Creating the necessary conditions to grow participation of retail investors in the capital markets, strengthening the legal framework for retail investors and increasing the transparency of financial products.
The Retail Investment Strategy (RIS), which was presented by the European Union in mid-May 2023 as “Omnibus Directive”, aims to strengthen retail investors and their confidence in capital markets. This will lead to adjustments that will affect the entire process chain from the development and distribution to the management of financial and insurance products.
Recent EU statistics show that only around 17% of household’s assets were held in financial instruments and 40% of European citizens are not convinced that the investment advice they receive from financial advisors and intermediaries is in their best interests. In addition, 45% of retail investors pay higher fees than institutional investors. By amending various existing capital market regulations, the aim is to create an environment that promotes the participation of retail investors in the capital market by adapting the framework conditions for investments. Among other things, the focus here is on access to sustainable and high-yield investment products, transparent marketing strategies and the avoidance of conflicts of interest.
After the European Commission presented its proposal on the Retail Investment Strategy in mid-May 2023, the European Council and the European Parliament discussed their respective positions in May and June 2024. Trilogue negotiations are currently taking place between the Commission, Parliament and Council. As soon as these have been concluded, the final text will be published in the Official Journal of the Union. An agreement is currently not expected before mid-2025, i.e. that the final publication is expected in the third quarter of 2025. Thereafter, the Directive needs to be transposed into national law before coming into force. Based on the published text of the Directive, the European Supervisory Authorities (ESAs) - including the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) - will provide suggestions for corresponding Regulatory Technical Standards (RTS). These standards set out specific operational requirements that financial institutions must comply with. The Commission then has the opportunity to make changes before the Regulatory Technical Standards are transposed into national law (as it is required for all new Directives or amendments to existing Directives).
With the aim of lowering entry barriers to the capital market for retail investors and removing obstacles, the EU Retail Investment Strategy aims to complement existing capital market regulations, in particular to
Financial institutions that set up, distribute and manage products that are subject to MiFID and PRIIPs regulation as well as the IDD for the insurance sector are directly affected.
Therefore, the entry into force of the retail investment strategy has a wide range of implications for banks, asset managers and insurance companies.
All in all, the consumer perspective is a key focus of the retail investment strategy. The aim is to promote a more consumer-friendly financial landscape that focuses on objective advice, fair cost structures and continuous product monitoring. Thereby, the attractiveness of investments for retail investors as well as their trust in financial service providers shall be increased. Consumer protection for retail investors will be strengthened by a series of measures aimed at greater transparency, fair cost structures and better protection against conflicts of interest.
The Retail Investment Strategy (RIS) as part of the EU's “Capital Markets Union Action Plan” aims to strengthen the access to and the confidence of retail investors in capital markets. Its far-reaching scope provides changes to a large number of existing regulations (MiFID II, IDD, PRIIPs, UCITS & AIFMD). Proposed adjustments in the area of inducements and product governance are the subject of controversial debate, but adjustments are also planned in the areas of disclosure, advice, investor protection and marketing.
Despite the fact, that it is still some time until the EU RIS regulation will be endorsed in national legislation, the impact is far-reaching. A structured approach with an early analysis and impact assessment is strongly advised, especially if there are still existing shortfalls in the former implementation of the regulations in scope of the EU RIS.
If you want to learn more about the EU RIS, you can download our RIS whitepaper:
Ralf Temporale
Country Lead Germany
Email: ralf.temporale@projectivegroup.com
Phone: +49 1520 2129298
Jan Baßler
Senior Program Manager
Email: jan.bassler@projectivegroup.com
Phone: +49 173 3416086
