The EU lowers financial product prices. On Wednesday, the EU announced proposals to lower retail investor fees for financial goods to boost investment and improve its capital market.
The European Commission’s retail investment package prohibits banks and insurers from paying commissions to brokers who sell their products without client assistance.
In 2021, only 17% of EU household assets were in equities and bonds, well below the U.S. level. Consumers chose banks. The commission claimed retail investors pay 40% more than institutional investors.
The commission noted that most retail investment products are sold on commission, so buyers may not obtain the best deals.
The EU executive announced a “staged approach” after Germany, Italy, France, and industry opposed a blanket ban on commission.
It recommends a limited prohibition on commission and stricter product suitability testing for buyers receiving assistance. EU authorities would evaluate products’ “value for money” against new cost and performance standards.
“Evidence shows that some products on the market provide little, if any, value for money to the retail client, particularly due to high product costs,” the commission concluded.
To end miss-selling scandals, the U.K. is strengthening financial consumer protections in July.
ICI Global, a funds industry association, said it seemed implausible that granular cost benchmarks against all 30,000 EU-regulated mutual funds would be reviewed equally across various asset classes to prevent decreasing innovation and choice.
EU nations and Parliament will decide the deal, which may vary. The biggest center-left party in Parliament pledged to eliminate commission-based sales.