A joint industry statement has been released following the European Commission’s Retail Investment Strategy (RIS), which proposes a number of reforms to the retail investment legislative framework. A full analysis is expected to follow.
The statement was made by a number of European financial and insurance organisations, namely AMICE, EACB, EAPB, EBF, EFAMA, ESBG, EUSIPA and Insurance Europe.
While the organisations are broadly supportive of increased retail participation in financial markets, commending the proposals’ shift to digital-by-default communication, more streamlined disclosures and promotion of financial literacy, the statement outlines a number of concerns regarding the proposed changes.
The first of these is the number of prohibitions to the payment of commissions, which the statement says will have “major disruptive consequences” to Europe’s financial sector, consumers’ investment access and insurance protection.
Additionally, the associations say that the ‘best interest of the client’ test is too focused on cost. This could lead to clients choosing what is cheapest rather than what will provide greater value to them, they say.
The organisations also say that the proposals go against the stated goals of the reforms, with new processes, policies, obligations and disclosures failing to reduce information overload on clients and make financial services access easier. The statement predicts that the reforms, as they stand, could reduce consumer engagement and see a more complex and burdensome investment process implemented in Europe.
Further, the potential introduction of “one-size-fits-all, quantitative ‘value for money’” benchmarks goes against the reforms’ stated intention of tailored solutions for different clients’ needs. Once again, this would prioritise cost-saving over efficacy and limits benefits to clients, the statement says.
Benchmarking in this way “essentially establishes a regulation-driven price intervention into capital markets,” the organisations warn, something which they argue could threaten market competition, hinder the development of innovative products and contradict sustainability initiatives.
Finally, the statement sees the implementation timeline for the European Commission's new requirements as “unfeasible”. It advocates for more consideration around the publishing schedule for Level 2 specifications and national provisions, as the current proposed dates will not give the industry enough time to comply.
The statement concludes: “We remain fully committed to contributing in a constructive manner to the debate over how to empower retail investors. We will continue this dialogue with the EU institutions and are keen on further discussing the proposed measures once we have completed our assessment.”
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