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EFAMA's response to the EU Commission's targeted consultation on options to enhance the suitability and appropriateness assessments

Distribution & Client Disclosures
22 March 2022 | Policy Position
Distribution & Client Disclosures
Retail Investment Strategy

EFAMA appreciates the opportunity to share our views on the European Commission’s consultation on enhancements to the suitability and appropriateness assessments forming part of the wider, upcoming Retail Investment Strategy.


The suitability and appropriateness assessments are quintessential elements in how financial advice is provided to (retail) investors across the EU, balancing investor protection and the need of, in particular, retail investors to access financial advice in order to participate in the capital markets. Given their essential importance to the overall financial health of EU citizens, we believe that this consultation should sit at the end of a well-defined process. As these assessments are well-established over a number of years, the first step in their possible revision would be a thorough, objective and evidence-based stock-taking analysis, clearly identifying their strengths but also any potential weaknesses. Recommendations should be based on these outcomes and properly consulted with stakeholders. This is crucial, as the current consultation assumes weaknesses of the current system without specific evidence and proceeds to provide apparent solutions. Stakeholders must be given sufficient time (at least three months instead of four weeks) to reflect on these proposals in order to provide the European Commission with substantive, meaningful and helpful comments and feedback.


The importance of such a process is to guarantee that changes are not made for the sake of ‘something new’ but rather provide meaningful and tangible benefits for retail investors. Concrete benefits are paramount given that the regulatory requirements for suitability and appropriateness processes are in constant flux (with the ongoing ESMA consultation on the integration of sustainability considerations into the suitability process being a prime example), leading to sometimes incremental, but more often substantial changes for the investors and ongoing costs for the industry. We, therefore, are keen to ensure that the implementation costs triggered by these changes make a real difference to (retail) investors and result in an increase of retail participation in the capital markets – a goal strongly subscribed to by EFAMA.


Due to the short deadline for response of four weeks, we could not properly collect all members’ feedback in line with our governance requirements and hence could not complete the online survey in time. We, therefore, wish to submit our preliminary comments below.


In any case, due to the complexity of the issues at hand and the inherent follow-up questions (see below), EFAMA and its members cannot provide any substantial assessments at this stage. We can only ask the European Commission to carefully consider our questions and continue the public engagement with stakeholders to ensure a better understanding of the newly proposed concepts. This open dialogue should ensure that stakeholders, including EFAMA, can provide more meaningful feedback on the proposal’s potential and impact soon. In the meantime, we stand ready to discuss any of our comments in further detail.

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