Efama suggests solutions for retail investment strategy

The European Fund and Asset Management Association (Efama) has released a document evaluating the European Commission’s retail investment proposal for EU investors and suggesting necessary adjustments. 

According to Efama, while the Commission’s proposal includes positive elements such as digital-friendly disclosures, comparable rules for investment and insurance products, enhanced financial literacy and measures against financial influencers, certain aspects were “counterproductive”.

Efama suggested removing quantitative ‘value-for-money’ benchmarks and replacing them with qualitative and quantitative value assessments across the entire value chain. 

The best interest test “focuses solely on cost, and overlaps with MiFID suitability rules, creating usability issues for investors for limited benefit” should be eliminated, it added. Additionally, Efama suggested extending the existing quality enhancement test to cover insurance products.

Instead of banning commissions on execution-only trades, a quality enhancement test should be applied to ensure commissions enhance investor services, it recommended.

The “suitability-light assessment” should be extended beyond independent advisors to highly regulated and secure investment products like Ucits, irrespective of the chosen distributor, suggested Efama.

It also proposed a dynamic implementation deadline set 18 months after essential technical standards are developed by the European Securities and Markets Authority to ensure a “clear and smooth implementation”.

Tanguy van de Werve, director general, Efama, commented: “If we want to increase retail participation in capital markets, the debate around the retail investment strategy should focus on more than just commissions and costs. We need to talk about creating value for investors, assessing their different needs and goals, and looking across the entire investment value chain. While key levers, like pension systems and taxation incentives, are not covered by the proposal, there is still plenty we can do to improve the strategy.”

© 2023 funds europe

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