The European Commission recently published a comprehensive strategy on retail investments to strengthen protection for retail investors across the EU. The strategy aims to boost retail investment while ensuring high standards of investor protection. This strategy comes at a crucial time, as more Europeans are investing their savings into capital markets. Here are some of the key takeaways from the EU retail investment strategy pdf:
More transparency and disclosure for retail investors
One of the main goals outlined in the EU retail investment strategy is to improve transparency and disclosure for retail investors. The Commission aims to introduce new rules to ensure investors receive clear and comparable information on financial products. This includes disclosure on fees, performance scenarios and sustainability impacts. The strategy also calls for more transparency on product costs along the investment chain to prevent excessive charges being passed on to investors.
Stronger suitability and appropriateness assessments
The Commission aims to strengthen suitability and appropriateness assessments for retail investment products. This means firms will be required to better assess whether a product is suitable or appropriate for each investor based on their profile, needs and objectives. Stricter rules will also be introduced around automated advice tools known as ‘robo-advisors’ to ensure suitability.
Review of inducements and compensation model
The EU strategy calls for a review of inducements and the prevailing compensation model for investment advisors. Inducements are monetary or non-monetary benefits provided to advisors that could potentially influence investment recommendations. The Commission will assess if and how inducements can be better regulated to avoid conflicts of interest. There will also be an examination of whether the prevalent commission-based model optimally serves retail investors.
Stronger investor protection across the EU
A key objective is to strengthen the level of retail investor protection across the EU and reduce fragmentation among national frameworks. The Commission plans to introduce an EU single rulebook for retail investor protection to harmonize standards across member states. There are also plans to enhance supervisory convergence and cross-border cooperation between national authorities.
Promoting retail investor participation
An important goal of the EU strategy is to promote greater retail investor participation in capital markets across member states. To achieve this, the Commission aims to improve financial literacy and investment education for EU citizens. There are also plans to facilitate access to capital markets by increasing awareness of opportunities and addressing barriers faced by investors. Overall, the strategy seeks to boost informed retail investment while empowering investors.
The European Commission’s retail investment strategy sets out a comprehensive roadmap to strengthen protection and transparency for retail investors across the EU. Key elements include improving disclosures, suitability assessments, reviewing inducements, harmonizing standards, and promoting participation. By boosting investor protection and engagement, the EU aims to build a true single market for retail investments.