European Commission explores ways to make fund offerings fairer for EU consumers
According to Blackrock just 43% of Eurozone households own any kind of investment at all. Many European investors have historically been disinclined to invest in capital markets. The most common reasons seem to be the high fees and lack of clarity surrounding the offerings. This lack of information means that investors are unable to compare and contrast the investment products.
It had been hoped that with the introduction of the MiFID II and PRIIPs regulations these issues would be addressed with the requirement of greater fund fee disclosure. It is worth bearing in mind that it is still very much early days with regards to these new regulations, however the European Commission has now seen fit to begin an investigation into these and other barriers that prevent European consumers from investing. Their findings could influence the way asset managers are able to sell their funds in Europe going forward.
The review is due to begin after the EU parliamentary elections in late May and may include an examination into issues such as fund fee comparison and fund subscription and redemption fees. It may also renew the contentious debate on whether commissions paid by fund managers to financial advisers and banks should be sanctioned.
A study commissioned by Brussels in 2017 discovered that investors in equity, real estate and mixed-asset funds could pay up to 8% in charges if they were to sell the product within a year. It also found that entry fees for these same funds could vary from 0.30% to 5%. The study was carried out before the MiFID II and PRIIPs regulations came into effect, however this sort of inconsistency is common amongst funds and misleading for the average European retail investor who may be trying to navigate the markets without the correct guidance and clear information.
It will be interesting to see whether the regulations are able to improve clarity and fee structure in the coming months otherwise it is clear the European Commission will have to step in and look for an alternative solution.
We will continue to monitor this investigation and any other changes to the regulations as they develop, ensuring we provide help when and where it’s needed.
For help with any of your regulatory requirements please contact our Regulatory Services team.
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All figures correct as at 31.12.2019.