The IA said the proposals on costs and charges disclosure are ‘a step in the right direction’. The proposals set out the information to be included in Key Information Documents and include total product costs for the investor, including entry costs, recurring costs (including transaction costs) and exit costs. The documents must also give a monetary and percentage figure for the overall costs of the product over time.
Jonathan Lipkin, director of public policy at the IA, said: “European regulators are right to propose separating transaction costs and product charges in the new Key Information Document (KID). We have consistently argued that this is a pre-requisite for meaningful disclosure, and is clearly in the interests of consumers. It will ensure that charges paid to investment product providers are visible in the context of the investment decisions they make on behalf of their clients.
“Although the KID is of course wider in scope than investment funds, we consider that the ‘ongoing charges figure’ (OCF) is a valuable piece of information and we will continue to encourage the European regulators to retain the OCF as a key part of disclosure.”
The details have been determined by a joint committee of European Supervisory Authorities, incorporating includes Esma, Eiopa and the European Banking Authority. The committee also said that the document should include a section on risks and potential returns with a risk rating from 1-7 and an indication of how the product might perform in different scenarios.