Unlocking Retail Potential: What the Retail Investment Strategy Means for financial services in the EU
Article provided by Deloitte Tax & Consulting, SARL.
Summary
The EU’s Retail Investment Strategy (RIS) seeks to put retail investors at the heart of the financial system, promoting transparency, fairness, and better outcomes for individual investors. As a key component of the Capital Markets Union (CMU) that was superseded by the Savings and Investments Union (SIU) in March 2025, which aims to reduce market fragmentation and channel more retail savings into capital markets, the RIS seeks to boost retail investor confidence and EU market competitiveness.
Integration of RIS into the SIU Strategy
Although initially launched in the context of the CMU with a focus on the interests of individual investors, seeking to ensure that retail investors can take full advantage of capital markets, the RIS has now been integrated into the broader SIU framework to reinforce coherence across EU financial policies. This strategic shift reflects the European Commission’s recognition that improving retail investor outcomes cannot be isolated from the wider effort to mobilize savings and deepen capital markets. By embedding the RIS within the SIU, the Commission aims to enhance the retail investment landscape through a unified approach that combines investor protection with market efficiency. This alignment is also intended to avoid further fragmentation, ensuring that the RIS contributes directly to SIU priorities such as sustainable finance, financial intermediation, and long-term wealth creation for EU citizens.
Timeline
- 24 May 2023: European Commission issued its legislative proposal for the Retail Investment Strategy.
- 12 June 2024: European Council agreed on negotiating mandate.
- 13 November 2024: EIOPA and ESMA issued a joint letter raising concerns regarding RIS’ complexity.
- 10 February 2025: EFAMA called for a significant simplification of RIS, warning that its current complexity and regulatory burden may deter rather than encourage retail investment.19 March 2025: European Commission unveiled its Savings and Investments Union (SIU) strategy, superseding the Capital Markets Unions (CMU).
- Today: Ongoing trilogue negotiations between Parliament, Council, and Commission regarding the RIS.
- By end of 2025: Expected final adoption of the legislation (exact timing depends on the progress of the trilogue negotiations).
- 2027: Expected application date, subject to final legislative agreement.
Expected benefits
Improved Transparency and Retail Participation: By simplifying and standardizing disclosure requirements, the RIS aims to provide investors with clearer, more comparable information. This increased transparency is expected to rebuild trust, empowering more retail investors to actively participate in EU capital markets and contribute to the growth of a dynamic investment culture.
Cost Efficiency: By reducing unnecessary regulatory complexity and promoting streamlined compliance processes, the RIS seeks to lower operational costs for financial institutions, resulting in more affordable investment products and services for end investors.
Fostering Innovation: The strategy supports the development of innovative financial solutions by establishing a regulatory environment that encourages competition while safeguarding investor interests. This approach aims to position the EU as a hub for financial innovation on the global stage.
Contribution to the Wider EU Economy: By mobilizing retail savings more effectively, the RIS is designed to channel capital toward businesses and sustainable projects, thereby supporting economic growth and aligning with the EU’s broader SIU objectives.
Enhanced Consumer Protection and Empowerment: At the heart of the RIS is a strong focus on retail investor interests—ensuring that investment advice and product offerings genuinely align with individuals’ needs, goals, and risk profiles. The strategy aims to protect consumers from misleading marketing, reduce exposure to emerging risks (e.g., social media promotions), and ensure that information is clear, accessible, and tailored for non-professional investors.
Key areas for attention
Inducements Regulation and Conflict of Interest Mitigation
The regulation of inducements remains a central debate in the RIS. Proposed measures aim to reduce conflicts of interest by banning commissions on execution-only investment services and enhancing transparency on commission payments and their impact on investment returns. While the European Parliament favors a full ban on inducements for financial advisors, the Council allows them for execution-only sales but with stricter safeguards to prevent conflicts of interest. The upcoming trilogue will be crucial in defining the final rules, with member states able to maintain or introduce stricter regulations, potentially leading to continued market fragmentation.
Debate over 'Value for Money' benchmarks
The RIS framework applies a uniform approach to “Value for Money,” emphasizing cost reduction which may overlook the diversity of investment products. EFAMA call for the removal of VFM benchmarks, suggesting instead that existing MiFID II governance rules and peer group assessments be used to ensure products offer fair value across the investment chain.
Overlapping Challenges of “Best Interest” and “Value for Money”
The RIS introduces both the “best interest test” and the “value for money” criterion, which aim to protect investors but can overlap and sometimes conflict. A product recommended as being in the client’s best interest may not always offer the best value for money, creating regulatory complexity and potential confusion in advice and product selection. Clarifying how these two standards should coexist is essential to ensure consistent investor protection and transparent financial advice.
Investor Journey Complexity and Information Overload
The RIS investor journey is criticized for being overly complex due to redundant tests and excessive information, which may discourage retail investors rather than support informed decisions. EFAMA suggests that additional information requirements could create regulatory burden and duplication, advocating instead for better use of existing data sources such as KIDs and the European Single Access Point. This approach would help streamline the process, avoid fragmentation, and promote a more unified and efficient investment market.