The Investment Association has called for an “urgent” review new Key Information Documents issued to investors.
Since January 1, Priips legislation has meant advisers now have to publish a stand-alone, standardised KID to their client including performance scenarios, risks, and the total cost of products.
Yesterday, however, the FCA gave advisers licence to go further than the KID to provide additional explanation if they believe the performance scenarios would mislead clients.
The regulator was responding to concerns the market has raised since the introduction of KIDs, particularly with regard to investment trusts.
A number of analysts have described the potential returns in the standardised KID format for investment trusts as “overly optimistic”.
Several board members at Baillie Gifford’s investment trust clients took their concerns to the FCA in letters, the manager revealed earlier this week.
The IA said in a statement last night that clients are still struggling to understand the KIDs, and that the structure of KIDs needed to be reviewed.
An IA spokeswoman says: “We welcome the FCA’s recognition of the serious challenges emerging in the Priips KID. From a positive starting point of trying to make different products comparable, the KID now makes it almost impossible to compare similar products. Performance scenarios and the way charges and transaction costs are presented are exceptionally difficult for customers to understand. What is needed is an urgent, early review in order to fix these problems.”