The Association for Financial Markets in Europe (AFME) has raised concerns that the European Commission’s proposal for the EU Retail Investment Strategy (RIS) is “overly prescriptive”. Submitting its response to the Commission’s consultation, the association says that the RIS could “impact wholesale capital markets, as well as the availability of investment product for retail investors, reducing rather than enhancing their choice”.
Costs and the perception of value were significant issues brought up in AFME’s comments. Zeroing in on the Commission’s intention to revise the Best Interest requirements in the Markets in Financial Instruments Directive (MiFID) inducement rules, AFME writes that “the new criteria take an approach towards investment advice that is mostly focused on costs, and does not consider other key parameters that are important in the context of investment advice”. It points out that “many products with higher fees could potentially also deliver a better overall return to particular investors best suited for those types of products”.
The approach thus risks “downgrading the value of the investment advice as a whole”. Advisers could become encouraged to steer clients towards the lowest cost products, “which may not always lead to the best investment results”.