The European Parliament has reached a provisional agreement with the Council on a new set of measures designed to strengthen protections for retail investors, improve access to quality financial products, and encourage greater participation in European capital markets.
The reforms form part of the EU’s broader retail investment strategy and aim to reduce reliance on bank lending, particularly for smaller companies, by making market-based investment more accessible and trustworthy for citizens.
Under the agreed framework, financial and insurance advisers will be required to act more clearly in the best interests of their clients. Firms providing investment or insurance products must ensure suitability is assessed using proportionate and necessary information, including a client’s financial situation, knowledge and experience, ability to bear losses, investment objectives and risk tolerance. The intention is to ensure that advice and products are genuinely aligned with individual needs, rather than driven by sales incentives.
A central pillar of the reforms is the introduction of stronger “value for money” requirements. Co-legislators agreed to prevent financial products that fail to offer adequate value from entering the retail market. Retail clients should also be able to compare products more easily based on costs, charges, performance and non-financial benefits. To support this, ESMA and EIOPA will develop supervisory benchmarks for insurance-based investment products. These benchmarks will act as reference points for national competent authorities when supervising value for money, while investment firms will be required to assess their products against representative peer groups.
The agreement also introduces a new approach to inducements. While third-party incentives will not be banned outright, they will only be permitted where they enhance service quality and where conflicts of interest are properly mitigated. A new inducement test will be applied to help ensure firms act in clients’ best interests and that consumers can clearly distinguish inducements from other fees.
Financial literacy and the growing influence of online “finfluencers” are also addressed. EU member states will be required to promote financial education initiatives tailored to different age groups and audiences. Where investment firms use financial influencers to promote products, those relationships must be governed by written agreements, with firms retaining oversight and accountability for the content shared online.
The reforms further update the key information document for packaged retail and insurance-based investment products, requiring more meaningful and forward-looking performance scenarios based on realistic data and assumptions.
Stéphanie Yon-Courtin (Renew, FR), lead MEP, said, “With today’s agreement on the retail investment strategy (RIS) we celebrate a major step towards savings and investment union. These rules bridge the gap between protecting consumers and helping businesses thrive in Europe. The agreement last night on the RIS scores majors wins for consumers and businesses alike. We are adapting to a more digitalised environment. Companies will move to digital-by-default disclosure for consumers, while consumers will be better protected against new risks emerging from online advice practices, such as financial influencers: no more getting rich from risky new financial products without accountability.
“As Europeans invest mainly on the basis of advice, we focused on preventing abuse while keeping advice accessible, both financially and geographically. Supervisors will meanwhile have stronger tools to look at how products are priced, how advice is delivered, and whether consumers are truly getting value for money.
“This agreement moves savings and investment union from theory to reality. It has been an honour for me to lead this file in the European Parliament. And while the final vote still lies ahead, today our message could not be clearer: Europe is serious about savings, investment and growth.”
The provisional agreement must now be formally approved by both the Parliament and the Council before the new rules can enter into force.
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