FECIF Editorial | July 2025

Europe's financial advisers risk getting trapped in a regulatory maze that could stifle the competitiveness we desperately need. While the Commission's simplification proposals sound promising, they could miss what really matters: letting advisers advise, not police.

The European Union stands at a crossroads in its quest to build a genuine Savings and Investments Union. The European Commission’s proposals to simplify the Retail Investment Strategy (RIS) represent welcome progress, yet they fall short of the transformative vision needed to channel citizens' savings into sustainable economic growth. In other words, good intentions need better execution.

Representing 500,000 financial advisers and intermediaries across 29 countries, FECIF recognizes the Commission’s efforts to reduce regulatory burdens. Simplifications around professional client classification, waving mandatory inducement tests, and moving away from standardized suitability reports are positive steps. However, these alone will not deliver the robust, competitive investment landscape Europe needs.

Currently, the regulatory framework creates unnecessary duplication, undermining efficiency without enhancing protection. National and European supervisory authorities already review products for cost-efficiency and compliance. Once authorized for the market, advisers should not be required to second-guess professional oversight. Responsibility for compliance should clearly rest with product providers and regulators, allowing advisers to focus on assessing individual client needs. Furthermore, financial advisers do not have access to benchmarking data reserved for supervisory authorities, making a reliable adviser-led cost-efficiency assessment impossible. Without this data, advisers risk facing legal challenges or being forced to narrow their product offerings to low-cost, low-risk options, limiting client choice and distorting competition.

Defining "cost-efficiency" for risk-bearing products is inherently challenging, as performance can only be forecast, never guaranteed. The adviser-led assessments proposed would force advisers into a defensive position, pushing them towards safe, passive products such as ETFs, even when actively managed investments may better meet client goals. This undermines the diversity essential for personalized advice and could ironically drive up long-term costs for clients seeking meaningful returns.

The requirement to present at least one low-cost, non-complex investment option may advantage large, non-European providers who can leverage scales to dominate simplified product categories. These risks concentrating markets further, weakening the EU's competitiveness and diverting capital away from Europe's economic transformation goals. To truly support the Savings and Investment Union, regulation must strengthen investor protection while supporting Europe’s markets rather than inadvertently disadvantaging them.

Additionally, Current suitability assessments fail to account for the varied objectives of investors across their lifecycles. A young professional’s short-term goals, such as buying a home, differ significantly from long-term retirement planning. Rigid profiling requirements force these diverse needs into narrow categories, excluding clients from opportunities that align with their true goals.

The proposals from France and the Czech Republic to remove mandatory loss-bearing capacity and risk tolerance assessments from appropriateness tests are steps in the right direction. These requirements add administrative burdens without meaningful value, blurring the distinction between advice and product sales.

Similarly, the mandatory portfolio view within the diversification clause presents practical implementation challenges. It's unreasonable to expect advisory firms to consider portfolios for which they have no service mandate, and such requirements are neither verifiable nor meaningfully implementable in practice. Current requirements for collecting investment goals and preferences already provide sufficient foundation for appropriate advice.

FECIF has consistently highlighted that advisers should not be transformed into regulatory enforcers without the necessary tools or data, nor should they be burdened with roles outside their scope, which risks reducing the quality and availability of advice. Financial advisers are best placed to combine sustainability preferences, management quality, and performance history with client-specific objectives to develop meaningful strategies, not just to tick regulatory boxes.

If we truly want the RIS to align with Europe’s ambitions, we need to start by removing adviser-led cost-efficiency assessments that demand data advisers simply do not have, leaving product compliance where it belongs - with providers and regulators. In this regard, the ongoing development of the practical standards for consumer risk profiling by the European CEN, which aim to reflect the complexity of advisory work in a usable framework while ensuring regulatory clarity, shows a more promising direction.

We must allow advisers to build flexible, lifecycle-aligned strategies so they can help people invest for what truly matters in their lives, from a first home to a secure retirement. And we cannot ignore how simplification measures, if poorly designed, risk concentrating markets in the hands of non-European giants, draining Europe of capital and choice when we need them most. These are not just policy tweaks. In fact, they are the foundation for a Savings and Investments Union that lets advisers do what they do best: advise, so that people can plan, grow, and invest in a future worth building.

Europe's demographic transition and sustainability goals require mobilizing private savings effectively. Achieving this requires advisers who are empowered to advise, not forced to act as regulatory gatekeepers without tools or clear mandates. The RIS proposals, while well-intentioned, risk constraining choice, reducing competition, and failing to support Europe’s strategic financial needs.

The path to a genuine Savings and Investments Union demands regulatory wisdom that balances protection with flexibility, ambition with practicality, and Europe’s growth goals with effective, high-quality financial advice. The stakes are too high to settle for anything less.