Key Takeaways – Retail Investment Strategy (RIS)
• The Retail Investment Strategy (RIS) is an EU regulatory initiative designed to strengthen consumer protection and encourage greater participation in capital markets among individual investors.
• Since its initial proposal in 2023, the file of RIS has progressed significantly through 2026.
• Following the European Parliament’s (EP) approval of the ‘trilogue’ agreement, the Council voted on the final text on 5 June. The text now awaits endorsement by the EP, with formal adoption expected by November 2026 before official publication.
• The new future regime shall be completed with upcoming significant implementation texts (Level 2 texts). It is expected to be applicable in July 2029 (yet to be confirmed).
The European Union’s Retail Investment Strategy (RIS) represents a significant regulatory initiative designed to bolster consumer protection and increase retail participation in capital markets. Data from the European Council highlights a notable gap in market engagement compared to other developed economies. For instance, while approximately 43% of US household assets were held in financial securities in 2021, the figure for EU households stood at just 17%.
Improving retail protection: the mission behind the Retail Investment Strategy
The Retail Investment Strategy serves as a major initiative within the framework of the Savings and Investment Union (SIU). The reform aims to restore investor confidence, enhance protection, and by doing so, stimulate retail investment in EU capital markets. Despite the challenges and risks these measures pose to the distribution ecosystem, the overarching objective is to drive greater retail client participation in financial markets.
Covering all financial products intended for retail clients, including funds and structured products distributed in securities accounts or as units of life insurance contracts, the RIS takes the form of amendments to European texts defining the rules for retail investor protection (MiFID II, IDD, and PRIIPs). Although it touches on other topics, it is mainly based on two issues: the Inducements Regime (distribution fees) and Value for Money (VfM).
The shift from fee bans to a mandatory inducements test
The subject of inducements primarily targets the distribution fees paid by producers to distributors for the marketing of their products. While the initial legislative proposal suggested a total ban on distribution fees for non-advised sales, this has been replaced by a mandatory inducements test. Under this new requirement, financial institutions must verify that fees comply with specific criteria. These conditions should remain consistent with current standards: inducements must be transparent, proportional to the product’s value, and deliver a tangible benefit to retail clients (such as professional advice or enhanced service value). However, further clarifications are expected in upcoming significant implementation texts (Level 2 texts) and, possibly, reinforced expectations from regulators regarding compliance with these conditions.
Implementing the new Value for Money framework: a dual approach
The main impactful outcome is a new Value for Money framework. The objective is to require manufacturers and distributors, respectively, to ensure that product costs (including distribution fees) are justified and proportionate in relation to performance and qualitative benefits. This is based on a dual approach:
- Comparing these costs, performance, and benefits to those of similar products within a peer group.
- For life insurance products, supplementing this with public supervisory benchmarks (European and/or national).
To ensure a fair comparison, companies must use specific criteria to identify their peer group. The exact details of these criteria, including whether companies should compare themselves to national or European peers, will be clarified in Level 2 text. These rules will also provide guidance on how to assess ‘Value for Money’ when peer grouping comparison is not justified or possible (e.g., where a product is unique and has no direct competitors). Notably, for derivatives, this comparison will focus exclusively on costs and fees. For structured products, we believe an alternative approach is necessary.
Why one size doesn’t fit all in Value for Money assessments: the AFPDB perspective
The AFPDB, the trade association representing French structured product issuers, has raised important distinctions regarding how Value for Money (VfM) should be measured for structured products. Unlike traditional funds, which can be compared to similar products based on past performance, structured products require a different approach. The AFPDB argues that since these products are forward-looking, they should be assessed by comparing their expected performance against the most logical alternative for the client – typically a zero-coupon bond with the same maturity from the same issuer. For exchange-traded securities, such as warrants/turbos, the association suggests a more streamlined approach focused entirely on costs.
Further Retail Investment Strategy developments: profiling and information standards
The new regulatory framework enhances retail investor protection through several other changes. The suitability test will now place greater emphasis on portfolio diversification, and the process for transitioning from retail to professional client status has been made more accessible. Additionally, all marketing and MiFID communications must now include prominent warnings for high-risk products, with specific implementation details to follow in upcoming guidelines.
Similarly, the documentation for PRIIPs (the KID) is undergoing digital transformation. The KID will now include a ‘Product at a Glance’ dashboard and a dedicated section on ESG (Environmental, Social, and Governance) factors. Moving forward, these documents must be provided in a machine-readable electronic format and may be presented using a layering approach.
Looking ahead: the implementation horizon for the Retail Investment Strategy
Although the rules should be officially adopted by November 2026, they will not be implemented immediately. Due to the planned transition periods, the new regime will likely come into force in mid-2029.
FAQs
What is the main objective of the EU’s Retail Investment Strategy (RIS)?
RIS is a regulatory initiative within the Savings and Investment Union (SIU) framework designed to strengthen consumer protection and restore investor confidence. Its goal is to encourage greater participation in EU capital markets among individual retail investors.
Will there be a total ban on distribution fees for non-advised sales?
No. While the initial legislative proposal suggested a total ban, this has been replaced by a mandatory inducements test. Under this requirement, financial institutions must verify that fees are transparent, proportional to the product’s value, and deliver a tangible benefit to retail clients, such as professional advice or enhanced service value.
How does the new Value for Money (VfM) framework work?
The framework uses a dual approach to ensure product costs are justified in relation to performance and qualitative benefits. Manufacturers and distributors must assess costs, performance, and benefits of products.
How will the documentation for retail products (KID PRIIPs) change?
The Key Information Document (KID) is undergoing a digital transformation. It will now include a ‘Product at a Glance’ dashboard and a dedicated section for ESG (Environmental, Social, and Governance) factors. Furthermore, these documents must be provided in a machine-readable electronic format and may utilize a layering approach.
When will the new Retail Investment Strategy rules actually come into force?
While the rules are expected to be officially adopted by November 2026, they will not be implemented immediately. Due to planned transition periods, the new regime is expected to be applicable in mid-2029 (though this date is yet to be confirmed).