September 2023
The Swiss Finance Council has an interest in the EU Retail Investment Strategy because our members operate as both retail investment product manufacturers and distributors, serving EU clients from both within the EU and on a cross-border basis.
It is important for retail investors to maintain access to a wide range of funds aligned with their preferences and investment diversification strategies.
We therefore support the establishment of a more holistic value assessment for both manufacturers and distributors of retail investment products that looks at factors such as performance, diversification, quality of service, economies of scale and not only cost. This would also ensure alignment with the broader Capital Markets Union objectives to promote investment into small and mid-size EU caps or ESG funds.
The proposed best interest test for financial advice should focus on recommending products offering the most value to the client. Therefore, we would support delete the requirement to recommend products without additional features that are not necessary to the achievement of client’s investment objectives. These additional features might include a financial product with a certain investment strategy which implies higher costs, a capital guarantee, or structured products with hedging elements.
We believe that changes to the scope of execution-only products, subject to an inducement ban, should be clarified to avoid a ban of legitimate third-party payments. We support a broader assessment of the impact of proposed measures, including greater transparency, on retail investor outcomes before considering changes to inducement policy. We also support maintain the existing regime, under which inducements should be passed through, as this provides tangible benefits to investors in term of choice and improved pricing.
Finally, we would welcome a clarification of the knowledge criteria so that sophisticated clients can effectively opt up to professional client status and access a larger product universe such as hedge funds and private equity.