Parliament and the Council have reached a provisional agreement on new regulations aimed at strengthening protections for retail investors in financial markets. The proposed changes seek to ensure that citizens can invest in high-quality financial products while being shielded from misleading or biased information.
The agreement, reached on Thursday morning, includes amendments to several EU directives. These changes are designed to enhance investor protection, encourage retail participation in capital markets, and reduce reliance on bank loans for smaller businesses.
Under the draft legislation, financial and insurance advisors will be required to offer products and services that match their clients’ needs. Advisors must assess suitability using relevant information about each client’s knowledge, experience, financial situation, risk tolerance, investment goals, and ability to handle losses.
To further protect consumers, lawmakers agreed that products lacking value for money should not be sold to retail customers. Consumers will also have access to clearer comparisons of investment product costs, charges, performance data, and non-financial benefits. To help with these comparisons for insurance-based investment products, the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) are tasked with developing supervisory benchmarks based on representative data sets. National authorities may use these benchmarks as references when supervising value-for-money standards.
Investment firms will need to compare their products against peer groups consisting of similar instruments to determine if they provide value for money.
The agreement addresses inducements—third-party incentives received by investment firms—by establishing a new test. Inducements will only be allowed if they improve service quality and do not create conflicts of interest. The new rules require companies to distinguish between inducements and other fees so clients understand what they are paying for.
EU member states will promote initiatives supporting financial literacy and education about responsible investment purchases. Special attention should be given to different age groups or target audiences where appropriate. With younger clients particularly vulnerable to online mis-selling by influencers or social media figures, the agreement introduces supervision over such activities. Investment firms employing “financial influencers” must have written agreements with them as well as oversight of their activities.
Negotiators also updated requirements for key information documents (KID) relating to packaged retail and insurance-based investment products (PRIIPs). These documents must now include forward-looking performance scenarios grounded in realistic data.
Stéphanie Yon-Courtin (Renew Europe Group), who led negotiations for Parliament, said: “With today’s agreement on the retail investment strategy (RIS) we celebrate a major step towards savings and investment union. These rules bridge the gap between protecting consumers and helping businesses thrive in Europe. The agreement last night on the RIS scores majors wins for consumers and businesses alike. We are adapting to a more digitalised environment. Companies will move to digital-by-default disclosure for consumers, while consumers will be better protected against new risks emerging from online advice practices, such as financial influencers: no more getting rich from risky new financial products without accountability.
As Europeans invest mainly on the basis of advice, we focused on preventing abuse while keeping advice accessible, both financially and geographically. Supervisors will meanwhile have stronger tools to look at how products are priced, how advice is delivered, and whether consumers are truly getting value for money.
This agreement moves savings and investment union from theory to reality. It has been an honour for me to lead this file in the European Parliament. And while the final vote still lies ahead, today our message could not be clearer: Europe is serious about savings, investment and growth.”
The provisional deal requires formal approval from both Parliament and Council before it becomes law.
