.jpg)
Good afternoon, thank you for your warm welcome, and indeed for the invitation to join you today.
I'm going to go off-script for a moment because you had a really, very impressive opening address.
You outlined the macroeconomic outlook – huge uncertainties and a lot of concern about what next year will bring.
But what struck me was your figure around retail investors and equity.
So the figure of 6.5 percent net return compared with minus 14 percent (taking into account inflation).
So I think those are very significant figures. And I think in this room and in my area, we are asking “why”?
And we saw during Covid a large increase in deposits amongst those that were working, not earning any income for the work that came from those deposits, and we again ask “why”?
So thank you for the vital piece of information.
Just a few remarks then on where we are and indeed where we are heading.
Starting by saying that your industry - the asset management industry - has a really important role to play in our European capital markets.
And as was said, a lot remains to be done.
This is very much a work in progress.
It is a long road with perhaps some difficult twists and turns to it.
But there is absolute commitment on the Commission's side that we develop the Capital Markets Union.
This is important because we need to have alternative sources of financing.
From your side, you manage the money of both retail and institutional investors, and help them to manage risks and get return on their investments.
This is a key source of funding for companies that want to grow and expand.
So really important from our Capital Markets Union perspective.
I mentioned the issue of alternative sources of financing, and also the role of capital markets in building a resilient European economy
We are too reliant on bank finance and we need that to change, and our work is in that direction.
Because we want to give investors more opportunities to invest across the whole of the single market, to support growth and to support a more competitive European Union at a global level.
We began our work on the CMU action plan in 2015, I was still a Member of the European Parliament at that stage.
But there has been significant progress made since then.
So far the Parliament and Member States have agreed on 12 out of 13 legislative proposals in the action plan.
These include new rules on securitisation, covered bonds, crowdfunding and the strengthening of SME growth markets.
We've developed a set of indicators to measure progress.
And I want thank EFAMA for working on the development of those indicators for the asset management industry.
Two years ago, in 2020, we adopted a new action plan stepping up our work on CMU, and here too, we are making progress on implementation.
Last year, we had our proposal, which was referenced, on the revision of the European Long-Term Investment Fund regulation – and indeed just last month the EU institutions reached a political agreement on this revised regulation.
Again, here we're simplifying the rules, opening these funds up to a wider range of investors.
We've also proposed the European single access point – which is a major innovation for our markets.
And it creates a one-stop-shop for companies financial and sustainability information.
And I think when we look to the future, we need to look at this “double-hat” of financial returns and sustainability information.
This initiative will make European companies more visible to international investors, and indeed investors themselves can benefit from a clearer view of these companies.
And in June the Council reached a general approach on the proposal.
The European Parliament are accelerating their discussions, and we hope that trilogues will start before the end of this year.
If I look to the review of the Alternative Investment Fund Managers Directive, here we're harmonising rules on loan-originating funds.
These funds can step in when more traditional lenders pull back in a distressed economic situation.
The Council agreed on its general approach in June, a vote in Parliament is expected this month.
Then we also have the review of MiFIR, which aims to put in place a consolidated tape for trading data.
As you know, today we have a lot of information on markets, but it's spread across different sources, and it's difficult to access for anyone but the most connected investor.
The consolidated tape will provide up to date information on the best prices and execution venues, so that all market participants have a complete view of the market.
We also proposed a review of the Central Securities Depositories Regulation to make the settlement discipline regime more effective and proportionate.
Next month, we will deliver a number of additional proposals to advance the Capital Markets Union.
We're working on a new Listing Act to make listing on public markets easier, particularly for smaller companies.
We're also looking at the more complex structural issues that contribute to fragmentation and barriers between national capital markets.
So we will table a proposal on corporate insolvency to make it easier for investors from another EU country to recover value in insolvency.
We're also looking at a legislative package on central clearing.
Because we want to increase the attractiveness of clearing in the European Union, to support the development of infrastructure, and reform supervisory arrangements.
And these three measures will come before the end of the year.
Let me move now to our work on the Retail Investment Strategy - this comes in the new year.
Because capital markets should be for everyone.
And indeed, as the figures pronounce, they're not right now.
Which means that we're losing an opportunity, but there is much to gain if we can get our Retail Investment Strategy in place.
Because we want to give individuals more opportunities to invest for the long-term.
And they can get better returns from that long-term investments than through savings.
And again your sector has a huge role to play in this.
Ironically, the European Union has one of the highest saving rates in the world.
But we have the lowest levels of retail investor participation.
In 2019, only around a third of EU household assets were held in securities, including mutual funds.
If you compare that to the US, where the equivalent figure was over half.
Now there are lots of reasons why that is the situation.
Just recently we carried out a Eurobarometer survey looking at the attitudes of citizens towards retail financial services.
All of these surveys are really important and they help us with our work.
One of the questions put to people who said they didn't hold any investment products – was why they did not invest.
Nearly half said they didn't have enough money.
Other reasons varied – around one in five said they were concerned about the risks.
Some said they found investing too complex and they didn't know how to invest.
Others thought they wouldn't get a good return for their investment.
Still others said they did not trust investment advice.
So, this survey shows that there are many reasons why people in the EU choose not to invest.
I would have thought that one of the reasons - if I listen to conversations - is “where do you start?”. I mean, it's quite a simple question, but I think, an important one.
Alongside the low level of retail investment, it has never been as easy to access capital markets.
Because we have apps, we have investment platforms.
And really if you have a smartphone and an internet connection, you can start investing, as indeed some are.
But we are seeing new investors come into this space, and maybe they don't see themselves as “investors”, per se.
I'm thinking particularly of young people, who are using mobile technology to buy and sell all sorts of products, and to invest.
What this means though for retail investors is that they may be accessing high-risk investments, and may not be fully aware of what exactly they're putting their money into.
So I think there's lots of reasons why, then, we need to look at retail investment and we need to have a strategy:
- To help consumers make the most out of their money and to cater for their long-term needs,
- To address the barriers that currently stop citizens investing,
- And to address both the benefits and the risks which new technology and technology generally is bringing to the market.
There are clear benefits for the retail investor – getting better returns seems to me to be the obvious one.
But there are also clear benefits for the Capital Markets Union – with more people invested in European capital markets.
So to feed into our Retail Investment Strategy, the Commission gathered a broad range of evidence over the past two years.
So this is a long time in the research process.
We've consulted with stakeholders.
We've had advice from ESMA, EIOPA, the joint European Supervisory Authorities committee.
And an extensive study on retail investments - we published that in the summer.
This evidence paints a picture of a framework made up of many parts, conceived at different moments, spread across different laws, that does not always seem to be coherent or in the interests of retail investors.
Right now in the Commission, we're reflecting on the evidence that we've gathered, we are still deciding on the right, evidence-based policy responses.
But I can lay out the main goals and our current thinking on the Retail Investment Strategy.
On the strength of the evidence that we've gathered, I believe there is a clear need for regulatory intervention to address a number of problem areas we've identified.
Overall, we need to make sure that we have in place a robust and balanced framework that protects retail investors and creates an environment in which they can invest with confidence.
Helping them achieve better outcomes and empowering citizens to make the financial decisions that are right for them is crucial.
We do want retail investors to understand the different investment opportunities that are open to them, and to understand the risks and the benefits involved.
So first of all, there is this question of information and disclosures.
There is as you know already an extensive set of rules on how information must be disclosed to retail investors.
Key information documents are intended to summarise the most important information for a good understanding of a particular investment product.
But we are also aware that disclosures are not working as intended.
Too much information can lead to confused – rather than informed – investors.
Our strategy should explore new and better ways to make sure that retail investors get information that is meaningful, clear, and understandable.
And we should make sure that the rules reflect technological developments so that retail investors benefit from the best and newest ways to understand investment products.
We also want to make sure that retail investors see information about whether a product is sustainable – because we know that more and more people are interested in sustainable investment.
I want to move to the issue of financial literacy.
And I think those of you who've heard me speak previously will know that this is more than a priority for me in my mandate.
It's important, this area of financial “awareness” or “education” or "knowing about money”, that our consumers are able to understand retail investing and the options that are open to them.
But I'd also add to this – that they have the confidence to ask the right questions. I think that is very much the key to the success of their choice.
Education and training, as you know, falls to Member States, but I think we have an important role at EU level in this area.
We've done quite interesting work with the OECD on a financial competence framework for adults, setting out what we would need in terms of skills and knowledge to make the best choices to suit the individual.
I think this framework will help the Member States frame programmes, it's also available to charities and others who work with citizens around financial awareness.
And I think it's really important that we work and talk about this issue so that more and more citizens talk about money, and how to get their best returns.
And indeed we need to particularly include women in this conversation, because very often they are not included and therefore lose out.
One of the other areas of concern, of course, is the impact of technology – in particular the risks of online marketing and its potential to mislead.
Developments that have received attention include the role played by financial influencers, the aggressive marketing of crypto, gamification, or short-lived content that tries to capitalise on the “fear of missing out”.
Or on the lie that what goes up keeps going up.
These are age-old concepts that we need to talk more about in an era when we are getting information fast and furious from so many different sources.
We need to adapt our investor protection rules in recognition of these developments.
Another area, fourthly, we're looking at the rules on suitability and appropriateness.
And these rules are about making sure that financial advisors and managers take into account what a retail investor wants and needs – and protects them from investing in unsuitable products.
Evidence from the retail investment study suggests that the quality of investor screening varies across the EU, and that positive outcomes for retail investors are not always prioritised.
I am also concerned about shortcomings in the way products are designed and sold to retail investors.
For example, ESMA found last year in 2021, that retail clients were charged approximately 40 percent more than institutional investors, across asset classes.
And that relates to the fifth issue: costs and fees.
Excessive costs and fees for products can significantly reduce returns on investment, and that may not always be fully understood by retail investors.
And both ESMA and EIOPA have raised concerns here.
And they have been exploring ways to make sure that the existing safeguards are well enforced.
As part of the Retail Investment Strategy, the Commission will consider whether we need to clarify the rules in this area.
Finally, I know there has been a lot of debate around the payment of inducements to distributors by manufacturers.
It is a sensitive issue that deeply divides opinion between industry and consumer organisations.
So it is a debate worth having.
Our Eurobarometer survey asked where people get their information to make their financial decisions.
By far the most important source – relied on by 45 percent of respondents – was a recommendation by bank staff or other financial advisors.
So it is really vital that this advice can be trusted.
Overall, I am committed to putting retail investors at the heart of our work.
The Commission's strategy should be – and will be – ambitious, broad, and deliver meaningful improvements.
We aim to ensure a coherent approach wherever possible, while leaving room for tailored sectoral approaches where this is more appropriate.
And we will try and seek to clarify the rules, reinforce investor protection, and boost confidence.
The main goal of this work is to empower consumers and encourage their increased participation in EU capital markets.
So I want to thank EFAMA for the constructive engagement.
And I count on your ongoing support as we continue to implement our plans to develop the Capital Markets Union.
Because we want a CMU that delivers for everyone – for investors and asset managers, for companies, and for citizens.
That means that we need to work together to nurture a confident, well-informed and dynamic retail investor client base.
Because this can play its part in strong, competitive and resilient EU capital markets.
One word, it's worth replying to from your opening remarks about sustainability and the move and investments that are needed in that regard.
You rightly point to the enormous amount of money that is needed.
And you're right to say that truly the tricky work comes now.
But as a Commission, we have put together the instruments that the industry and corporates and investors need.
We have the new Taxonomy – a complicated process, but an instrument that can be used.
We now will have corporate disclosures, I think that many people will need to prepare.
You know essentially what's in there so preparation can start.
And we have financial regulation disclosures.
My work in the coming year will be to ensure usability of those instruments.
So that they answer the need for information which is focused, which is quality and usable for both investors and the corporate sector.
I don't underestimate the challenge of our efforts.
But I do recall many decades ago when I studied accounting and finance at diploma level, never hearing the word “sustainability” mentioned.
It was “return on investment” coldly, and that was it.
We're moving to an era where it does matter, beyond return on investment.
It matters how money is invested, it matters the impact a company is making on both the environment, the climate and society.
And these things will matter more in the future.
And if you look at the discussions in Egypt with COP as we speak – there is a huge urgency for action.
So we have the tools, we now ask everyone across all sectors to take the action necessary.
And the Commission will not be found wanting in supporting all of your efforts.
Thank you.
