where the investor knows what she/he is buying, what the costs and risks are and on which basis the distributor is recommending a certain product. This is a unique opportunity to promote investor protection to the benefit of us all, and I sincerely hope the Commission will push this initiative forward with all the necessary determination. The asset management industry is ready to play its part in this initiative.”