Retail Investment Strategy 2026: EU holds financial services providers and distributors to account

Product governance – and, by extension, product development processes – are coming under the spotlight with the ‘value for money’ approach. In future, institutions will have to demonstrate that the costs and fees associated with newly launched products are reasonable. Among other things, peer-group comparisons are to be carried out for individual products, based on different comparison systems for MiFID and PRIIPs products. Furthermore, firms are to assess and document in detail whether total costs and fees are justified and proportionate. If this is not the case – as might be the case with UCITS funds or other structured products – such products must not be authorised for sale. Consequently, this will result in significant additional operational burdens in product authorisation processes and will lead to far-reaching adjustments, such as repricing or the redesign of the product range. All assumptions and reference values used in product development must be reported to the supervisory authority.

In the debate on inducements, the partial ban on commissions for non-advisory and ‘execution-only’ transactions – which many had feared – has been rejected. Instead, the agreement now provides for a detailed ‘inducement test’. These ex ante assessment criteria require, amongst other things, that investors be shown specific and transparent benefits. Compared with the previous requirements for quality improvement, this leads to a significantly increased burden of assessment and documentation. A (partial) ban on commissions remains a possibility, however. Member States may opt to introduce the ban, and a review of the inducement regime is planned in the medium term. Here too – taking into account the existing supervisory requirements (including the register of inducements and their use) – early strategic consideration is recommended.

In future, for well-diversified, non-complex and cost-effective products, the obligation to assess investors’ knowledge and experience and to take these into account in the suitability assessment is to be abolished. However, the mandatory warnings as part of the appropriateness assessment are to remain in place. Where client information is incomplete, appropriate warnings must continue to be issued and, in such cases, a recommendation must not be made.

With regard to transparency and disclosure requirements, amendments to the PRIIPs Regulation will have particular implications for (fund) Key Information Documents (KIDs). These must be machine-readable, past performance will become the standard, and information on costs, risks and returns must be clearly highlighted, whilst stricter labelling and presentation requirements apply to marketing materials. PRIIPs manufacturers will be required to provide retail investors with “appropriate tools that facilitate analysis and comparison between the various investment options, including costs”. Sustainability disclosures are to be regulated by the SFDR.

RIS brings with it many strategic and operational changes for financial institutions across all sectors. Alongside the need to review product portfolios, make remuneration models transparent and expand marketing requirements, there are also opportunities arising: for example, through stronger customer loyalty via transparent peer-group and value-for-money analyses, and through the promotion of digital transformation. At the same time, implementation requires substantial investment due to adjustments to IT (product comparison tool), (data) processes and training programmes