Advisers join asset manager KID reform push

International advisers have joined European fund managers in a call to reform key information documents for packaged retail and insurance-based investment products – six months into implementation.

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Designed to boost client understanding of retail investment products, the Priips Kid has been severely criticised by the European Fund and Asset Management Association (Efama).

In its report Efama Evidence on the Priip Kid Shortcomings, published Thursday, analysts said documents “at best confuse and at worst mislead” clients.

Efama’s director general Peter De Proft (pictured), who addressed the European Commission on 29 June, said: “We urgently call on the European securities association and the European Commission to plan an immediate targeted revision of the Priip delegated regulation, well ahead of any planned formal review of the rules.

“The clock is ticking painfully slowly, and time is of the essence as investors are currently presented with misleading information.”

Ucits exemption call

“We are also extremely concerned that the current legal framework is such that it will require funds to produce both a Priip Kid and Ucits Kid simultaneously by December 2019,” continued De Proft.

“Given the compelling evidence of the negative impact of the Priips Kid rules on investors, we strongly recommend that the exemption for funds producing a Ucits Kid be extended until these issues are satisfactorily resolved in the upcoming Priips review.”

Adviser findings

In a recent survey of advisers, shared with Portfolio Adviser sister title International Adviser, researchers from industry association Feifa (Federation of European Independent Financial Advisers) concluded that “clients rarely, if ever, understand the Kid documents”.

Analysts for Feifa also identified worrying inconsistencies between providers and between jurisdictions – further muddying the water for clients.

Feifa chief executive Paul Stanfield said the association would support Efama’s calls for accelerated reform.

Key findings from Efama:

  • The latest methodology for calculating transaction costs produces confusing and unreliable figures: on a constant basis, transaction costs are either over or underestimated, sometimes even leading to overall negative transaction cost figures being presented to investors, which is confusing.
  • Investors are deprived of important past performance and benchmark information.
  • In future performance scenarios, a lack of context means that investors are provided with “excessively optimistic and linear performance scenarios”.
  • Comparisons between similar investment products with different holding periods are impossible because costs are now averaged over a product’s recommended holding period.

For more insight on international financial, planning please click on www.international-adviser.com

 

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