Joint Industry Statement on the EU Retail Investment Strategy

EFAMA and various representatives from the European financial and insurance sector published a joint industry statement addressing the EC’s RIS proposed on 24 May 2023 (please see EventID #21279 and EventID #21284 in this context). While a complete analysis of the proposals is still ongoing, the industry representatives express their initial concerns and provide high-level remarks.
The statement begins by acknowledging the industry’s support for the objective of increasing retail participation in financial markets. They appreciate the EC’s efforts in promoting digital communication, streamlining disclosures, and enhancing financial literacy.
However, the industry raises several concerns about the proposed measures:
– Prohibitions on commissions: Although the EC abandoned the idea of completely prohibiting commissions, the RIS proposals include restrictions on commission payments. The industry representatives argue that such prohibitions would still have disruptive consequences for the European financial sector and limit consumers‘ access to investment and insurance protection. They also express reservations about the proposed “best interest of the client“ test, which focuses disproportionately on costs and may lead clients to prioritize cheaper products over potentially more valuable ones.
– Increased complexity: The industry expresses concern about the significant number of new processes, policies, organizational requirements, technical disclosures, and compliance obligations introduced by the proposals. They argue that these measures deviate from the goal of reducing information overload for clients and making financial services more accessible. Instead, the added complexity could discourage consumer engagement and create a longer, more burdensome investment process.
– One-size-fits-all benchmarks: The proposed introduction of quantitative “value for money“ benchmarks is criticized by the industry representatives. They argue that such benchmarks contradict the core goal of offering tailored solutions to different clients‘ needs. Value encompasses more than just costs and varies for each consumer based on their circumstances, objectives, and personal values. The industry questions the need and legal basis for such benchmarks, as they believe it would introduce regulation-driven price intervention into capital markets. This intervention could impede the development of innovative products, especially in emerging investment areas, and be incompatible with efforts to promote sustainability. Ultimately, these measures could harm the international attractiveness of the EU’s capital market.
– Unfeasible timeline: The industry raises concerns about the implementation timeline for the new requirements. They argue that the industry needs adequate time to apply the new measures in the millions of contractual relationships it holds with retail investors and customers. The current proposed transposition dates would make it impossible for the industry to comply, especially considering that the necessary Level 2 specifications and national provisions may not be published in time.