The European Parliament has reached a provisional agreement with the Council on a wide-ranging package of measures designed to encourage greater retail participation in capital markets while strengthening protections for individual investors.
The reforms form part of the EU’s broader retail investment strategy, which aims to make it easier for citizens to invest in suitable, high-quality financial products while reducing reliance on bank lending, particularly for smaller companies.
Under the agreement, financial and insurance advisors will be required to ensure that any products or services they recommend are genuinely suitable for their clients. Suitability assessments must be based on proportionate and necessary information, including an individual’s knowledge and experience, financial situation, ability to bear losses, investment objectives and risk tolerance. The changes are intended to reinforce the principle that investment advice should always be delivered in the best interests of the client.
The deal also introduces new safeguards around value for money. Products that do not offer sufficient value would be prevented from being placed on the market or sold to retail investors. At the same time, consumers should be able to more easily compare financial products based on costs, charges, performance and non-financial benefits. To support this, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority will be tasked with developing supervisory benchmarks for insurance-based investment products. These benchmarks will serve as reference points for national competent authorities when supervising value for money across the market.
Investment firms will also be required to assess their products against representative peer groups, ensuring that pricing and outcomes are aligned with comparable financial instruments. This is expected to give supervisors stronger tools to identify poor-value products and intervene earlier.
Another key area of reform relates to inducements from third parties. While incentives can be permitted where they enhance service quality, such as through research or training, a new inducement test will be introduced to ensure conflicts of interest are mitigated and that firms act in clients’ best interests. The changes are designed to improve transparency and help clients distinguish inducements from other fees.
The agreement also addresses growing concerns around financial literacy and the influence of social media. EU countries will be required to promote financial education initiatives tailored to different age groups. In response to the rise of so-called finfluencers, firms that use influencers to promote financial products will need written agreements, clear contact details and oversight of their activities to reduce the risk of online mis-selling.
Updates were also agreed for key information documents for packaged retail and insurance-based investment products, with a stronger focus on forward-looking performance scenarios based on realistic data.
Commenting on the deal, Stéphanie Yon-Courtin (Renew, FR), lead MEP, said:
“With today’s agreement on the retail investment strategy (RIS) we celebrate a major step towards savings and investment union. These rules bridge the gap between protecting consumers and helping businesses thrive in Europe. The agreement last night on the RIS scores majors wins for consumers and businesses alike. We are adapting to a more digitalised environment. Companies will move to digital-by-default disclosure for consumers, while consumers will be better protected against new risks emerging from online advice practices, such as financial influencers: no more getting rich from risky new financial products without accountability.
As Europeans invest mainly on the basis of advice, we focused on preventing abuse while keeping advice accessible, both financially and geographically. Supervisors will meanwhile have stronger tools to look at how products are priced, how advice is delivered, and whether consumers are truly getting value for money.
This agreement moves savings and investment union from theory to reality. It has been an honour for me to lead this file in the European Parliament. And while the final vote still lies ahead, today our message could not be clearer: Europe is serious about savings, investment and growth.”
The provisional agreement must now be formally approved by both the European Parliament and the Council before the new rules can enter into force.
Keep up with all the latest FinTech news here.
Copyright © 2025 FinTech Global
