You KIIDing? Consumer Panel says two-page document not enough
KIIDs will be sent to all UCITS IV fund investors outlining, among other things, a short description of the fund’s investment objective as well as details of costs and associated charges.
But, though the FSCP believes KIIDs will strengthen consumer protection, it argues it will not be a standalone solution.
Speaking today at the European Insurance and Occupational Pensions Authority’s second Consumer Strategy Day in Frankfurt, FSCP vice chair Kay Blair said: “The problem with financial services is that there is a fundamentally unequal relationship. Products are sold by highly knowledgeable providers to consumers who often lack an understanding of the full nature of the product they are buying.
“Although the concept of a document which allows comparison between products with similar outcomes is welcome, it is difficult to see how a single document can bridge the information gap.”
Blair said the FSCP welcomed the MiFID principle that providers must act, honestly, fairly and professionally in accordance with the best interests of their customers, but said consumers also needed access to “straightforward outcome products that are easy to understand and have expected outcomes”.
“Unfortunately, financial services providers are adept at developing complex products with unclear or confusing outcomes,” she said.
“Within a context of appropriate remuneration and straightforward products, the KIID has the potential to strengthen consumer protection, particularly if it is part of a much wider, more meaningful communications strategy.
The KIID should allow potential customers to compare both products with similar outcomes and those from different providers.
“However, the format of the document must be rigorously tested and the assumptions on which it is based must be clear and understandable if it is to achieve its objectives. It must also take account of the fact that we live in a digital age where people are used to receiving information in a different format.”