View more on these topics

EU unveils investment costs disclosure overhaul


Policymakers are consulting on the detail underpinning disclosure documents being brought in under new European rules.

Key Information Documents, known as KIDs, are being introduced as part of the packaged retail and insurance based investment products regulation, or Priips, which comes into force on 31 December 2016.

KIDs aim to make costs and product details clearer for investors and will be supplied by product providers. Each KID must comply with a mandatory three-page template.

A joint committee of European Supervisory Autorities – which includes Esma, Eiopa and the European Banking Authority – have today set out details of what must be included in KIDs.

The KID must set out total product costs for the investor, including entry costs, recurring costs and exit costs.

It must give a single figure for the aggregated costs of the product over time, given in both monetary and percentage terms.

Product providers will also be required to disclose transaction costs under the new rules. The paper proposes that transaction costs should be calculated based on an average of the past three years.

In addition, policymakers say the document must include a section on risks and potential returns.

This includes a risk rating for the product on a scale of one to seven – where one is the lowest risk and seven is the highest – and an indication of three performance scenarios: one unfavourable, one moderate and one favourable. These scenarios must be produced net of costs.

Where the risk of a product rises significantly if it is not held to maturity, the provider will be required to give investors an additional risk warning.

European Supervisory Authorities joint committee chairman Steven Maijoor says: “Today’s consultation is a major step forward for the EU’s retail investors by setting out clear proposals on the contents of the KID, which are aimed at improving safeguards and transparency around investment products.

“The KID, once implemented, aims to safeguard retail investors’ interests by ensuring they receive sufficiently clear, concise and understandable information to allow them to make better informed investment decisions.”

Investment Association director of public policy Jonathan Lipkin says: “European regulators are right to propose separating transaction costs and product charges in the new Key Information Document. 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’ 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.”

A final text on Priips was agreed in April 2014, under which a previous proposal to include adviser cost information in the KID was scrapped.

However, firms and national regulators have been awaiting further details of the rules.

Today’s consultation closes on 29 January.

Example format for cost disclosure:

Screen Shot 2015-11-11 at 15.33.19

Example format for product risk rating:

Screen Shot 2015-11-11 at 15.34.33



Members lose £500k from worst performing auto-enrol defaults

Staff enrolled in workplace pension schemes could lose £500,000 over their lifetime if their savings are invested in the worst performing default funds. Research by JLT Employee Benefits, published today, shows the difference between the investment returns of the ten largest group personal pension providers. Auto-enrolment default fund performance ranges from 3.5 per cent to […]

FCA interior logo 620x430

FCA raises non-advised drawdown concerns

The FCA says it will consider “stepping in to break the link” between providers and retirement decisions if there is evidence consumers are not shopping around for drawdown products. Speaking at the Westminster Employment Forum in London last week, FCA director of competition Mary Starks said: “We’re very conscious that if we see a significant […]


Follow the money: Pension Wise row deepens after employee dismissal

A former financial adviser who became a Pension Wise guider as a career “swansong” has been sacked by a Citizens Advice branch following a row over how guidance staff are being used. The case shows issues uncovered by Money Marketing last month at another bureau have spread to other offices delivering face-to-face Pension Wise appointments. Shadow pensions […]


Cost of acquiring clients ‘threat to robo-advice’

The cost of acquiring clients is the “elephant in the room” in the online advice debate, says FinaMetrica. In a report on the robo-advice market, published last week, FinaMetrica says developing a successful online advice proposition requires a significant marketing investment. The risk profiling tool provider says: “Robo-advisers are very good at servicing customers, but […]

The Natixis Solution: H2O MultiReturns Fund

A product designed to bring some unique attributes to the crowded absolute return global macro space With diversification and risk management top of investors’ wish lists when it comes to alternatives, step forward the H2O MultiReturns Fund. H2O Asset Management is an independent boutique backed by Natixis Global Asset Management and has a 14-year track […]


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Yet again more compulsory mind numbing documentation for the industry to pass over to the unsuspecting public for them to ignore and put in file 13!

    Yet again they appear to just instruct the industry without consultaion to justify their existance. It will be interesting to see if there is any industry feed back on the FMAR regarding the level of compulsory documentation having a detrimental effect on the advice process.

    Left hand not knowing what the right hand?

  2. This may or may not be a good idea but it is yet more change and more cost for firms and hence clients to bear. Has anyone else noticed how expensive investing has become? Could this possibly have any relation to the costs to platforms and investment companies that they are now trying to recoup?

    All future changes should come with a 10 year guarantee, meaning that once introduced they cannot be fiddled with by regulators for ten years. Most of this stuff is simply never given the time to bed in before the next regulatory ‘innovation’ comes along.

  3. Just like roads really – when you see one being resurfaced, you know it’ll only be a few months before someone comes along and digs it up. Some things just seem to be beyond anyones ability get it right first time.

Leave a comment