The European Fund and Asset Management Association (EFAMA) has welcomed the decision by EU member states to move away from banning commissions on execution-only transactions.
EFAMA said the move would ensure retail investors still had access to direct distribution channels such as fund platforms – although it went on to suggest there was “much that still needs to be discussed and clarified”.
“There are currently a variety of tests envisioned, including inducement, quality enhancement, best interest, and suitability and appropriateness tests,” the trade body noted. “It is important that these tests work together effectively and do not create additional investment barriers.”
EFAMA also argued: “When it comes to value-for-money proposals, there are lingering concerns about how the European supervisory benchmarks would interact with peer group assessments conducted by companies. The value-for-money framework must ensure the data used for the supervisory benchmarks comes from the data used to conduct peer group assessments. As things stand, the risk is high that we end up with a complex, costly, and ineffective value-for-money framework.”
The Retail Investment Strategy directive, which was first proposed in May last year by the European Commission, is intended to amend multiple aspects of existing legislation. Its aim, according to EY, is to “foster an environment conducive to increased participation of retail investors in capital markets in Europe”. This was to be done, EY explained, by increasing participation in EU capital markets, enhancing trust and confidence in those markets, helping retail investors achieve better outcomes, and contributing to the wider EU economy.
Retail participation
The European Commission has long held the level of retail participation in EU capital markets remains low compared with other advanced economies. In 2021, it noted the approximately 17% of EU household assets being held in financial securities was well below the amounts held by US households. For its part, EFAMA has argued European citizens would greatly benefit from putting more of their savings into capital markets.
“The forthcoming trialogue discussions present EU policymakers with an opportunity to refine the Retail Investment Strategy and avoid unnecessary complexity,” said Kimon Argyropoulos, regulatory policy adviser at EFAMA. “For example, having two separate systems each trying to define value-for-money would be a recipe for failure. Policymakers need to create a framework that is both effective and practical, minimising burdens for the industry while maximising benefits for retail investors.”
Once the new European Parliament is fully constituted, the Retail Investment Strategy will be discussed further by both bodies to reach a final agreement.
