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 Josep Soler-Albertí
FECIF Board member, Executive delegate of EFPA Spain
RIS: let’s make the skills matter.
After many consultations and reports within the framework of the Retail Investment Strategy (RIS), the European Commission (EC) published in May the proposal for an “Omnibus Directive” as regards the retail investor protection rules, which modifies five main financial market directives. This proposal is geared towards improving the conduct of institutions to address shortcomings in financial distribution such as insufficient information, and excessive costs and biases in money management and advice that could hinder retail investors' access to equity markets, as per the Capital Markets Union (CMU) main aim.
The initial responses raised by the sector have generally been rather lukewarm, especially in acknowledging the weaknesses of the present placement of European savings and of the current distribution models for financial services and products in Europe exposed by the EC, and clearly forceful in expressing opposition and caveats regarding the specific measures announced by the Commission to alleviate the insufficiently effective functioning of these models. This type of reaction has been followed by most of the representative associations of financial entities and professionals, including the most relevant in our advisory or financial mediation activity. Although, it must be said, with different degrees and nuances.
I sincerely believe that we are facing a much more powerful challenge than a simple regulatory threat, as it was on other reforms. The explanatory statement of the RIS proposal is clear and basically reiterates what the Capital Markets Union project has pursued since it was enunciated by Jean-Claude Junker in July 2014, nine years ago, which is not more than to create a single market for capital in the whole territory of the EU. The reasoning behind the idea was to address the issue that corporate finance in the region relies too much on debt (mainly bank loans) and the fact that capital markets in Europe were not sufficiently integrated and developed so as to protect the EU and especially the Eurozone from future crises. The peremptory need to expand the access of private investors to capital markets and thereby improve the performance of European savings is the obvious consequence of the CMU and RIS, and it must be said that the elements of European longevity and aging make this ever more urgent. The RSI is a political response - probably still poorly defined and less consensual - to a major social and economic problem. We should, firstly, accept the reality and magnitude of the problem. This is not, as can be interpreted from some reactions, any blaming of the current agents and participants in the sector. We must consider it as a collective challenge that is being launched to the sector, which will need to imply great changes. It is advisable that we not only not reject it, but that we make it our own project and participate in its resolution. European savings are not well used and invested due to a host of circumstances, such as a large deficit in financial education and dedication of individuals; an excessively banked financial sector that has slowed the development of investment in capital markets; atomized financial markets with little integration in the Euro area; and probably also an excessive confidence of European individuals in the ability of States to guarantee us sufficient retirements.
Therefore, professionals and financial entities must gain resilience in the face of the dimension of the challenge posed by the RIS, not limiting ourselves to expressing our disagreement with some of the announced proposals but rather presenting alternatives. The main challenge will not be to save costs and resources from the necessary regulatory adaptations, but rather to ensure that they are done effectively and ensuring the achievement of what should be shared objectives. For financial advisors, the most relevant element is to convince ourselves that the activity potential is enormous since an immense majority of European savers - and I would dare say also, of European savings - have a strong partial or total deficit of advice and of financial planning. To begin with, I believe that we should, among all representative entities and professionals, whether advisors, mediators, intermediaries, or financial planners, agree on higher standards of professional excellence, and above all this should be more homogeneous throughout Europe, based on professional self-regulation. Knowledge, competence, and ethical compliance are essential to guarantee quality advice. One of the key goals and motivations in the process of implementing the Retail Investment Strategy should be “to make skills matter”. We, together, as representatives of financial advisors, should be convinced that more harmonization and quality are needed and possible for the qualifications of financial advisors in Europe if RIS is to deliver on its ambitious goal of empowering and protecting retail investors, making them comfortable and eager to use financial products to achieve their life goals, including providing for a secure retirement.
Let's be sure that we make the skills of financial advisors matter in the implementation of the Retail Investment Strategy, for the financial well-being of clients, the large professional expansion of financial advice, and the growth of the financial markets in the EU.
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