The fundamental aim of the EU Retail Investment Strategy (RIS), namely strengthening retail investors’ participation in Europe’s capital markets, is to be supported. The German Association of Public Insurers (VöV) therefore appreciates the opportunity for consultation and is ready to lend constructive support to the implementation process. In particular, the planned amendments concerning the digital provision of information, the elimination of duplicate information requirements and the improvement of financial literacy are to be welcomed. The Association and its members also fully support the proposed removal of the general ban on commission.
At the same time, certain aspects of the Retail Investment Strategy still require some amendment. This concerns especially the many downstream Level 2 and 3 regulations. This not only results in the significant expansion and increased stringency of Level 1 regulations; the draft also contains more than ten Level 2 authorisations for the insurance sector alone. Combined with the extremely short implementation and application deadlines, this produces a situation of legal uncertainty which has significant disadvantages for customers, insurance undertakings and insurance intermediaries alike. For this reason, we advocate a substantial reduction in the large number of downstream Level 2 legal acts and the inclusion of essential requirements in the form of principles at Level 1. At the same time, realistic implementation and application deadlines are necessary which together mean that the binding application of regulations by undertakings should take place at the earliest twelve months after the adoption of all Level 2 and 3 regulations.
Although the EU Commission has refrained from the general ban on commission for now, it stipulates a review in the third year after the law’s entry into force of whether the measures implemented have resulted in an improvement and how the regulations (up to and including the general ban on commission) might be then be tightened further. The VöV believes that an analysis of the outcome should take place after five years at the earliest and that there should be no automatic amendment of the law. Moreover, the Retail Investment Strategy proposes banning commission for execution-only sales. The VöV and its members fundamentally reject any ban on commission.
Moreover, even execution-only sales involve a certain amount of effort that should be remunerated accordingly. It is not clear from the proposal how this should occur. We therefore advocate that it should remain permissible to charge a performance-based commission for execution-only sales.
Whereas the focus on the digital provision of information is a sensible improvement, the amendments to the information and transparency requirements will result overall in actually increasing the information overload that was originally identified. On the one hand, information requirements must be consistent with existing regulations and, on the other hand, the clarifications announced for Level 2 should already be implemented at Level 1.
At the same time, the proposals for revising the product approval process and establishing a binding (comparative) benchmark will result in harsh restrictions on undertakings in respect of product pricing. Key details such as permissible deviations are entirely unclear at present. The undertakings required to implement the regulations are therefore facing great chal-lenges while the actual customer benefits remain largely unclear. For this reason, the RIS should be restricted to purely qualitative provisions for achieving value for money and leave the specific implementation to the Member States.
The Commission also proposes a far-reaching revision of existing advisory processes. A best interest test is to be introduced and the suitability test radically revised. In the same way as the revision of the product approval process, the legal text lacks key implementation details and refers repeatedly to the Level 2 and 3 regulations that are still to be compiled. In part, the requirements specified contradict each other and could result overall in disadvantage to tied intermediaries (compared with independent intermediaries) and commission-based advice (compared with independent advice). In the opinion of VöV, both the predecessor of the best interest test and the existing suitability test requirements are tried and tested and should therefore be retained. At the very least, however, it should be ensured that uniform legal requirements apply to all types of advice and remuneration.
