On the occasion of the Call for Evidence on the retail investor journey, the French association of retail structured product manufacturers (AFPDB) would like to share its views with ESMA.
ESMACommission Call for Evidence
Retail Investment Journey
AFPDB’s answer
The French Structured Investment Products Association (Association française des produits d’investissement de détail et de bourse – “AFPDB”) is the industry association representing issuers and manufacturers of structured products and securitized derivatives in France. The AFPDB purpose is to contribute to the development and promotion of structured products on the French and European markets by defining industry best practices and by maintaining an open and constant communication with policy makers, supervisory authorities, market participants, market operators, technology and service providers. afpdb.org
Only the questions answered by AFPDB are reproduced below; the full questionnaire is in the PDF.
Question 1
What are the key reasons why many retail savers choose not to invest in capital markets and instead keep their savings in bank deposits? Please explain and provide practical examples, or evidence drawn from experience, where available.
The entry into force of MiFID2, as well as IDD and PRIIPs, has led to significant regulatory expansion and a strong protecting framework for retail investors but burdensome and unstable for firms, with a possible disincentive on retail participation in capital markets.
In that context, we could support the aim of simplifying the regulatory framework while remaining cautious:
- about how such initiative will be articulated with the RIS and the Commission’s initiative on simplification in the SIU context
- on the fact that any simplification should avoid creating new sets of rules or substantial changes in the framework that would create disruptive and costly effort to being implemented.
One identified area of simplification is the detailed level 2 and 3 rules that require firms to collect or provide, more often on a systematic basis, a significant volume of information provided to clients, which overly burdens the client’s journey. Another one is the definition of sustainability preferences that is too complex and not well designed because of inconsistencies between SFDR and MiFID/IDD texts. Another improvement would be to facilitate sophisticated retail clients opting for professional categorization, as being discussed within the RIS context.
For most of the rest of the MIFID framework and even more for PRIIPs regulation, legal and regulatory stability should prevail over disruptive changes that would not prove to add real value for investors.
We also stress that attracting investment requires net performance, which must not be eroded by withholding taxes, and should ideally be supported by targeted tax incentives that should be recommended for a wider scope of investment products.
Question 2a
To what extent do retail investors find investment products too complex or difficult to understand? Please select one of the following options and please explain and provide practical examples, or evidence drawn from experience, where available.
Whilst the amount of information and alerts provided to investors, may make financial instruments appear too complex for clients, and act as a deterrence. We do not believe that the “complexity” feature of financial instruments is an obstacle for retail investments:
1. complexity is not risk
The simplicity feature of investment products should be more carefully assessed as there are several angles to it and ensure a level playing field among asset classes. “Simplicity” does not equate to low risk. Both features should also be linked to return and performance of products. The simplicity feature of an investment product is obviously an asset from a retail investor’s perspective. However, it should not be overweight, as it is no substitute for a proper risk-assessment which is equally important. Very simple products can be very risky, while features adding to complexity often protect investors (such as protection against capital loss or issuer default) making products less risky.
2. “complexity” is not a fatality
Complexity is not so much of an issue unless it prevents the understandability of the product for the relevant clients.
To ensure understandability of products, several mitigants exist:
- Firms are required and encouraged to provide explanatory information and educational material to investors
- Competence of investors can be increased thanks to educational material as well as their own experience, in time
- Product governance framework ensures that target market identifies the appropriate investors considering their level of knowledge and experience; as well as the distribution strategy (e.g. with investment advice)
- Financial literacy of investors can be improved, and several initiatives have been launched in that aera)
3. Complexity cannot undermine a good risk & cost return ratio.
Manufacturers and distributors should be ultimately and respectively liable to demonstrate why and how the product provides a good risk and costs / return ratio while being understood by relevant investors.
Question 15a
MiFID II disclosure requirements aim to provide transparency and support informed investment decisions. In practice, do you believe these disclosures are helping retail investors engage with capital markets, or are there aspects – such as volume, complexity of content, lack of comparability, or format – that may reduce their effectiveness? Please explain and provide practical examples, or evidence drawn from experience, where available.
AFPDB members are concerned about changes to the MiFID II framework and stress the need for legal and regulatory stability. We would therefore urge ESMA to carefully consider the impact of constant changes to regulation on business and ultimately on investors engagement with capital markets.
However, AFPDB would be supportive of efforts that aim to streamline and simplify disclosure rules that do not effectively support investor protection. In particular, we welcome the explicit reference made in recent SIU communications that the final outcome of the RIS negotiations should minimise regulatory burden.
Question 16a
Do retail investors find the PRIIPs KID helpful in understanding investment products? Please provide details notably on the elements that are the most helpful and on ways to improve them. If not, are there alternative ways to protect retail investors that could be considered, while not increasing the volume of required disclosures.
From our experience, the KID is now satisfactorily understood by retail investors and stakeholders. Even if not perfect, considering its objectives of having harmonized and prescriptive set of rules for all packaged investment products and to make them as suitable as possible for retail investors, we consider that the current KID achieves those objectives. At some point, oversimplification will be detrimental to accuracy and comparability of the information.
PRIIPs KID would not, in our view, benefit from being streamlined and simplified. Considering that the regulatory framework has been substantially reviewed multiple times in the last years, we would favour now regulatory stability and outline that a successive set of changes to the framework is costly, disruptive and therefore inefficient. At the very least, any proposal for changes in both content and format should demonstrate beforehand it would significantly improve the KID for retail investors, based on comprehensive consumer testing, and industry consultation on a wide and representative sample of products.
Implementation costs of PRIIPs KID since 2018 have been considerable, and the PRIIPs KID review of scenario and cost table applicable since 1/1/2023 caused further implementation costs.
Question 17
For firms: Do you measure investor engagement with KIDs and digital disclosures (e.g., click-through rates, reading time, or interactive tools)? Are these available in formats adapted to mobile-first environments? Please explain and provide practical examples, or evidence drawn from experience, where available.
Also, AFPDB members do not support the inclusion of voluntary interactive tool nor of the “personalized” KIDs’ customer tool. They could be used in an “improper” way without adding value for retail investors. Similarly, we do not favour layered format for KIDs. KID is a relatively short document and, we should encourage investors to carefully read the entire document rather than subjectively suggest that some parts are more important than others. The retooling efforts and costs involved would be very substantial and therefore inaccessible for smaller players. None of them will bring real benefit to retail investors.
Question 18
Do retail investors find the costs and charges disclosures helpful in understanding the costs of investing? Please provide details notably on the disclosures that are the most helpful (e.g., total costs, illustration of cumulative effect of costs on return) and on ways to improve them. If not, are there alternative ways to protect retail investors that could be considered while not increasing the volume of required disclosures?
As explained in our response to Question 15a, costs and charges disclosures is an area where information overload has been observed that can negatively impact investor engagement. Accordingly, we believe that there is scope to improve associated disclosures via streamlining some of the existing MiFID requirements.
Question 24
For firms and trade associations: to what extent do national tax regimes create barriers to offering investment services and attracting retail investors on a cross-border basis? Please explain and provide practical examples, or evidence drawn from experience, where available.
Taxation relief is a core investment driver and tax incentives, including those aimed at promoting pension savings, are indeed key for capital market investments of retail customers.
This is why each Member State needs to keep as large as possible a scope of eligible instruments and include structured investment products under any national tax-privileged investment-scheme so as to avoid market distortions through investor bias and by doing so, maintaining a level-playing field.
Question 25
To what extent do tax-related issues discourage retail investors from investing in investment products issued or manufactured in another Member State? Please explain and provide practical examples, or evidence drawn from experience, where available.
As per our answer to Q24, AFPDB believes taxation relief is a core investment driver. This is why each Member State needs to keep as large as possible a scope of eligible instruments and include structured investment products under any national tax-privileged investment-scheme so as to avoid market distortions through investor bias and by doing so, maintaining a level-playing field.
Question 32
How do retail investors perceive the integration of sustainability preferences in suitability assessments? How has it impacted the investment advice/portfolio management services they receive? Please explain and provide practical examples, or evidence drawn from experience, where available.
From our experience, investors and firms have been struggling for integrating sustainability preferences in suitability assessments.
One of the main issue lies in the complexity of the definition of such preferences, relying on technical and complicated concepts of SFDR such as Taxonomy alignment and principal adverse impact consideration, even further complicated with quantitative thresholds.
This complexity created also a challenge for manufacturers in their target market assessment to define sustainable features from that complicated definition.
On top of that complexity, there are inconsistencies between sustainable regulations. For many products enhancing ESG purposes, qualitative and quantitative aspects (relating to the measuring the ESG contribution) are set out for defining sustainability preferences as part of the target market specifications the in MIFID II and the IDD frameworks, while the relevant SFDR rules, due to the limitation of the SFDR scope, cannot be applied to these products. Such major inconsistencies lead in practice to a high level of legal uncertainty hampering both, an adequate implementation of the target market criterion (under MIFID and IDD) as well as (an insufficient) support of interested investors in their product selection at the ESG end.
Question 34
For firms and trade associations: Have firms observed cases where clients struggle to express their sustainability preferences in a meaningful way? How have these issues been addressed to help retail investors? Please explain and provide practical examples, or evidence drawn from experience, where available.
Like provided in our answer to Q32, firms have been observing cases where clients struggle to express their sustainability preferences in a meaningful way. This is notably due, in our view, to the fact that such definition is too complex and not well suited for many financial products.
Contact
Olivier Gentier
Secretary General
olivier.gentier@afpdb.org
Authoritative PDF version: ESMA Call for Evidence – Retail Investment Journey – AFPDB’s answer, 21 July 2025 (PDF).