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Adviser fee information escapes EU disclosure rules

Advisers will no longer have to duplicate information on fees in client disclosure documents being brought in under new European rules.

Following last-minute negotiations EU policymakers have agreed a final text on the packaged retail investment products regulation, or Prips, which will be voted through the EU Parliament next week.

As part of a number of significant changes to the text, the regulation has been renamed packaged retail and insurance based investment products, or Priips, to reflect the inclusion of insurance-based products.

A key proposal of the regulation is the key information document, which aims to make costs and product details clearer for investors.

A draft text of the regulation had proposed that advisers include fee information in an annex to the KID, which consists of provider product information.

Apfa and the Wealth Management Association had raised concerns this was an unnecessary duplication of information, as advisers would already be providing information on their costs within their own disclosure documents. They argued the requirement to include it again in the KID could result in conflicts over whether advisers or providers are liable in the event of firm failures.

The final text removes the requirement to include adviser cost information in the KID. Instead, the KID must include a “clear indication” that advisers will provide cost information separately.

The WMA says the final text includes a number of other “wins” for advisers, including the removal of a previous requirement for the customer to sign and return a copy of the KID before a product could be purchased. The complexity label for certain products has also been removed and replaced with a “comprehension alert”.

The complexity label would have rated complex products according to a scale, whereas the comprehension alert means for certain complex products the KID will include the statement: “You are about to purchase a product that is not simple and may be difficult to understand.”

WMA deputy chief executive John Barrass says: “This is a much simpler version and removes the risk of customers complaining that a product was sold to them as having a particular level of complexity over another.”

Apfa director general Chris Hannant says: “The original intention was to get product information in a simple document so the customer is clear on what they are buying. The European Parliament saw it as an opportunity to stick inappropriate things into the legislation. Forcing advisers to provide information twice would have been ridiculous.”

Conservative MEP and spokesman on economic and monetary affairs Syed Kamall says: “After many months of painful negotiations, the final outcome is not as bad as it could have been.”


Alan Smith

It looks like common sense has prevailed.

All regulation should begin and end with the customer and their ability to understand the information they are being given.

Clients can be overloaded with too much information so a simpler and clearer approach from Europe is to be welcomed.

Alan Smith is chief executive at Capital Asset Management


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