EFAMA wholeheartedly supports a retail investment strategy that gives EU citizens the necessary tools and the confidence to put their savings to work by investing in capital markets.
While the themes covered in the European Commission consultation on a retail investment strategy for Europe are all highly relevant, they focus primarily on technical amendments to already existing rules. At this stage, the consultation fails to outline a comprehensive strategy to increase retail investors’ participation in capital markets.
The patchwork of rules currently governing retail investor participation is either misaligned or tends to focus too narrowly on investor protection and on the risks associated with investing. There is an urgent need to also concentrate on the benefits of investing. It is a well-documented fact that people lose money by leaving their savings in their bank accounts. EFAMA’s latest Market Insights evidenced that, on average, UCITS equity funds delivered a total net return of 108% in real terms between 2010-2019, whereas bank deposits lost 10% in net value over the same period.
Easy access to financial advice for retail investors is essential to ensure that retail clients invest in financial instruments that are suited to their individual needs and preferences. The ban on inducements contemplated in the consultation document would make it harder for less affluent citizens to access much-needed financial advice, thereby contradicting the CMU objective of increasing retail participation in capital markets.
Tanguy van de Werve, EFAMA Director General: ”We consider investment advice and its availability paramount to increasing retail participation in European capital markets, alongside improved financial disclosures and increased financial literacy.”
A successful retail investment strategy would also need to integrate the following recommendations:
- Early education of EU citizens to increase their financial literacy and foster a better understanding of capital markets. Higher literacy will ensure that basic concepts are more easily understood by retail investors than is currently the case. EFAMA believes the European Commission should play a coordinating role and bring together existing best practices of Member States.
- Aligning financial disclosures across various regimes, providing meaningful – rather than conflicting – information. Digital disclosures can provide a more tailored experience and enable well-informed investment decisions while avoiding information overkill. Also, the current ESG-related disclosures must be enhanced to provide clarity and simplicity for retail investors.
- A PRIIP KID that focuses on information relevant for each type of investment product, as each type of investment product provides a different value proposition and thus requires different disclosures. Indeed, the PRIIP KID’s fundamental problems stem from its conflicting objectives of providing at the same time clear, fair and not misleading information and comparability between widely different types of investment products. A loss in theoretical comparability will be more than offset by improved explanations of the fundamentals for each type of investment product and more meaningful information.
EFAMA also considers it vital for the Commission to invest more time and resources into proper consumer testing of policy options with retail investors before submitting legislative proposals to the EU co-legislators. This should ensure that the proposed changes create tangible incentives and clear benefits for retail investors, the financial industry and the EU as a whole.
Notes to Editors:
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About the European Fund and Asset Management Association (EFAMA)
EFAMA, the voice of the European investment management industry, represents 28 member associations, 58 corporate members and 24 associate Members. At the end of Q1 2021, total net assets of European investment funds reached EUR 19.6 trillion. These assets were managed by 34,615 UCITS (Undertakings for Collective Investments in Transferable Securities) and 29,600 AIFs (Alternative Investment Funds). At the end of 2020, asset managed by European asset managers as investment funds and discretionary mandates amounted to an estimated EUR 27 trillion. More information available at www.efama.org.
 Such as promoting financial literacy, adequate investor protection, access to advice and understandable disclosures.